Specific issues arise in the organization of oil, gas, and mining activities that require special attention. On the basis of the agreements between states and investors (discussed in chapter 4), many other agreements are concluded, covering, for example, joint ventures and subcontracting for services and supplies, for gas sales, and for transportation. The range of agreements goes well beyond the scope of the Sourcebook. However, the kind of governance that they establish is often investor led or driven by “industry best practices” developed over time and through experience in many different countries. An example is the widespread use of joint operating agreements in the hydrocarbons sector. Increasingly, the focus of governments on securing wide benefits from oil, gas, and mining makes it necessary for them to understand better these second order agreements and the investor-led governance they establish. Some of the common topics will be examined in the second part of this chapter.
Table 5.1 The Norwegian Approach: Dividing Institutional Governance Tasks and Responsibilities Task
Responsibility
Policy making
Ministry/parliament
Legal framework
Ministry/parliament
Ownership to resources
Ministry/regulator
Collector of tax or share of production
Ministry/tax regulator/ state-owned company
Regulatory work
Independent regulator or government directorate
Commercial activities
State-owned or private, national companies or international oil companies
Source: Norwegian Petroleum Directorate.
5.2 ORGANIZATION IN THE PUBLIC INTEREST
The challenges of building government institutions are well known. A central theme in much of the literature on development is the importance of capacity building, particularly to equip countries new to oil, gas, or mining development for the specialized tasks of oversight. A wide variety of educational programs has sprung up in centers around the world to meet the need for specialists. Yet if the goal is extractives-led, nationwide development, the kind of knowledge needed by states goes beyond technical information; they need an understanding of the kinds of organizational structures that are typical in the oil, gas, and mining industries and the challenges that such structures present for oversight and partnership. Without sound knowledge of standard approaches to EI governance, and how government interventions can fit into or modify them, governmentdriven efforts to make the sector work properly to achieve overall social and economic benefits may have limited and disappointing outcomes. Responding to the challenges of sector organization benefits from knowledge of the ways other governments have designed their sectors for oil, gas, and mining activities. In the hydrocarbons sector, the Norwegian approach has had a strong influence on current thinking.1 One of its key features is the separation of regulatory and commercial functions. Instead of entrusting both to a state company, this approach places them in separate institutions (table 5.1). A recent example of this from an African country can be found in the regulatory scheme for petroleum activities in Uganda (see table 5.2).
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Table 5.2 Ugandan Regulatory and Institutional Framework Directorate of Petroleum in Ministry of Energy and Mineral Development
Supports policy formulation and licensing of acreage
Petroleum Authority of Uganda
Regulates and monitors compliance of petroleum operations
Uganda National Oil Company Ltd.
Moves the country’s commercial interest in production-sharing agreements forward Creates joint ventures across the petroleum value chain
Source: Petroleum Authority of Uganda
In practice, the Norwegian approach has not proved an easy one for many countries to adopt. It argues against a consolidation of domestic sector capacity. That is less attractive when there is a lack of skilled personnel and institutional capacity. (In practice this is a common problem). Where those conditions apply, a consolidated approach may be better able to deliver near-term results. Consolidation may even be a step toward a later separation of functions, although once established a consolidated approach will of course create vested interests that make a later separation difficult. In mining, Botswana and Chile have enjoyed success similar to Norway’s in the