So goes Sudan’s gold rush. ‘Artisanal mining’ is the phrase normally used to describe the phenomenon of ordinary people digging for minerals with basic equipment. We hear a lot about it in Eastern DRC, some West African states, parts of India.

But it doesn’t describe what’s happening in Sudan. There’s not much ‘artisanal’ about it. The orderly, Mahmoud, has a nephew, Mohammed, a recent graduate from Khartoum University, who tells me he has friends from college who have just headed out into the desert for months at a time, digging with a pick axe, a spade, sometimes scrabbling with their bare hands. But they have no training and no craft. An American miner who visited the fields says that most of the prospectors don’t know how to set the metal detectors they have bought, sometimes for up to $12,000, so that they can spend hours digging to find it was an empty biscuit tin or food packet that triggered the machine.

And the most astonishing thing of all about Sudan’s gold rush is the way it materialised from nowhere. Five years ago, nobody was digging for gold. Now estimates put up to two hundred thousand men in the northern deserts at any one time. How is it that gold was ‘discovered’ so late, and embraced so widely – just as Khartoum’s major source of money for the last few years, oil, disappeared with the independence of the south?

The government makes no secret of its ‘plans’ – ‘prayers’ might be a better word – for gold to replace oil as the cash generator in Sudan’s economy. There’s precious little else. Agriculture is in disarray, lacking investment, prey now to land grabs from Gulf investors and export of crops which are needed at home for a population of 30 million for whom prices are far too high. There is no real industry to speak of. Several hundred thousand Sudanese still work in the Gulf and send remittances, but not enough to float the economy, particularly Khartoum, now a bulging city of seven million people. And there are no jobs, especially for the young.

Mohammed shows me a film he shot in college about how there is no opportunity for the young and gifted. A man with an engineering degree from the UK returns home and can’t get even a low paying civil service job. We spend an evening with a friend of his who can quote Aristotle and Habermas – he earns $400 a month as a bell boy in a hotel. And that’s the educated elite. Hawkers sell the usual array of goods at traffic lights and, in the shanty towns which now surround the old town of Khartoum on all sides, a million young men or more hang around with nothing much to do.

And then gold came, all of a sudden. Industry figures put Sudan’s gold production as four tonnes in 2009. Sudanese government figures have jumped that to 41 tonnes of gold last year, worth about $2.5 billion. Though how they know that, since he also says that most of that is outside any kind of government ambit, is hard to say. There was only one foreign company active in Sudan, the French ArialGold. now the government says 128 companies are active.

It’s hard to make those figures add up. A recent report by France24 from the country’s only industrial mine, operated by an affiliate of Areva, quoted the French engineers on site as saying it had produced about two tonnes a year in the last few years, and the operation turned over about 65 million euros. And it’s not clear even if the rosiest of predictions came true that it would balance the government books. Nobody knows with precision in Sudan but oil probably made up two thirds of government income before South Sudan’s independence in 2011. That dropped to virtually nothing last year when the South shut oil production in. The government will earn some revenues from the re-opening of the pipe, but not much compared to its yawning needs. It has to all intents and purposes given up providing much in the way of public services like health and education.

The rise of the official shift towards developing a gold industry coincided with an astonishing bombardment of media coverage about young men seeking their fortune in the deserts. Most of the gold now produced is artisanal, which means the government sees little to no tax revenue from it. It finds is way to Port Sudan and a network of traders who know how to place it into world markets.

But the question is, what is the connection between the popular gold rush, and high government policy?

Ask ordinary Sudanese if they actually know anyone who’s struck it rich and they all do. The guys from Gedaref who came back and moved out of their tin shacks into an actual house with bricks and a roof. The young man from a poor family who could suddenly afford a big four -by-four. It’s never anyone close, though, always someone from the town or the neighbourhood. As a distribution, the chances don’t seem that high.

The structure of the industry takes care of that. The vast majority of those working the wells and scratching in the dirt are on a daily subsistence allowance and a notional cut of anything they find. The allowance barely covers their costs – since all food and provisions cost twice to three times as much in the desert as they do even in Khartoum. A small bottle of water might cost $3 in a country where the average income per head is $40 per month.

The workers sign on for a trip of two to three months with an ‘investor’, a guy with enough capital to get them there in a truck, own a few metal detectors and some kit to break up rocks. Different outfits just set up an operation wherever they feel lucky – there are no licenses or rights awarded and no local authorities to arbitrate. There are no facilities. Most miners sleep on bare ground and live for a couple of months out of a knapsack. No cover, no privacy, nowhere to wash.

