Impact sharing agreements an answer to Tullow-Turkana woes

By Valentine Ataka

The stand-off between Tullow Oil Plc and the Turkana community in Northern Kenya is not just a shame; it is also a bad sign, a very bad tell tale sign of things to come. Remember, strictly speaking, all operations in the area are still exploratory. Your bet is as good as mine on what to expect once (if) limited production starts next year as projected.

The unfortunate incident of protest by locals expressing dissatisfaction with Tullow’s ‘failure’ to employ enough locals leading to the latter suspending its operations and evacuating its workers brings to fore serious issues relating to security, investment viability and Corporate Social Responsibility (CSR) commitment. Questions now abound on whether the Turkana region is secure enough to carry on the operations; whether the success prospect is worth the risk and of course whether the IOC is doing enough to meet the legitimate expectations of the local communities.

Much as such stalemates are not new to any oil and gas operations world over, I dare say they are avoidable if communities and operators are willing to make certain structured commitments and concessions. This has been done elsewhere through formalised social contracting tools known as an Impact Benefit Agreements (IBAs) or Benefit Sharing Agreements (BSAs).

Tullow’s operations (and all the other operations of oil companies) in Kenya is governed by a Production Sharing Contract (PSC) between it and the national government. A look at Clause 13 of Kenya’s standard PSC reveals that the Company is under an obligation to ‘employ Kenya citizens in the petroleum operations, and until expiry or termination of [the] contract, train those citizens’. Two things stand out in this provision.

The clause is non-specific on proportions and is grossly generic in speaking of Kenyan citizens and not necessarily ‘local communities; probably for a good cause. It follows therefore that even though Tullow has now come out and declared that in fact 57 per cent of her employees are from Turkana, there is strictly speaking no legal obligation on the company to source any given proportion of its work force from the local community.

That said, the company cannot run away from the reality that locals have legitimate expectations to have the lion’s share of jobs at the operations sites. Whilst such expectations might have no basis in law, Tullow knows better than to turn a blind eye to the grievances voiced. Tullow knows that irrespective of the safety it might find in statute or the PSC, it needs social acceptance of its operations in the area.

It must address itself to the demands of the Turkana people. Such conflicting interests exist in realms beyond what is provided for in law and must be looked at broadly as those affecting an international company’s stature as a responsible corporate citizen. Specifically Tullow by committing itself to the international (US and UK) Voluntary Principles on Security and Human Rights as adopted by companies in extractive and energy sectors has an enduring interest in pursuing an approach to the problem that addresses the root cause thereof (poverty, unemployment and lack of capacity) as opposed to a strict legal obligation. However there is the problem of ascertaining the scope of demands that the local communities might pose in proportion to what the company is genuinely capable of doing.

On the other hand as things stand there is no framework within which the local communities can negotiate, measure or quantify the impact benefits from the operations. The option adopted by industry players and communities in other countries in such circumstances is the use of IBAs and BSAs which are recognised by the united Nation’s Permanent Forum on Indigenous Issues as acceptable practice in resource benefit sharing.

An IBA is a written quasi-legal agreement that is the outcome of a consultation process about a proposed resource extraction, project or development that has the potential to impact the rights or interests of local communities. Though usually not required by law, it is a tool often used by companies in extractive industries to secure social acceptance of upstream projects and ensuring certainty in the demands of the local communities.

The writer is an Advocate of the High Court of Kenya