Sudan in the Global Context

1. Sudan in the Global Context

2. Global Energy Security: The importance of Africa • Increased global energy demand, an unstable Middle East and depleting finite resources (Peak Oil) means that sub-Saharan Africa is now playing an important role in the supply of oil and gas • The US is now heavily dependent upon sub-Saharan Africa for its oil supply with Nigeria being its sixth largest oil supplier. This will increase to 25% by 2015 • Sudan is a relatively small player in the global market, but nonetheless significant and important to the new emerging economies China and India

3. What is happening across sub-Saharan Africa • To date the exploitation of oil and gas resources in Africa has not brought the economic prosperity as predicted • Rather poverty, environmental degradation and conflict have become the norm • There is little best practice in an Africa context that can be shared

4. Why is this? • Poor governance underpinned by weak institutions • Little or no transparency and accountability (what happens to the oil revenues?) • “Dutch Disease”: Oil dependence with little development of other economic sectors

5. Corporate Social Responsibility and the Oil Industry

6. The Rise of Corporate Social Responsibility (CSR)? • An erosion of the Licence to Operate (Shell in Nigeria, BP in Colombia) • Rise of a need for a Social Licence to Operate • Changing expectations of shareholders communities and other stakeholders • Beyond Philanthropy: A need to do much more than “community projects” • A Public Relations exercise in which oil companies have become excellent at “spin”

7. What Corporate Responsibility is not? • A panacea for all of the social and economic problems in a country • Oil companies cannot and nor should they become a surrogate state • Ultimately the Government is responsible for providing services for its citizens. • It is based on Voluntary Principles; there are no mandatory rules and regulations for oil companies to adhere to

8. CSR within a Local Context • Do oil companies have a special responsibility when operating in countries which are politically unstable with a high risk of conflict or return to conflict? • How far should the responsibility of an oil company extend?

9. What Oil Companies will tell you • “It is not our place [as an oil company] to comment or become involved in the politics of a country” • “We abide by the laws within the host state” • “We are committed to the protection of human rights and support the UN Declaration of Human Rights” • “We exercise the same environmental standards wherever we are operating”

10. Case Study: What happened in the Niger Delta • Nigeria is currently losing 10% of its oil through illegal oil bunkering and deferred production – in 2006 600,000 bpd was being deferred due to community disturbances • Violent conflict perpetrated by armed gangs and hostage taking have become the norm in the Delta • Shell who is the main operator has spent millions on community projects but its licence to operate has now simply been eroded. • WAC Report 2003: If current conflict trends continue uninterrupted, it would be surprising if [Shell] is able to continue on-shore resource extraction in the Niger Delta beyond 2008…..

11. The Human Security Complex

12. The Human Security Complex • The security of Oil Company Personnel and its Operations should not be seen as more important than the security of Local Communities • The Oil Company’s security resides with it’s Local Community and vice-versa • Both are intrinsically linked and one cannot be achieved without the other

13. The Human Security Complex • It is essential for the oil companies to work with the local communities and vice-versa in order that a secure environment is maintained for both sides • Community policing: Security should come from within the community. Security is there to provide a service rather than to be an enforcer • The mutual aim of security is to create an environment of understanding and peace

14. Voluntary Principles: Security and Human Rights • Launched in 2000 the VPs provide a set of guidelines for companies to reduce the risk of their security arrangements leading to human rights abuses. This framework is seen as the international best practice on this issue and is referred to by the other frameworks. • By 2007, 16 extractive companies had committed themselves to implementing the Voluntary Principles. The companies include Anglo America, BG Group, BHP, BP, Chevron, ConocoPhillips, ExxonMobile, Freeport,Cooper & Gold, Hess, Marathon, Newmont Mining, Norsk Hydro, Occidental, Rio Tinto, Shell and Statoil. Other members of the framework include the governments of UK, Norway, the Netherlands and the US and 7 non-governmental organisations and three observer organisations and the International Committee of the Red Cross. • The Voluntary Principles states that all companies should undertake a risk assessment and follow 14 recommendations concerning companies dealings with Public Security Forces (grouped under Security Arrangements, Deployment and Conduct, Consultation and Advice and Responses to Human Rights Abuses) and 14 recommendations for dealing with Private Security Forces.