The mines can be up to 20 metres deep but are often less, depending on the equipment available. Out of a vertical shaft, they will dig many horizontal tunnels, and the haphazard nature of this development is what makes the wells vulnerable to collapse. Up to 100 people died in one such complex of tunnels in Jebel Amir in Darfur in April. The team owner puts guards at the top of the wells to search all miners ending their shifts, to ensure they aren’t withholding any nuggets.

The whole context is anarchic. There are frequent disputes within and between mining teams. An unknown number of people died at the same mine which collapsed in Darfur back in February when two Arab tribes fought for ownership of it. Mahmoud says he has seen a single mountain with perhaps 2,000 men mining it when news – or rumour- spread of a couple of decent finds. Mining is said to have picked up in areas controlled by Malik Agar, a former rebel reconciled to the regime under the peace agreement in 2005 and now split again and waging insurrection as the Sudan Revolutionary Front – the rebels, too, would like as much ready cash as they can lay hands on. And insecurity in the mining regions is such that many Sudanese citizens consider it normal and inevitable to be stopped and robbed on their way out of mining districts. Mahmoud himself had been forced off a bus near El Obeid and robbed. Luckily, he says, he was on leave and in civilian clothing. As a soldier, he could easily have been shot.

And scams, of course, are rife. Mohammed’s cousin bought an ‘American’ detection machine from a shop and headed out into the desert. A couple of days later, he realised he had a cheap Chinese knock-off which had been re-labelled, and went straight back to Khartoum. But, one week later, the shop had disappeared without trace.

Gold mining has also entered folk-lore in these five years. There are plenty of songs about it. Stories about how a team found a rich seam before dusk but they were all dead in the morning – the jinns, or spirits, of the place had killed them. Another story about how a team is heading back empty-handed after months of scratching in the dirt. As they are having their last meal, one of the rocks heated by the fire starts to glow with liquid gold. There is a human canvass being painted which is epic and, it has to be said, tragic more often than not.

So what is the government role?

Mustafa, a businessman who once worked for a senior presidential adviser, tells me there are rumours that when artisanal miners strike a rich seam, officials come and ‘poison’ the wells with so much arsenic ordinary folk are scared off. That’s how the government locates deposits which it intends to exploit itself commercially later on.

What’s undeniable is that the vast majority of land in northern Sudan is owned by the state. And that with growing and restive urban populations, it doesn’t hurt to have millions of them fixated on the idea that there is a way out of grinding poverty.

Sudan is a country whose political leaders of virtually all ideologies have frequently shown themselves to be world class cynics. Governments who arm murderous militias and then claim they had nothing to do with resulting massacres. Rebels who cut off food aid to civilian populations under their control so the international community declares famine and sends supplies, which they then appropriate. For decades, with the lives of tens of millions of people.

In that context, it’s not at all hard to believe that the government has actively promoted gold fever as the cheapest way of prospecting. Why spend any of your own money exploring if you can get half a million men so desperate that they will drive out into the desert to do it on spec? Then you can strike the deals, favour your own companies, maybe even throw a little money into the Treasury at the end of the day.

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It’s a country where, really, anything is possible.

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Dear Minister Bias,

This year, 2013, is of unprecedented importance in ensuring good governance of the extractive sector in Mozambique. We are worried that the Government of Mozambique is falling short in its commitment to transparency.

At the EITI Global Conference, Mozambique will be welcomed as a compliant country in reporting and reconciling revenue payments made by extractive sector companies. Everyone accepts that transparency is an essential component of good governance. But transparency means more than publishing revenue payments.

In the consultation process on reforms to the EITI, Mozambique voted for mandatory contract disclosure to be a “requirement” for all EITI countries. We are surprised and disappointed to find, in the recent publication of new draft laws on the mining and petroleum sector, that there is no commitment to mandatory contract disclosure at all. Why would you advocate for contract disclosure inside the EITI, but not do it yourself?

Your current position seems to be that you will publish the “principal terms” of the contracts. OpenOil’s experience in analysing petroleum contracts shows that it is impossible to understand the implications of contract terms for government revenue without seeing all of the relevant clauses.

To illustrate this point, we append to this letter, a series of questions (indicative not exhaustive) that we consider vital to fully understanding the implications of these EPCC contracts for government revenue. This is information that citizens of Mozambique have the right to know.

There is a clear global trend towards mandatory disclosure of extractive sector contracts. From the Sydney Global Conference onwards, EITI will encourage all countries to disclose contracts. The current revision to the mining and petroleum laws provides an ideal opportunity to demonstrate Mozambique’s commitment to transparency. The alternative is to pass laws that will already be out-of-date before they are even signed.

Adriano Nuvunga, Executive Director, Centre for Public Integrity

Johnny West, Founder, OpenOil

A Review of Mozambique’s Model Exploration and Production Concession Contract

4^th Licensing Round – 2010

Following is a list of questions of vital public interest formed by a reading of the model contract of the 4th licensing round, which closed in 2010 with an award of the Lower Zambesi area to the Norwegian company DNO. But the questions pertain to all oil and gas agreements Mozambique has signed so far with international companies.

