Leaked documents & PLATFORM report reveal extent of RBS-financed oil threat to Uganda

Impacts of British oil corporations’ secret contracts in Uganda finally revealed. Leaked company audits confirm concerns over revenues & environmental damage in project backed by bailed-out RBS
Protester with megaphone outside RBS HQ in London

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Late last month, 84% publicly-owned Royal Bank of Scotland led a deal to provide Tullow Oil with around $1 billion of new finance to support a controversial oil project on the border between Uganda and the Democratic Republic of Congo which has long been struck by a resource war. Today, People & Planet’s campaign partners PLATFORM can reveal how damaging this project really is.

Confidential oil contracts and audit reports for British/Irish companies Tullow Oil and Heritage Oil’s operations in Uganda on the Lake Albert border with Congo have been revealed today. These are accompanied by a legal analysis published by PLATFORM in partnership with the Civil Society Coalition for Oil in Uganda.
Uganda is heading towards oil production in 2010/11 with no oil legislation yet in place, no revenue management system, and is locked into contracts that undermine the country’s sovereign control over its own natural resource.

The report ”Cursed contracts: Uganda’s oil agreements place profit before people” raises serious economic and environmental concerns about how oil will be extracted at Lake Albert.

The terms of Uganda’s Production Sharing Agreements, which the oil companies and Ugandan government continue to refuse to release, are now available online. Two confidential audit reports carried out by Ernst &Young in 2009 have also been made publically available. These confirm a number of PSA clauses, raise concerns over environmental damage and warn of the companies inflating their costs.

In the report released today, PLATFORM has investigated the contract terms relating to economics, sovereignty, human rights and the environment, examining relevant paragraphs in the Ugandan context, in relation to current oil company practice in Uganda and in comparison to contract terms in other countries.

The analysis works article-by-article through the Production Sharing Agreement and, in particular, raising questions about:

How the structure of the deals guarantees huge profits for the companies while placing risks and responsibilities on the Ugandan government (p.6)
The lack of transparency over bonus payments to the Ugandan government (p.7)
The complete absence of penalties for environmental damage caused by the companies (p.22),
The legal rights granted to the companies to flare natural gas (p.19)
The ‘stabilisation clause’, whose breadth has been confirmed by access to a confidential Ernst&Young audit report (see note 3), which will restrict Uganda’s ability to improve its environmental protection and human rights standards in the future (p.27)

The report recommends that: ”Urgent changes should be made to the contracts, legislation and regulatory regime covering oil, to achieve some level of environmental protection, to ensure accountability for military forces enforcing security, to protect a degree of Ugandan sovereignty, to minimize economic distortion through revenue flows, to capture a more appropriate share of the revenues and to re-apportion the economic risks.”

Tullow has repeatedly stated that they are committed to ensuring they operate according to ”good international and industry practice” – but PLATFORM’s report (pdf) reveals how this is meaningless when there is no such agreed standard and no contractual enforcement mechanisms for the host country.

PLATFORM campaigner Mika Minio said:

”The reality is that extracting Ugandan crude is most likely to exacerbate poverty, distort the Ugandan economy, exacerbate human rights violations, entrench the power of military forces, escalate tensions across the border with Congo, create new health problems for local communities, increase both intentional corruption and revenue mismanagement, reduce Uganda’s wildlife stocks and pollute the land, water and air.”

PLATFORM researcher Taimour Lay in Uganda said:

“Tullow’s statements demonstrate strength in corporate responsibility rhetoric. Yet their practice here on Lake Albert tells a different story – one of arrogance, environmental damage, collusion in secrecy and indifference to human rights abuses.”

Taimour Lay added

“The confidential documents we have published make clear that the corporations and the government cannot be trusted to protect the Ugandan people from the negative impacts of oil extraction. It is up to social movements and civil society to create the pressure to defend rights, livelihoods and Uganda’s rich environment.”
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