News / Economy

Liberia Considers Reforms Before Oil Flows

— Liberia's state oil company has been thrust into the spotlight with the resignation of its director and the introduction of two new draft laws aimed at reforming the oil sector.  Watchdog groups say the laws could mean the difference between an oil sector that contributes to the country's development or one that cements Liberia's reputation for corruption. 
 
Last month, Liberian lawmakers began considering two new oil bills -- one that would apply to the National Oil Company of Liberia, or NOCAL, and another that would regulate future oil exploration and production.
 
The draft law on NOCAL operations is partly aimed at reducing the company's powers, by removing its policymaking duties so that it becomes simply a commercial oil company operating on behalf of the state.  A separate body would be created to be responsible for policy issues, such as how to manage bidding.
 
The Senate quickly passed the bills.  But as the House of Representatives took up consideration of the drafts, Liberian civil society groups strongly protested that the process needed to be more transparent.  They accused NOCAL officials of trying to push the laws through before their contents were publicly known.
 
Silas Siakor, head of the Sustainable Development Institute, said public consultation is essential for Liberians to have confidence in how the country’s oil will be managed.

“The process that was being pushed by Mr. Robert Sirleaf and his colleagues was totally opposed to the idea of any kind of citizen input to the law-making process, excluding the population from having every kind of input to the process,” Siakor said.
 
In the end, the House of Representatives voted to suspend debate.   
 
Then, in a surprise development one week later, the president’s son, Robert Sirleaf, resigned as head of NOCAL.  He said that his mandate had been to spearhead reform of the oil sector, something he had successfully accomplished now that the draft legislation is being considered.

But Chloe Fussell, campaigner for the watchdog group Global Witness, said there was an unacceptable push to rush these laws into effect so that NOCAL could begin auctions for offshore drilling rights.  The country is still years away from pumping oil, but exploration has yielded the discovery of significant deposits.
 
Fussell said Liberia is at a critical juncture and this legislation -- if handled correctly -- could reform the oil sector.  She said it could help Liberia avoid the problems it’s had in developing other natural resources, such as the forestry sector, which has been marred by the inappropriate allocation of permits to big companies.
 
“It could potentially make the Liberian oil sector one of the best-run and best-governed sectors on the continent, if not in the world, in terms of developing countries with new oil finds,” Fussell said.
 
Relevant NOCAL officials were not available to comment for this story.
 
The legislature is now on break until January, creating an opportunity for the type of public consultation sought by civil society groups.  Outside groups are now conducting a review of the legislation.

Fussell said she is encouraged by some aspects of the drafts, including a provision that would require companies to disclose who their ultimate owners are before allocating contracts.
 
“The country should really know who it’s dealing with.  You don’t get these front companies that are actually owned by high-level politicians, or somebody who shouldn’t be meddling in the sector," she said. "You should actually have transparency about who owns those companies, where they’re based, who ultimately makes the profit and controls the company.”
 
Global Witness has also argued for the need for an independent regulator to ensure that the laws are properly enforced.  It is unclear whether the laws in their current form provide for that.

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