CONFIDENTIALITY

• Could the minister confirm that the terms of these contracts allow the Government to place all contracts in the public domain immediately, since clause 23 enjoins confidentiality on both parties “except as authorised by applicable law”? Since the applicable law (clause 31.1) is that of the Republic of Mozambique, the government has the contractual right to be transparent.

KEY FINANCIAL TERMS

• Royalties: Could the minister confirm that the 6% of natural gas and 10% of crude oil referred to as the Petroleum Production Tax (clause 11.5.a) is effectively a royalty for all contracts since 2007, since it seems to be levied unconditionally and before Disposable Oil is calculated.

• State Participation: Could the minister clarify the situation with regard to possible state participation in the project by a state-owned company? Clause 9.13 stipulates various conditions under which a State Participating Interest might evolve, such as the ‘soft carry’ of costs for that percentage stake being reimbursable to the Contractor as Petroleum Costs – but the contract does not specify what percentage the State Interest might be, or when in the lifetime of the project a decision to take it up might be made.

• Cost Recovery Ceiling: Could the minister provide the percentage specified in clause 9.5 as the maximum percentage of Disposable Petroleum every year? This clearly has an impact on how soon the government of Mozambique might expect sizeable revenue flows from projects governed by this contract.

• Valuation: Could the minister disclose whether there have been disagreements over valuation of Petroleum under this contract (clause 10.3) that caused an expert to be appointed to adjudicate? Or whether this has ever happened under similar valuation clauses in Mozambique’s other petroleum contracts?

• Profit Splits: Could the minister specify the rate of profit splits applied to the Contractor and the State at different R factors from 0 to 3? Does the ministry have any estimate for when the different R-factor thresholds might be reached in the lifetime of this project, and the same for other projects under similar R-factor profit share arrangements?

• Economic Equilibrium: Could the minister confirm that clause 11.9 is effectively an economic equilibrium clause? Since it guarantees adjustments to the contract to offer “the same economic benefits as it would have obtained if the change in the law had not been effected”, can the minister specify whether an assessment of such benefits under the current project has been agreed between the Parties, and if so, how has it been specified? (For example by Internal Rate of Return?). If such an assessment has not been agreed between the Parties now, does the government have its own analysis of the economic benefits to the Contractor so that in the event of new legislation affecting that, it is able to make its own proposal as to what changes would be needed in the contract to restore the existing economic benefits to the Contractor?

• Production Bonuses: Could the minister specify what bonuses are due to be paid at the start of commercial production, at 25,000 barrels of oil a day equivalent (BOE) production? And also, could she clarify whether the text intends increments of bonus every additional 25,000 BOE or every 50,000 BOE (since both are mentioned in the text, one apparently in error).

NON-FINANCIAL TERMS

• Training: Clause 18.3 states “The Concessionaire shall co-operate with MIREM in giving a mutually agreed number of Government employees the opportunity to participate in training activities”. Could the minister specify how many employees that is? Could the minister also clarify how much money has been agreed for training programs during the Exploration Period (clause 18.6)?

• Institutional Support: Could the minister clarify how much money the contract specifies (clause 18.5) the Concessionaire will pay to support Government entities involved in Petroleum Operations? To which institutions are these sums paid, have these sums in fact been paid, and who keeps a record of those payments?

• Social Projects: Could the minister specify how much money the contract specifies (clause 18.6) to be spent on social projects in areas where Petroleum is produced? Is there a list of such areas by administrative district for this and other contracts with similar clauses?

• Environmental Protection: Clauses 28.2 and 28.3 specify that the Contractor shall prevent environmental damage “in accordance with accepted standards in the international petroleum industry” and “in accordance with Good Oilfield Practices”. Could the minister specify what such accepted standards are, and provide a definition for “Good Oilfield Practices” which despite being referenced six times in this contract is not included in the article of definitions? Could the minister further clarify whether any specific environmental reporting standards, such as those of the Global Reporting Initiative or IPIECA, have been agreed?

• Environmental Impact Study: Clause 28.6 specifies that the Contractor will conduct a baseline study of the state of the environment in the concession area and the potential impact of Petroleum Operations? Can the minister confirm that a study has been carried out, and if so has it been made available to the public?

• Arbitration: Could the minister specify what the seat of arbitration under ICSID rules would be if the two parties had a significant dispute they could not solve themselves?

