Oil and transparency

After the fall of several regimes during the Arab Spring, new governments face questions about how they will improve governance, curb corruption and bring more social justice and transparency into national economies.

The multi-billion dollar oil industry is one example. Next month, a transparency roundtable in Tripoli will bring national and international researchers, policymakers and other civil stakeholders together to discuss the future of Libya's oil industry now that Moammar Gadhafi's regime has been toppled.

The conference could be one step in making post-Gadhafi Libya a showcase for a more transparent oil industry in the region - at least that's what conference organizer Johnny West of Open Oil hopes.

He told Deutsche Welle why more transparency in the energy industry could benefit both people and companies.

Deutsche Welle: What is the aim of Open Oil?

Johnny West: We label it a transparency business. We do a lot of things that our colleagues in the NGO world do. We work very closely with Global Witness and Revenue Watch on research and assessment projects around good governance in the oil industry. But we are seeking market solutions to improve governments and the oil industry to get better outcomes from the oil industry for the people who live in the countries where it is produced.

Nigeria is perhaps the best known example of the resource curse. It has had an oil industry for 50 years which has earned, in present day value, well over $500 billion for the country. And yet there are 90 million people living in absolute poverty.

What is the biggest challenge to making the multi-billion-dollar oil industry more transparent?

There are a lot of challenges and we don't pretend that we have complete solutions or to say that a complete transformation could happen overnight. I think now is the most promising time in the history of attempts to try to improve governance in the oil industry because of new laws being passed in the United States and debated in Europe as well.

In the United States there was a law passed last year that stipulated that natural resource companies that are listed on any American financial exchange will now have to publish project-by-project details of the amounts of money they transfer to governments in every country around the world where they operate. Meanwhile in Europe, we're at an earlier stage - but last week the European Commission announced it was going to propose a draft of legislation which would be even more binding on natural resource companies based in Europe to do a similar thing. That will transform the transparency environment in and around the forestry, mining, fishing and oil and gas industries globally.

Are there drawbacks in making things too transparent?

Companies typically argue that large degrees of transparency are against commercial interests. Commercial secrets are definitely a legitimate argument against total transparency all the time. But it tends to be massively overused by companies. Frankly, I think it is a knee-jerk position where almost any new step in revealing more information is automatically claimed to be against commercial interests without the details of that argument ever being examined.

There is also a whole range of issues in which it is in companies' favor to have greater transparency because one side of the resource curse is to look at what happens in countries that have these industries and have massive corruption and there is lots of conflict. The other side of the coin, from a company's self-interest point of view, is that all of that creates continual political instability which means you are in with the dictator and things seems to run smoothly and no one ever has to publish anything - until the dictator gets a bullet in his head, as happened in Libya recently. Or until there is a revolution and people throw you out of the country or the country descends into civil war and you are not able to continue operations there at all. Those are costs to business.

How exactly are you trying to conduct the Open Oil business?

A huge part of what we do is public education in one form or another. That includes training local journalists, providing reference material and social media.

How do you finance all that?

We run consultancies. We are looking to do some policy innovation which could get some commercial support. For example we now are looking at a pre-feasibility study for fair trade oil, or sustainable oil from Libya. The idea is whether in Libya - after the revolution with a new set of policymakers and a blank page - it is possible to evolve a way of verifying and monitoring the oil that has been produced according to best practices in terms of the environment, in terms of human rights and community relations and in terms of making sure the money that the state earns from that isn't stolen. We think it's worth investigating in some detail.

You are holding a conference on transparent oil in Libya. What do you hope to achieve?

The idea of the roundtable is what, if anything, leaders would like to do to make sure that the oil industry in Libya is run better for the people of as a whole and to avoid some of that massive corruption, which is so intricately linked to secrecy and authoritarianism.

Do you think Libya could become a showcase model that could work for other countries as well?

Yes, we hope Libya could become a model. I was at a press conference in Tripoli three or four weeks ago in which they published figures down to the dollar and the numbers on the bank account. The current leadership has shown a very high degree of transparency so far.

They have a lot of issues to deal with in getting the economy running, dealing with all the political fallout and establishing security, so it's not going to be a smooth ride. But it does offer huge potential. But to what extent Libya can be a model to all other countries… First it's massively oil rich, so it faces a different set of issues even to say Egypt. Egypt has a $30-billion-a-year oil and gas industry, but it's not in any sense oil rich. Nevertheless, the bad and non-transparent management of that industry creates serious problems inside the politics of Egypt as well as the economy. Those issues are distant to Libya because it is super oil rich. Maybe a marginal, early-stage West African producer like Liberia or Sierra Leone is not going to think much one way or the other because it does not see itself in the same peer group, but even if Libya were to only serve as a regional super-rich model - imagine how the oil industry starts to looks to citizens of Saudi Arabia and Kuwait and the UAE when it's being transparently and well-run in Libya.

Given the diversity of countries, situations and the interests of huge oil companies, why do you think your ideas of a transparent, just and social oil industry will be put in practice?

I think the time is on our side. It's true we're against high odds, so to speak, but we are always looking for a win-win. I know it's popular to think of everything as a zero-sum game when it comes to oil and big oil, and we love to hate them. But there are win-wins if you can present governance as avoidance of litigation in a very direct appeal to the business' gut instinct.

It's such a zillion dollar industry and you don't have to be claiming to transform it overnight to find a lot of worthwhile things to do. We could just let it go and say nothing could be done and anyway, we don't like fossil fuels, and we're waiting for a post-carbon economy sometime in the 2050s. We think that is too long to wait, and we think something can be done.

Interview: Anke Rasper / sms

Editor: Sam Edmonds