15. Voluntary Principles: Security and Human Rights • Companies should note the effect that its activities may have on local communities and the importance of engaging with civil society to contribute to the welfare of the local community • Understanding that useful and credible information and the sharing of that information is a vital component of security and human rights • Supporting efforts towards strengthening institutional capacity within the security sector

16. Voluntary Principles: Security and Human Rights • “The quality of complex risk assessments is dependent upon regularly updated and credible information from different sources – local and national governments, security firms, other companies, home governments, multilateral institutions and civil society” • “This information may be most effective when shared to the fullest extent possible[…..] between companies, concerned civil society and government

17. Voluntary Principles: Security and Human Rights: The Role of SOHSI • The Voluntary Principles should be seen as a tool and a guidance for the communities to utilise for levaraging their position within the security debate and helping them to engage more effectively with the oil companies. Thus the Voluntary Principles provides opportunity for a more inclusive security arrangement. • SOHSI could be used as the lead forum to launch and help implement the Voluntary Principles at the local level- taking into account the local context - and could help provide training and independent monitoring. • Supporting these Voluntary Principles would be the implementation of fully participatory independent SEIAs. • There are expertise in the field on what makes a good SEIA. SOHSI could run a series of local workshops using an expert on SEIA to inform what communities need to expect when an SEIA is conducted.

18. Making CSR Work in a Local Context • A Project Manager who is socially engaged in the country; he/she wants to be there (with their family) • A Project Manager who is empowered to make his/her own decision on the basis of local needs • No overbearing safety rules and security restrictions – assess what are real threats and what are not • Individual responsibility rather than ‘Corporate’ responsibility

19. Making CSR Work in a Local Context • OIL SEARCH is a small Australian oil company operating in Yemen • It is the first oil company in Yemen to apply full transparency in its dealings with the local communities • The Project Manager genuinely likes Yemen and makes an effort to really understand the local communities • The Project Manager is empowered to make his own assessment of what needs to be done to meet local needs - Oil Search has an impressive environmental record – it listens and takes appropriate action • Of all the oil companies working in Yemen which include Total and Agip, the Ministry of Oil always goes to Oil Search for advice

20. Oil Companies on Corporate Social ResponsibilityCNPC and Petronas

21. CNPC and Corporate Social Responsibility • “CNPC continues to have close relations with local communities, and makes active efforts for local economic development and the improvement of living standards of the people”.

22. CNPC and Corporate Social Responsibility • “CNPC regards people and the natural environment as the most important resources. As one of the world's major energy company, we operate in accordance with the highest business principles and code of ethics. We respect all the related laws and regulations as well as the culture of each of our host countries. Every CNPC staff-member is dedicated to the "Caring for Energy, Caring for You."

23. PETRONAS and Corporate Social Responsibility • “PETRONAS AND THE COMMUNITYAs a responsible corporate citizen, PETRONAS has successfully initiated and supported various social, environmental and community projects, partnering with non-profit organisations, geared to help the community gain from economic and social opportunities and a better quality of life.”

24. PETRONAS and Corporate Social Responsibility • “PETRONAS is environmental- friendly by exercising care and taking reasonable precautions to mitigate any adverse impacts its business operations may have on the environment operational wise.” • “PETRONAS is continuing its efforts to promote sustainable development. To this end, PETRONAS has developed a corporate sustainability framework to monitor, track and promote initiatives in seven relevant and pivotal areas identified by the Group - shareholder value, energy demand, societal needs, HSE, product stewardship, climate change and biodiversity.”

25. Oil Companies and the Environment

26. International Environmental Standards in the Oil Industry • An absence of adequate environmental laws and enforcement in developing countries • The regulating of onshore oil activities of the oil and gas industry falls within the domestic jurisdiction of the state • Oil companies have been asked to voluntarily adopt their own acceptable environmental standards

27. International Environmental Standards and the Oil Industry • Guidelines and standards for oil and gas exploration can be found with The International Association of Oil and Gas Production (OGP) and with various NGOs and IGOS that are influential: IUCN, UNEP, ISO, WB ICC, WBCSD • Voluntary codes and guidelines contain three types of standards for protecting the environment: - Construction Requirements: underground storage, pipelines etc. - Environmental Practices: limiting omissions and the implementation of waste disposal methods - Environmental Performance: adoption of environmental management procedures and systems

28. Environmental Impact Assessment (EIA) • An EIA has the potential to be a very powerful tool to ensure that environmental and cultural impacts are assessed • As part of the EIA process (under national EIA legislation) a Social Impact Assessment (SIA) is a method of assessing the impact of development strategies and projects on societies and cultures • The EIA is a prerequisite to the approval of a major resource development project

29. Environmental Impact Assessment • EIAs are usually produced by the project proponents who have the greatest stake in the acceptance of the project • EIAs should be conducted prior to the commencement of a project but in practice EIAs are conducted after an economic and technical feasibility study with the developer already committed to the project

30. Environmental Impact Assessment • Public participation including local communities are an integral part of the EIA process, however participation can be limited if access to critical information is withheld • The environmental impact statement does not have to be adhered to – it can be ignored by the oil company • Post decision monitoring is often inadequate or non existent • It can end up being little more than a box ticking exercise

31. An Alternative ModelThe UK Shetland Isles: A Positive Experience of Oil

32. An Alternative Model • Shetland offers three elements of best practice: - Community Empowerment - Protecting the Environment - Community Development