It wasn’t the UN – it was a workshop on the Ugandan oil sector at a hotel in Kampala. But Norway’s absence from the foreign donors gathered there seemed to underscore the challenge they face to figure out how to help Uganda make the best of its oil wealth. If all the stakeholders on the donor side can’t come together and grind out a cohesive strategy to coax the power players in government not to misuse oil money, where do they begin?

The problem, which I think donors understand but can’t do much about, is that in Uganda and elsewhere in Africa corruption doesn’t begin or end with oil. It has long been part of the fabric of political society to make an extra buck. But a shift in mentality takes more than just a few years to happen. The enabling mechanisms of corruption in the oil industry – illicit revenue flows, opaque license allocations, to start with – get moving more quickly than a new way of doing business in the chambers of government. Affecting a change in attitude will require the commitment of not only the current donor community, but probably the next generation too. By that time Uganda’s modest oil reserves will be long gone.

But let’s say for a minute that the donors are able to come together and present a unified front. What incentive will the government have – or not the government but the executive, which is subject to few checks and balances – to listen to the donors and follow management models set by Norway or Botswana? The Europeans could withhold aid to try to force the hand of the executive, but it doesn’t really need the money. Foreign aid makes up around a quarter of the government budget right now but cue oil production and that share could plummet to two or three percent. Missing a few drops in the bucket won’t convince the government to clean up its act.

So lest we get bogged down let’s add one more assumption. Say donors are able to figure out how to incentivize reform. What factions of government do they then approach? Some members of parliament are already friendly to anti-corruption efforts, especially the Parliamentary Forum on Oil and Gas, a pressure group of legislators advocating greater transparency. But many of the Forum’s members are marginalized from the body politic for their activism. They now have a relatively safe, sanctioned place to say what they want about the abuse of power but their barbs just glance off the executive’s armor. Other parliamentarians the donors go after to champion the anti-corruption cause might similarly fear being excluded or painted, as the president is fond of doing, as agents of foreign interests.

Instead, the donors should look to influence the institutions responsible for regulating the sector: new bodies like the the national oil company, the petroleum authority and the investment advisory committee; or existing institutions like the central bank, the revenue authority, the environment management authority, or the auditor general.

But there are many ambiguities in whom exactly these institutions report to, especially between the petroleum authority and the energy minister, who seems to figure along every link in the chain of management. How can donors be sure that the institutions themselves are independent? None are insulated from political interference. It’s difficult to legislate against this kind of interference anyway, even more so when there’s no great tradition of the government respecting laws it writes itself (see: Access to Information Act 2005).

Many at the workshop complained about a lack of transparency in the sector, that a bit more sunshine would make everyone’s job easier. I agree it would be great to know how much the revenue authority has already collected from license fees, royalties, signature bonuses and taxes, where the money is sitting or whether it has been spent and if so on what. Many would also be interested in knowing the exact terms of the production sharing agreements the government has signed with the companies Tullow, Total and CNOOC. But as George Boden from Global Witness pointed out, transparency does not equal accountability. Just because we may eventually know where some of the money went doesn’t mean the government won’t misuse it. If the government doesn’t care to follow its own laws or the best practice of international transparency initiatives like EITI, and the judiciary that might prosecute offenders is in the grip of the executive anyway, what loopholes can the donor community exploit?

The value of real technical assistance shouldn’t be overlooked. The government needs to have an information base that it can rely on if it decides to make the system run better. This can range from getting a decent geological survey in place to support in future contract negotiations. Corruption in the national oil company could be mitigated by a minority private sector flotation, like Statoil, Petrobras and Ecopetrol have done, subjecting the company to investor oversight. I know the idea has been floated in Uganda but it’s not clear whether it has reached the nerve centers of government.

But all of this requires political will. The executive has to want to comply with global best practice for anything to happen. Perhaps I’m pessimistic but I don’t see this desire coming through ‘positive engagement’ from the donors, whatever that means. The government needs to feel some pain in order to change.

By that I mean nothing sinister – they just need to be shamed globally, economically, embarrassed into doing things the right way. Foreign companies won’t help Uganda extract its oil if it hurts their reputation to do so, if their shares drop because they abet such a corrupt regime. That’s power: look at what happened to the Kazakh company ENRC after a scandal broke around their dirty deals in DRC. If Tullow, Total or CNOOC encounter similar difficulties in Uganda it could scare other investors away and the government could be left out cold, or take a shovel and dig for oil itself.

It would help if these foreign companies’ shareholders were better informed about what’s happening in Uganda. If they knew the potential dangers there they might sell, sell sell. Investors would leave and the government might be forced to change. But the foreign donors’ problem is that there’s little they can say to their national corporate champions. DFID won’t wag the finger at Tullow, France can’t scold Total and something tells me China’s not too worried about the scruples of CNOOC.

