No Transparency Provisions in Draft Oil Law

After years in the drafting pro­cess, a copy of Cambodia’s much-anticipated draft petroleum law obtained this week shows that there are still no provisions governing the public disclosure of payments made to the government by oil and gas companies.

Dated February 2010, the draft could still see changes, though several sources interviewed this week said that the copy appeared to be the latest versions of the pro­­­posed law.

Advocacy groups have criticized the apparent lack of legislation on financial transparency in the draft and said that the law would do little to deter public skepticism when payments from the sector are not publicly declared.

According to the draft law, companies must report all oil discoveries, work programs and financial information, including “proper accounting,” to the Cam­bo­­­dian National Petroleum Au­thor­­ity (CNPA), the government’s regulatory body. It also says the CNPA is in charge of collecting all fees from oil and gas companies.

“The law leaves much up to oth­­er pieces of legislation and many questions unanswered,” George Boden, a campaigner for the environmental watchdog Global Wit­­ness said in an e-mail.

“It does not put in place adequate safeguards to protect people and the environment and it does not cover revenue collection and management or downstream activities,” Mr Boden said.

“What is most concerning is that the law does not refer to transparency over information relating to the petroleum sector or public consultation.”

Diep Sereiviseth, personal assistant to CNPA Chairman and Deputy Prime Minister Sok An, said the draft was still being developed.

“This is not a finished draft and certainly not a public document to comment on. We are still working on it and will need comments from the industry and other stake holders input,” he said in an email.

While it is uncommon for national petroleum laws to include financial disclosure provisions, laws geared at financial transparency, including those from the oil industry, are good practice, said Borre Gunnerud, a legal consultant contracted by the Norwegian Agency for Development Cooperation (Norad), who worked on one of several draft petroleum laws for the CNPA from 2006 to 2010.

“As far as I know, such a law does not exist [in Cambodia] and no such law is in progress,” he said.

“Without transparency,” he added, “there is always the risk that funds don’t go where they are supposed to go.”

Public disclosure of revenues from the extractive industries is vital to ensure that all Cambodians benefit from the wealth generated from oil and gas, said Oxfam America’s East Asia Regional Program Coordinator Lim Solinn.

“All aspects of [a] petroleum legal regime should clearly discuss the types of revenue and the role of regulatory ministries in revenue collection and management of the industries,” Ms Solinn said, highlighting the importance of a government body separate from the CNPA that would be responsible for collecting oil revenues.

“At the end of the day, Cambodian people at large should benefit from this transaction, as they are the ultimate owner of the resources.”

Other articles in the draft law compel companies to perform “diligent conduct of exploration work programs in accordance with good oil and gas industry practices.” The draft also states that companies must ensure the “safety of employees and protection of the environment from damage due to Petroleum Operations.”

The draft law states that companies who do not inform the government of their exploration activities can be punished by a maximum fine of 50 million riel ($12,254) and between three of five years in jail. Companies who do not conduct environmental impact assessments prior to beginning exploration can also be punished by five year jail sentences.

Additionally the law states that that the government “may acquire ownership of land and easements through adequate compensation which are determined by the Royal Government to be necessary for conducting Petroleum Operations.”

Under the law the government may also establish “legal enterprises…as authorities, national companies, or joint ventures for the purpose for commercial participation in petroleum operations.”

French oil giant Total and Australian miner BHP Billiton have made multi-million dollar payments to the government’s “social development fund” though BHP, which departed Cambodia in 2009, drew negative scrutiny to the government last year when it announced that the company was the target of an investigation by US authorities over what appeared to be payments made to Cambodian officials.

Payments made to the government by other companies have not shown up on government’s books, environmental groups say.

Despite the dearth of laws on public disclosure of government finances, Cambodia is set to see an increase in revenues to the state when US oil giant Chevron Corp begins extraction off the coast late next year.

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