33. An Alternative Model • Community Empowerment: Shetland realised at the beginning that the Oil Companies needed Shetland more than Shetland needed the industry • The Shetland Council representing the local community devised a strategy in which they would only negotiate with all of the 33 oil companies operating in the North Sea – counteracting the divide and rule strategy the oil companies wanted

34. An Alternative Model • Protecting the Environment: It recognised that oil presented a great environmental risk to Shetland. An independent environmental group was established with the Universities of Aberdeen and Dundee which provided: - Proactive independent research - Independent Environmental Impact Assessments - Independent regular monitoring and auditing

35. An Alternative Model • Community Development: The Shetland community receive Disturbance Payments - a penny per tonne of oil coming through the terminal. • This has resulted in a long-term large source of income for the community - currently worth £250m - placed in a Charitable Trust • The Trust allocates the fund in relation to the demands and needs of the community – health, education, culture and arts

36. The Way Forward for Sudan

37. The Way Forward: What the Sudanese communities can do • Create a centre of understanding and knowledge about the oil industry – this is vital for strengthening the communities’ negotiating position • Build links and strengthen relations between communities across the oil-producing region in Sudan – this will strengthen the communities’ negotiating position and break the “divide and rule” strategy that the oil companies often like to play

38. The Way Forward: What the Sudanese Communities can do • Strengthen links with other African States affected by oil and gas exploitation to enable sharing of knowledge and expertise, best and worst practice and lessons learnt • Strengthen the media capacity in Sudan in the monitoring and reporting of oil

39. Community Cohesion is the Key • The Niger Delta, Shetland and Papua New Guinea (Hides) provide interesting learning • The Niger Delta is writhe with ethnic conflict, exacerbated by the control of the resources which undermines their negotiating position • In Papua New Guinea a cohesive community with a strong community leader worked in their favour • In Shetland, the community were divided regarding the oil industry’s arrival on Shetland – whether it would be positive or negative. However, seeing that it was inevitable, they chose to unite and work together to get the best for Shetland as a whole.

40. Other Slides

41. International Guidelines for Oil Companies • There are no mandatory rules or regulations in which MNCs have to abide by • All of the initiatives which provide guidelines for oil companies are based on voluntary principles

42. The Extractive Industry Transparency Initiative • “The Extractive Industries Transparency Initiative (EITI) supports improved governance in resource-rich countries through the verification and full publication of company payments and government revenues from oil, gas, and mining.  The Initiative works to build multi-stakeholder partnerships in developing countries in order to increase the accountability of governments.” • “Good governance is a precondition for converting large revenues from extractive industries into economic growth and poverty reduction. When transparency and accountability are weak, the extractive industries may instead contribute to poverty, corruption, and conflict—the so-called “resource curse.” The EITI is an important step in defeating this “curse.””

43. The Extractive Industry Transparency Initiative • The primary beneficiaries of EITI are the governments and citizens of resource-rich countries. Knowing what companies pay and what governments receive is a critical first step to holding decisionmakers accountable for the use of revenues. Resource-rich countries implementing EITI can benefit from an improved investment climate by providing a clear signal to investors and to international financial institutions that the government is committed to strengthening transparency and accountability. • Companies and investors, by supporting EITI in countries where they operate, can help mitigate investment risk. Civil society can benefit from an increased amount of information in  the public domain about those revenues that governments manage on behalf of citizens. In summary, implementing EITI as part of a program of improved governance will help to ensure that oil, gas, and mining revenues contribute to sustainable development and poverty reduction.

44. The Extractive Industry Transparency Initiative • The EITI initiative is based on Voluntary Principles • Companies are encouraged to support it, but the emphasis is on the governments of resource rich states • So far not one country has been formally validated against the criteria thus achieving compliancy

45. OECD Guidelines • The Guidelines constitute a set of voluntary recommendations to MNCs in all major areas of business ethics, including human rights and the environment

46. UN GLOBAL COMPACTTen Principles Human Rights: • Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and • Principle 2: make sure they are not complicit in human rights abuses

47. UN GLOBAL COMPACTTen Principles Environment: • Principle 7: Businesses should support a precautionary approach to environmental challenges; • Principle 8: undertake initiatives to promote great environmental responsibility; and • Principle 9: encourage the development and diffusion of environmentally friendly technologies

48. The Relevance and Importance of these Initiatives for Sudan • All of these initiatives and guidelines are limited because they are all based on voluntary principles • However, it is important that the oil companies are encouraged to embrace this voluntary principles, because it provides a window of opportunity for communities to begin a dialogue with the oil companies

49. Three workshops have been held in the past 18 months: two in Khartoum and one in Juba The Sudan Oil and Human Security Initiative (SOHSI), was born out of dialogue between local communities, oil companies and local government What do we mean by Human Security? How SOHSI Evolved

50. THE HUMAN SECURITY COMPLEX FEAR CONFLICT MISTRUST HUMAN INSECURITY REJECTION TENSIONS COMMUNICATIONBREAKDOWN