Maybe it’s up to the EU or other risk assessors to tell investors what’s up. Though even in this scenario, it’s hard to see Uganda being singled out in a global anti-corruption campaign which will influence shareholders. Uganda’s corruptniks still pale in comparison with those in Equatorial Guinea or DRC.

But for now the donors in Uganda, frankly, don’t know where to begin and they have a lot to learn about oil before they do. It won’t help if Norway’s resource experts aren’t at the table to help the others along.

As there was a lot of talk around beneficial ownership within the new EITI standard, we thought we’d try and model what it could look like. It’s one of those thorny issues. Civil society wants it, corporates often state their belief that it is a heavy reporting burden – but the arguments on both sides can tend to be at a theoretical level. So we thought we’d try and ground it a little (report here, data here), by using Norway as a proxy for what kinds of data that would yield, and to what end?

What we were seeking is to find a sweet spot which would impose very little reporting burden on companies and yet which could demonstrably yield value for the EITI process because it could answer questions. So we adopted what has been called the “one level up” principle – to look at what would happen if all EITI reporting companies included their own legal names and corporate identifiers, their shareholders and their corporate identifiers, and the jurisdiction of their parent companies. Any reasonably run company should be able to access this information in less than an hour!

To expand a little: the full legal name might mean, for example, not

The ‘first mile’ of corporate data – the Tanzanian company register in government offices in Dar es Salam

“Tullow” as it is referred to in media reports or ordinary conversation (and some current EITI reports!) but the full name of the particular corporate vehicle operating in that country (such as “Tullow Uganda Holdings B.V” in Uganda). And the identifier is a unique number that the company has within any company registry, much as individuals have unique tax and national insurance numbers. These are the bits of information which allow a particular corporate vehicle, the one which is legally responsible for signing the contract and observing its conditions, to be uniquely identified.

We restricted to one-level-up because it avoids the debate around finding ultimate ownership. Our friends at OpenCorporates.com actually claim that the concept of “ultimate ownership” is in any case misleading, since in many, perhaps most, cases we are not talking about a single dimension of ownership, travelling from local affiliate up to source like some explorer finding the source of a river. What happens if a company four steps up the chain has a cross-holding in another one three stages “higher”, for example?

We could model Norway because the EITI reports were in Excel format, the legal names were included, and the Norwegian company register can provide the corporate identifiers and shareholding structures of the parents. We took the companies in the 2011 EITI report and then matched them to these records and where possible, established the jurisdiction of the parent holdings. Finally, we related these company structures back to the size of payments reported within EITI.

The results are not particularly surprising in the case of Norway. The oil sector is dominated at both affiliate and parent level by companies which are incorporated in Norway itself – 64 percent, as you can see from the diagram.

Then again, many of the international companies had at least two levels of local vehicle: ExxonMobil Exploration & Production Company AS, for example, which is a Norwegian company, is owned by ExxonMobil Norway Upstream Holdings Inc, also a Norwegian-registered company with its own number in the Oslo registry. There might well be other Norway-based companies further up the chain. And yet one would imagine that this chain ultimately stretches back to ExxonMobil in the USA.

This illustrates a key point in the positioning of EITI. It’s the first mile of company information which EITI can most painlessly provide – and which is the most useful and needed. For instance, while the records in Norway are already online and available with a simple web scrape, the picture at the top of the blog shows you what we start wth – what the “first mile” of corporate ownership looks like in, for example, Tanzania, in the offices of the company register in Dar es Salam.

But once this level of information is there, it is likely to lead out into the global corporate web which is increasingly coming into the public domain. Even if a parent company is in a tax haven like the Cayman Islands, we at least know that it is there, and what its address is because the index to the Cayman Islands, along with around 70 other jurisdictions around the world, are digitised and online.

The world is full of “data wranglers” who can connect the first mile data to the rest of the growing repository of public domain data.

What immediate applications could the “one level up” approach be used for? One might be to indicate potential black spots in double taxation treaties. The graph from Norway shows 35% of sector activity controlled by foreign companies in some 16 other countries – what percentage of that is in juridictions that Norway has double taxation avoidance treaties? This may be a case which becomes more interesting in many EITI countries which may not have developed comprehensive treaties.

Another application is to be able to create a roster of parent companies – and their publicly listed company officers and shareholders – who represent the beneficial ownership of an extractives sector in a country as a whole. When available for public view, this can offer a powerful tool for civil society and local media to evaluate for possible connections with decision makers in government. Such data are also of great interest to new entrants in the private sector who are trying to understand the landscape for potential investment, one of the reasons the World Bank has sponsored digitisation and upgrading of company registers in over a dozen countries around the world to date.

We therefore believe “one level up” would position EITI well to contribute great value with a relatively small data set with minimal reporting burden.

But before we get there: this is the original format sitting in the government offices!

