Long read … but worth it. Why Tullow Oil
Tullow Oil does not have a social licence to operate in Turkana, Kenya.
In 2015 when Tullow Oil’s partner Africa Oil discovered that Tullow had spent (without authorisation) nearly $100 million on drilling wells they were dumbfounded. They threatened to sue Tullow Oil to recover unauthorised spending. Tullow Oil fired its operations and drilling manager for the unauthorised spending.
Then Africa Oil went (begging cap in hand) to the World Bank’s International Finance Corporation (IFC) for $50 million to continue operating in Turkana. The United States Treasury smelt a rat. The treasury was troubled by IFC’s lack of disclosure of key documentation that would have allowed a more thorough assessment of the risks associated with the investment, (all the more troubling given the project’s potential for significant impacts on critical habitats and marginalized and indigenous communities).
In addition, the United States treasury was deeply concerned about:
(1) Tullow (Operator) and Africa Oil’s exploration activities, which are in critical habitats or land claimed by marginalized communities; these fall outside the scope of the IFC’s proposed investment.
(2) Lack of sufficient financial additionality. Africa Oil, a predevelopment stage company with no cash flow, is publicly listed on two separate stock exchanges, with a market capitalization of nearly $800 million, signifying ample investor demand given its potentially lucrative holdings.
(3) Environmental and social (E&S) impacts. Why did the IFC deem it necessary to put in place E&S management systems when IFC’s performance standards should already apply to Africa Oil through the involvement of Tullow Oil and Helios Investment Partners LLP, Africa Oil’s largest shareholder and current IFC investee.
The $50 million agreement required Tullow Africa Oil and its partners to comply with the IFC Performance Standards on Environmental and Social Sustainability (2012) and undertake specific actions detailed in an Environmental and Social Action Plan (ESAP) and Environmental and Social Review Summary (ESRS).
Environmental Resources Management was commissioned to act as the Independent Monitoring Group (IMG), The first three reviews were undertaken in December 2015, July 2016 and January 2017. The fourth review, undertaken in July/August 2017 desk-based given travel restrictions to Kenya during the August 2017 elections, and comprised a review of documents, project presentations by video conference and email discussions. (Yes – can you believe it, a desk-based review.
So, after two years and four reviews Tullow and Africa Oil are still not compliant with the findings of the four reviews by the “independent monitoring group”. Tullow Oil and Africa Oil are continuing to finalise and operationalise relevant management systems, plans, procedures and guidance to ensure effective identification and management of environmental and social risks. It seems the United States treasury were correct with their concerns.
The list of non-conformances number 22. They are Level 1 which means that the issue or situation is not consistent with applicable standards or commitments. The IFC dilutes the criteria slightly by adding that the non-conformance does not pose an “immediate risk” or impact to resources or receptors, but must be corrected “sooner” than “later”.
Here is the list of the 22 non-conformances.
(1) Lack of Free, Prior and Informed Consent for Land Access
(2) Inadequate Environmental and Social Assessment Systems, Policy, Identification of Risks and Impacts, and Management Programmes.
(3) Inadequate Organisational Competency, Capacity and Training.
(4) Poor Monitoring and Reviewing of Social and Environmental issues/impacts
(5) Inadequate Contractor Management and Training.
(6) No measures in place to manage worker grievances
(7) No Site Specific Environmental, Health and Safety Plans
(8) No site-specific assessments regarding road design. Inappropriate road design standards
(9) No procedures for assessing sites
(10) No sediment Erosion control plan
(11) Site Restoration Guidelines inadequate
(12) No documentation of community profiles of the potentially affected communities’ exposure to risk and disease including the potential impact of project activities on communities
(13) Inadequate data or baseline on biodiversity conservation and sustainable management of living natural resources
(14) No specific assessment on Ecosystem services
(15) Inadequate Conservation significance mitigation
(16) Inadequate Biodiversity Action Plan
(17) No invasive species management
(18) Unsatisfactory Decommissioning and Restoration practices and plans
(19) Inadequate Supply Chain Sustainability assessments
(20) Inadequate Monitoring and Evaluation Criteria regarding biodiversity, natural resources
(21) Inadequate compliance with IFC performance standards in exploration blocks with regard to biodiversity
(22) Poor Restoration activities re site rehabilitation
One has to ask why the IFC took the risk with this investment.
Note: IFC are bound by their own standards, governance and regulations to closely monitor, all aspects of Tullow (Operator) and Africa Oil’s operations, and that the IFC will promptly provide the US Treasury notice of any adverse environmental and social impacts stemming from Tullow and Africa Oil’s operations.
Let us see if this happens.