Legal expert advises Sudan to revise oil contracts
March 15, 2007 (NAIROBI) — Sudan should toughen environmental and social clauses in its existing contracts with oil explorers to benefit fully from its energy reserves, a legal expert on exploration agreements said.
Canadian lawyer Jay Park told a south Sudan investment meeting in neighbouring Kenya on Wednesday that typical features of production sharing deals like regular environmental impact assessments were “completely absent” from cases he studied.
But he cautioned any new rules would need enforcement.
“How a contractor behaves is as important or more important than the contractual provisions,” Park told delegates, including oil industry executives, south Sudanese officials and diplomats.
“But if a government wants enforceable rights to require certain behaviour, contractual or other legal provisions are necessary,” he said.
Park said there was scope for improving existing contracts under provisions in a 2005 peace deal that ended two decades of civil war in Sudan and allows the government to intervene.
“If existing contracts are deemed to have fundamental social and environmental problems the government of Sudan will implement necessary remedial measures,” the agreement states.
In addition to the environment, other areas of concern were provisions in contracts for the use of local goods and services, and the final benefactors of “social development fees.”
“Do they in fact go to local communities?” he asked. “There is no contractual requirement that they do so.”
Sudan estimates average oil production will run at 520,000 barrels per day (bpd) this year.
The country, which has said it is mulling joining oil cartel OPEC, has drawn Chinese, Indian and Malaysian oil investment as U.S. sanctions and civil wars have deterred Western companies.
Oil was one of the main reasons for Sudan’s war, which ended in January 2005 with a deal that formed an autonomous south Sudan administration and a new coalition government in Khartoum.
The southern government is due about half of revenue from oil in the south, where the nation’s biggest fields lie.
(Reuters)