Under more scrutiny, however, it reveals the opposite. The information available contains contradictory figures and reports about the oil and gas sector on a daily basis and it seems as though raw information released through outlets one would assume to be reasonably reliable is being overwhelmed by rumours and popular gossip, to the detriment of accountability of the sector.

There are many international institutes and organisations monitoring Egyptian extractive industries, in pary because of the country’s geopolitical importance. These organisations, as well as government agencies and companies, produce a lot of data about a range of things such as company activities, trade figures and environmental impacts. Nor is Egypt is a newcomer to the business; while it might not be a major hydrocarbon producing country comparable to Saudi Arabia, it has a significant history of oil and gas production going back four decades. Since the country’s oil boom in the 1970s, and since the discovery of vast reserves of natural gas in the 1980s and 1990s, the extractive industries have played a major role in Egypt’s political economy, and the country has been a net exporter of energy for most part since World War II. Given its experience with and the importance of the sector, you would therefore expect people to know more about it, or at least how to handle existing information.

That’s not to say that people with these skills don’t exist – there are of course very knowledgeable people in Egypt who have a great understanding of the industry. The problem is, they are few, and their informed opinions are often overwhelmed in the public sphere by all kinds of incorrect assumptions and estimates, and invented ‘facts’.

Let’s take the example of oil and gas exports. In July 2012, a time when Egypt was facing serious electricity blackouts, an Egyptian Petroleum Ministry official was cited talking about government plans to decrease exports of natural gas in order to meet growing domestic demand. While there have been similar statements made before, the topic still is of great importance considering the country’s dependence on revenues from hydrocarbons on the one hand, and its almost complete reliance on gas for its electricity production on the other. One would expect journalists and government officials to be accurate about something carrying such political weight.

 But what then followed the announcement was a serious of conflicting and contradictory news about the actual current status of exports. In October 2012, state-run newspaper al-Ahram reported that Egypt had in fact already stopped exporting gas to Jordan and Spain since March the same year – three months before the original ministry announcement. Spain and Jordan account for about a third of Egypt’s gas exports, so halting shipments to those countries is not a minor issue. The flow of gas had to be stopped several times for shorter periods before, as the Arab Gas Pipeline through which Jordan receives its gas had been sabotaged 15 times since the ousting of Mubarak. A complete stop of exports, however, results in a substantial decrease in revenues, so press reports require attention to detail.

Yet only a week later, Petroleum Minister Osama Kamal released a statement claiming that the country had only decreased and not halted the exports to Jordan, thereby contradicting what had been reported by Egypt’s main outlet. He even stressed Egypt’s general willingness to increase exports again. This line of information was then followed for some time, until it was announced last December that gas was again pumped at the normal rate to Jordan. But when there finally seemed some clarity on the status of natural gas exports to Jordan, al-Ahram again reproduced the same counter-factual news as previously, stating Egypt had halted its exports to Jordan since March, thereby adding further uncertainty to an already nebulous information environment.

It would be unfair to say that conflicting news reports are somehow an issue specific to Egypt. Publishing information around the oil and gas sector is often, if not always, highly political and even more so in a country where petroleum has been increasingly difficult to obtain and become a subject of hot, popular debate. All the data produced by companies, statements by public figures and so on are therefore likely to be subordinate to certain interests, which is true for most parts of the world.

With Egypt, however, there seems to be another issue besides interest-led news: accuracy. In a country in which social media has become such an impressive and widespread phenomenon, any kind of information is travelling at tremendous speed from person to person. Perhaps because of this, it seems like the country has also become a big rumour mill. To increase transparency in the Egyptian extractive industries, it therefore is of great importance to first increase the knowledge about how to handle information on oil and gas. While transparency in terms of publishing contracts and reporting on negotiations, amongst other issues, is still of major concern in Egypt, so is the improvement of the general information environment.

There are some big decisions to be made by investors in Azerbaijan’s oil and gas sector this year, with

The protests I witnessed on March 10 in Baku’s Fountains Square, motivated by non-combat deaths and ‘hazing’ allegations in the Azerbaijani military, may not have delivered the thousands of activists promised on Facebook. But the government’s heavy handed response was enough to reveal jitters at the heart of the Aliyev regime, as rumblings of discontent arrived in Baku following earlier protests in regions such as Ismaili. Baku’s riot police were certainly sporting their Sunday best in central Baku, kitted out with state-of-the-art water cannons and rubber bullets and deploying them generously. But they had little to show for their efforts than a series of iconic defiant images beamed across international media.

