BY CHRISTIAN TURNER
The discovery of oil and gas can be a defining moment for nations. Lessons from other countries reveal the potential and pitfalls of a booming extractive sector. While it can boost an economy and fuel growth in other sectors, it can also distort the economy (the so-called ‘Dutch disease’) and foster conflict and insecurity. In Kenya, the oil and gas sector has a huge potential to secure foreign investment and a significant boost to GDP. As IMF Managing Director Christine Lagarde recently said, it is a one shot chance for Kenya to drive inclusive growth. However, managing expectations and tensions is critical.
The UK remains committed to working with Kenya to develop the extractives industry. UKAID has committed £3.5m (about Sh503m) towards the development of local content, technical advice towards developing relevant pieces of legislation and regulation, promotion of transparency, and production of evidence based research and engagement with the industry and the civil society. We believe by working together we will be able to realize Kenya’s Vision 2030 aspiration to be ‘Africa’s oil, minerals production, logistics, trade, services and manufacturing hub’.
We encourage Kenya to sign up to the Extractive Industries Transparency Initiative (EITI), a voluntary approach set up to help tackle corruption, improve the way revenues from oil, gas and minerals were managed and make sure that people across the world shared in the economic benefits of the natural resources in their country.
Nigeria, Tanzania, Zambia and Mozambique are all EITI compliant, and seeing the benefits. We believe that EITI membership would bring similar and benefits for Kenya and help create the environment which will attract investment and delivery of Vision 2030, as well as help facilitate the equitable and sustainable development of the Kenyan extractives sector. Joining EITI at such an early stage in the development of the extractives sector will help to maximise the benefits and avoid some of the challenges seen in other countries.
The UK has significant expertise in oil and gas and British companies have much to offer in partnership with Kenyan and other companies. Several decades of impressive and profitable exploration and production of the North Sea Oil and gas reserves has provided the UK with a global competence, in all aspects of exploration and production.
Tullow Oil leads the way in oil exploration while BG Group and Ophir Energy are leaders in offshore gas exploration. Smaller UK companies are also present such as Afren and Bowleven. These companies are committed to adding value into the Kenyan economy, building Kenyan expertise and creating jobs.
Globally, in the early 2000’s, Governments, private industry and civil society were concerned about rights violations in some resource-rich regions. Continued tensions in Niger Delta and elsewhere led to impetus to develop agreed standards on rights policy, legislation and institutional frameworks.
The Voluntary Principles on Security and Human Rights were developed in response to this need and are the only human rights guidelines designed specifically for oil, gas, and mining bodies. The Voluntary Principles provide a widely accepted framework by which the extractive sector can manage its operations in a manner that reduces the risk of human rights abuses and conflict and increases the chances of the industry helping deliver economically and socially sustainable development.
This framework has benefits for business, local communities and the nation state. Following the Voluntary Principles can help companies build good relations with the communities in which companies operate. This helps deliver a stable operating environment and so reduces the risks and costs for investors putting their money into new areas of oil and gas development: put simply, it’s more profitable to operate if you don’t need to build fences around your sites. This, in turn, helps to encourage more responsible investment to the benefit of the local communities and the host Government.
Adherents to the Voluntary Principles can include Governments, companies and NGOs. They meet at least once a year to share best practice and to discuss implementation challenges. The more countries that take part, the more widely these principles can be implemented and their benefits felt. Current members include Ghana, Colombia, Norway, Netherlands, the UK and USA.
The UK has the chairmanship of the Voluntary Principles process for the next one year. Our key priorities for this year include encouraging more governments to join the Voluntary Principles and strengthening companies’ transparent and accountable implementation of the Principles in line with the UN Guiding Principles on Business and Human Rights.
To this end, we will be holding a high level two day forum on the 6th and 7th October in Nairobi on ‘Building a secure environment for responsible investment in Kenya’s extractives sector’.
(Dr Turner is the UK High Commissioner to Kenya)