Emerging oil and gas producers should pursue policies that acknowledge the realities of their national contexts, can bring about rapid results and allow for incremental improvements to governance processes.
The Guidelines for Good Governance in Emerging Oil and Gas Producers, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. The following are the Guidelines’ broad recommendations for addressing these challenges.
- International best practice may not be appropriate in the case of emerging producers in the oil and gas sector. Instead, the aim should be for more appropriate practice, taking account of the national context; more effective practice, in the interests of achieving rapid results; and better practice, allowing incremental improvements to governance.
- In order to attract the most qualified oil company to a country with an unproven resource base, the host government can invest in geological data, strengthen its prequalification criteria and ensure transparency. It should also plan for success and anticipate the implications of hydrocarbon discoveries in its tax code.
- Licensing is a key mechanism whereby government can reap early revenues and maximize long-term national benefits. Government must ensure that it simplifies both negotiations and tax structures to mitigate knowledge asymmetries with oil companies.
- Government and industry must engage and share information with affected communities to manage local expectations regarding the petroleum sector and build trust.
- In emerging producers, budgets for local content may be small and timelines for building capacity short. In this context, the focus should be on the potential for repeat use of any local capacity developed.
- Meaningful participation of national organizations in resource development is a central objective of many emerging producers. Capacity is needed to enable this, and the Guidelines examine where and how best to develop that capacity.
- Incremental improvements to the governance of the national petroleum sector will allow emerging producers to increase accountability. The focus in this regard should be on building up capacity in checks and balances as resources become proven.