Tom de Waal, in his recent piece for Foreign Policy, asked the question “how do you renovate a house that’s falling apart at the foundations?”, one likely to be vexing President Aliyev, even if he is elected to a third-term later this year (a strong possibility, even if a smooth ride is unlikely). The oil revenues reliably filling state coffers over recent years have allowed him to buy patronage and support (or at least passive compliance) both inside his country and on the international stage. But depletable resources have a nasty habit of depleting, and as Azerbaijan passes peak production such revenues are likely to fall year on year, with significant implications for Aliyev’s financial and political capital. And he will only be able to dip into the State Oil Fund to cover the gaps for so long (the Fund’s direct transfers to the state budget shot up 16-fold from $686 million in 2007 to $11.64 billion in 2011, while oil production began a downward trend, falling by 17% over 2010-2012 ).

Oil riches and regime stability have long been linked by Resource Curse theorists. Windfall oil revenues, like “manna falling from heaven”, allow leaders to buy political loyalty and to strengthen coercive structures, placating citizen opposition (enter water cannons). This anti-democratic effect of oil might help to explain why authoritarianism has proved so durable in Azerbaijan, where we are coming up to 20 years of Aliyev rule. In 1993, when Aliyev Sr. came to power, the prospect of a relatively stable autocratic political system seemed like a pretty good deal for a nation at war and in economic turmoil.

But to a resident of Baku’s suburbs in 2013 watching the Bentleys roll past while the prices for staple goods continue to rocket, just how convincing is this stability narrative? And just how much stability can be expected from a notoriously volatile commodity such as oil, which plunged from $145 – $60 per barrel in one year from 2008-2009? Even for those willing to sit back and exploit the rent-seeking opportunities, with falling production, even at current prices there will simply soon be far fewer rents to seek.

What the waves of civil unrest across the country have shown recently is the potential for popular content to spill over unexpectedly and quickly gather momentum, such as that which led to Georgian President Sakashvili’s unexpected downfall in last year’s parliamentary elections across the border. In all of the Caucasian countries emerging from the break-up of the Soviet Union, the birthing pains of the 1990s have been at the forefront of peoples’ minds. But what recent displays of anger and defiance have shown is that, while Azerbaijanis will tolerate poverty levels and the misery of missing out on the fruits of the most recent oil boom, it is when their dignity is insulted that the touchpaper is lit. In Ismaili it took the obnoxious son of a Minister crashing his Hummer into a downtrodden local taxi driver that provided the trigger.

Cynicism is also on the rise over the role of international democracy watchdogs, such as the OSCE Office for Democratic Institutions and Human Rights, ODIHR (dubbed ‘Oh, Dear’ by some activists). And the government’s response to events does little to stem the growing anger – the arrest of youth activists from the NIDA movement over recent weeks on the usual trumped up drug charges is a tactic that is wearing thin. And neither do international ‘meddlers’ get off lightly, as Presidential aide Ramiz Mekhtiev’s war cry against foreign NGOs makes clear, and the more recent closure of the Western-led Free Thought University by government security forces. 

Getting a reading of the level of genuine will for political change in Azerbaijan is tricky – opposition activists can draw dramatic conclusions from the wave of protests, while what we have seen until now are ripples on the surface. The few hundred brave protesters taking a shower in Fountains Square last month will not be the only ones at the polling stations in November. But on the ground nerves can be felt on all sides, and the outlook for the oil industry has no small part to play.

The wiki-based Azerbaijan Oil Almanac, co-produced by OpenOil and Baku-based news agency Turan, is now live at oil.turan.az (in Azerbaijani) and en.oil.turan.az (in English).  It is the first bilingual open-source, digital curation of publicly available information on Azerbaijan’s oil industry. 

Like many Brits, I suspect, I was reminded by Margaret Thatcher’s death of how ambivalent I felt about her legacy. It would be churlish not to recognise the change in entrepreneurial culture that happened in the 1980s. From where I stand it would be doctrinaire not to see the spread of home ownership as a positive, and the dimishing of the power of the unions as necessary. At the same time, the Falklands still seem like an abomination and all the old footage from the miner’s strike, the IRA hunger strikes and the inner city riots have brought back just how divisive a period that was. Not all bad, I guess. At least people cared about politics then and there was a clear choice.

But with all the talk of conflict both Margaret Thatcher’s supporters and her detractors more or less agreed about what Thatcherism was: she had taken the Sick Man of Europe from the 1970s and transformed it into a paragon of freedom and free markets by the early 1990s. Triumphantly, said her supporters. In a way that irreparably damaged Britain’s social fabric, said her opponents, and we are still paying for it today. Thatcher herself constantly reinforced in interviews the idea of cruel to be kind, herself as Housewife in Chief, making the hard choices to keep the family going in hard times.

But two things are clear about the North Sea oil dividend: the first is that Thatcherism would not have been possible without it; and the second is that the way it was managed is about as far away from fiscal prudence as could be imagined.

