Lawyers fault negotiation skills for bad oil, gas deals

East African countries will continue losing billions of dollars in natural resources deals due to poor negotiation skills when dealing with international companies, experts have warned.
A methane gas plant on Lake Kivu, Rubavu District. Poor negotiations cost the region substantial gains from oil deals. File.
A methane gas plant on Lake Kivu, Rubavu District. Poor negotiations cost the region substantial gains from oil deals. File.

East African countries will continue losing billions of dollars in natural resources deals due to poor negotiation skills when dealing with international companies, experts have warned.

The remarks were made yesterday at the opening of a four-day workshop in Kigali for lawyers from the East African Community on negotiating transactions and drafting agreements for extractive and other industries.

Participants observed that international companies in oil, gas and other resources draft agreements in their interests, leaving regional countries at the disadvantage.

Opening the training, Justice minister Johnston Busingye said inadequate negotiation skills are hurting the continent and as a region continues to discover natural resources, it is imperative to train enough experts to help governments.

“Many countries lack skills in negotiating such agreements and the consequences of poor contracts are persistent poverty and environmental degradation. You need knowledge to ensure that contracts are well prepared,” he said.

The minister added that people who are displaced for extraction purposes deserve better returns for their raw mineral wealth.

East Africa is considered among the regions endowed with vast natural resources that have attracted global attention.

Equittable use of resources

Oil discovery in Uganda, methane gas deposit in Lake Kivu in Rwanda, gas exploration in Tanzania as well as oil and gas findings in Kenya have attracted international investors.

However, although minerals and gas are being discovered, there is an ongoing debate as to whether the resources will fully contribute towards economic and social change to the community with some people terming it as a “curse for the region.”

The training is organised by East African Development Bank (EADB) and conducted by DLA Piper, an American law firm working in 30 countries in the world.

Speaking at the training, Amb. Claver Gatete, the Minister for Finance and Economic Planning, who also chairs EADB Governing Council, said the region counts on natural resources to finance national budgets.

However, he warned that if these resources are not well managed, countries risk losing.

Amb. Gatete also said regional countries needed experts with vast experience in negotiating international business agreements to spur their economies.

“You make a mistake in negotiations, the country loses and it hurts the economy; it’s not just about signing the contracts, we also need lawyers to advise on how to manage and identify the right companies to deal with,” he said.

Amb. Gatete added that natural resources should not be considered a curse for the region, but an opportunity to develop regional economies to compete favourably on the global market.

What lawyers say

Ben Turyasingura, Uganda principal state attorney, said most of international companies that are involved in the exploration of regional resources are interested in enriching themselves and East Africa needs to be more vigilant.

“Our region suffers a knowledge gap in exploration of resources, that’s why we have to be aware when dealing with them. We need more training, otherwise these people are not our friends they just want our resources,” he told The New Times.

Turyasingura said Uganda has experienced similar challenges giving an example of foreign firms; Tullow Oil (based in London) and Heritage (Australian) that were embroiled in wrangles after failing to pay Ugandan government $313 million tax bill.

Hussein Kandoro, a lawyer working with Tanzania prime minister’s office, believes the region was suffering from overdependence on templates from elsewhere while negotiating.

“Sometimes we go into negotiations without knowing what to do. We never use our own templates to negotiate; we depend on others,” he said, adding that after signing contracts, it was necessary for regional lawyers to follow up to verify whether the implementation of the agreement is respected.  

Peter Okombe Ongori, from Kenya, called on EAC governments to invest in capacity building for legal experts.

“Natural resources is a new sector in the region and we don’t have the expertise; we have done contract laws but we need deep knowledge on oil, gas and other naturals to protect resources,” he said.

Fredrik Lindblom, a trainer, said the region is currently facing the same challenges like Norway in 1970s, where at the time of developing substantial oil and gas resources, especially in North Sea, things were uncertain.

EADB director-general Vivienne Yeda said regional natural resources had the capacity to turn around the economic fortunes oc the region.  

 

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