Britain earned about 100 billion pounds in taxes from the North Sea in the 1980s as production surged up from its start in 1975 and fields like Brent, Piper and Cormorant become household names. In today’s terms that would be maybe double that, 200 billion pounds, more than a tidy chunk of change. More importantly, it accounted for about ten percent of the government budget during that time. Welfare benefits totalled about 23 billion pounds when the Conservatives came to power in 1979. Unemployment was about a million and a quarter then but had risen to three million people by 1984 – when welfare benefits had risen to 37 billion pounds. The increase of 13 billion pounds matches almost exactly the average annual revenues the UK government was receiving at the time.

Famously, Britain didn’t save any of the 200 billion pounds it has earned in total from the North Sea, in stark contrast to the Norwegians who now have 100,000 euros for every man, woman and child in the country in a Future Generations Fund. Norway of course has far fewer people, only the same as, for example, Scotland, so the money goes a lot further. In her resignation speech to the House of Commons in 1990, Margaret Thatcher responded to the Scottish Nationalist MP Jim SIllars by saying lots of overseas investments had been made which the British people would see the benefit of. It’s hard to know what, in fact.

What else could you have done with that much money? At this remove it’s hard to know. Maybe the revenues should be linked to another element of British oil policy in the 1980s – a totally laissez faire attitude to management and state interests in the industry. Again in contrast to Norway, who in 1971 took the decision to create Statoil, their state oil company. Tony Benn had founded the British National Oil Corporation in 1975, based in Glasgow, but it was sold in the 1980s to BP. Successive ministers of finance, the economy and oil took pride in the fact that the UK Continental Shelf was ‘investor friendly’. The government employed a royalty and tax scheme where blocks went to the highest bidder and the state did nothing more than collect the taxes which were calculated simply from production and normal company profits.

But this is also a misleading simplification. First, we must presume that Norway, with its centre-left thinking and dominant state-owned oil company, was and is investor-friendly: as of last year 70 oil companies held blocks in the Norwegian sector including the canon of Big Oil: ExxonMobil, Shell, BP, Chevron, ConocoPhillips, Anadarko, Eni, Total and so on. Secondly, the British state might not have intervened to run the oil industry but it constantly intervened under Margaret Thatcher to capture ‘superprofits’ – changing the rate of taxation or imposing windfall taxes whenever the Treasury saw the chance, a habit it continues to this day. As XXX, the chairman of the Tullow board said in a speech last year, Tullow had been subject to more improvised tax changes in the UK North Sea in the previous decade than it had been in the 16 African countries it now operates in. Norway has done far less of this: on the other hand its need is not nearly so pressing since between Statoil’s operating stakes and its own standing rates of taxation it was far better placed to capture windfall profits as they occurred through existing arrangements, without a need to improvise windfall taxes whenevr Brent sustained a new price floor.

If one is not blinded by ideological blinkers, another interpretation is possible. Norway’s economic nationalism and state-owned company has been socialistic – and also market-aware, prudent, and competent. Britain’s fanfared laissez-faire approach in the North Sea has been, in fact, spendthrift, trustafarian and inept.

So back to that dividend – what could it have achieved in different hands? One thing is striking that North Sea production scaled up just as Clydeside’s heavy industries declined and died. A more interentionist state policy might have subsidised the refitting of the shipbuilding and other engineering activities to serve the massive new market in the UK’s own waters. Could Scottish shipyards have become rigging outfitters competitive with those of the South Korean chaibol over time? Could the undoubted enterprise culture which sprang up in Aberdeen at the small and medium company level, geologist shops and logistics, for example, have been augmented by state-sponsored champions that eventually became industry leaders – in the same way that Statoil is now a global leader in deep sea technologies?

Or maybe, outside the oil sector, the dividend might have been invested in an industrial policy that revolved around more than privatisation, enabling infrastructure, training and so on – Barack Obama’s ‘you didn’t build that’. We have to be careful not to overconclude: Norway didn’t have a debilitating class conflict or an entrenched labor aristocracy to contend with. Once it pursued the national ownership route it took the best part of twenty years for Statoil to emerge as a dominant force, because the Norwegians gave the international companies generous terms at first and gradually tightened as they went up their own carefully planned learning curve. It wasn’t Chavez, in other words. Would a policy run by Tony Benn, Michael Foot or Neil Kinnock have been so disciplined? We’ll never know.

In fact, one might suggest it was the Thatcherite style of management of the industry that was closer to Chavismo – both leaders’ core ideological achievements were built off lottery wins, meaning that the cost-benefit analysis is seriously skewed.

They might have broadly achieved what they claimed but for a very simple reason that has been overlooked – they were far luckier than anyone imagined, including, of course, themselves.