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Algerians outraged over latest corruption accusations against state oil and gas behemoth


Fox News

March 3, 2013 / Associated Press

ALGIERS, Algeria –  Corrupt and gorging itself at the trough of Algeria’s vast oil wealth — that’s how most Algerians privately view the elites running the country. Yet few have been willing to say so publicly, until now.

New corruption scandals are shining a new spotlight on state oil company Sonatrach, which jointly with BP and Norway’s Statoil runs the desert gas plant that was the scene of a bloody hostage standoff in January.

A recent anguished public plea by a former Sonatrach official shocked Algerians and raised hopes that the leadership will try to clean up the oil and gas sector in Africa’s largest country.

There’s plenty at stake: Algeria is also one of the continent’s richest countries, as the No. 3 supplier of natural gas to Europe, with $190 billion in reserves, up $8 billion in the last year alone.

The Feb. 18 letter by former Sonatrach vice president Hocine Malti in the French-language Algerian daily El Watan broke the silence around the company. Addressing the shadowy leader of Algeria’s intelligence service, it asks if he is really serious about investigating new bribery scandals involving Sonatrach and Italian and Canadian companies.

When Italian prosecutors in January announced an investigation into oil company ENI and subsidiary SAIPEM for allegedly paying €197 million ($256.1 million) in bribes to secure an €11 billion contract with Sonatrach, it provoked a firestorm in the Algerian media, until the North African country’s justice system finally announced its own inquiry Feb. 10.

Malti, author of the “Secret History of Algerian Oil,” scoffed that Algerian authorities were only following the lead of international investigators and wondered if Mohammed “Tewfik” Mediene, the feared head of the Department of Research and Security, would allow the real sources of corruption to be tried in court.

“Is it too much to dream that some of your fellow generals, certain ministers or corrupt businessmen — members of the pyramid that you are on top of — members of this fraternity, might also end up in front of justice?” he asked in the letter. “Or will it be like always, just the small fry are targeted by this new investigation?”

“Will we have to continue to listen for news from the Milan prosecutor to know the sad reality of our country, to discover how certain people, whom you know quite well, people you have come across in your long professional career, have gorged themselves on millions of dollars and euros of the country’s oil revenues?” he added.

The response to the letter was swift. Energy Minister Youcef Yousfi promised that once an investigation was complete “we will take all necessary measures” against those harming the interests of the nation.

President Abdelaziz Bouteflika, who rarely appears in public, said in a written statement, “these revelations provoke our disgust and condemnation, but I trust the justice system of our country to bring clarity to the web of accusations and discover who is responsible.”

Malti told The Associated Press by telephone from his home in France that he wrote the letter partly out of anger that Algeria had to rely on foreign prosecutors to reveal the extent of its own corruption and addressed it to the head of intelligence to shock people.

“It made a lot of noise because with this letter, I broke a taboo,” he said. “The head of the DRS is an unapproachable figure in Algeria, at times we can’t even pronounce (say) his name.”

It is not the first time the state-owned hydrocarbon company, which provides Algeria with 97 percent of its hard currency earnings, has been enmeshed in scandal.

In 2010, its head, three of its vice presidents and the minister of energy were all fired in a corruption investigation run by Mediene’s intelligence agency.

However, rather than restore faith in the country’s corruption-fighting mechanism, the 2010 purge was widely seen as a chance to settle scores between the DRS and Bouteflika, since most of those fired were his close associates.

Algeria ranks 105 out of 176 in Transparency International‘s 2012 corruption index, and the occasional corruption investigation often just seems to be how the elites settle their scores, such as a string of revelations about prominent politicians in November, which observers said were linked to next year’s presidential elections.

“I realize that people might be shocked by what is happening at Sonatrach — these scandals are terrible and we condemn them as individual acts,” Sonatrach head Abdelhamid Zerguine said on the radio Sunday, the anniversary of Algeria’s 1971 nationalization of its oil industry from the French. He promised to fight further corruption “with utmost vigor,” even while denying it was systemic.

The scale of the scandals is staggering. Nearly €200 million ($260 million) was paid out by the Italians, according to the Milan prosecutor. ENI has pledged full cooperation with prosecutors in their investigations.

Meanwhile, according to a joint investigation by Canada’s Globe and Mail newspaper and an Italian business paper published Feb. 22, Canadian company SNC-Lavalin paid a series of bribes of its own to secure a $1 billion engineering contract. Company spokeswoman Lilly Nguyen responded to queries about the case saying “to the best of our knowledge, SNC-Lavalin is not specifically under investigation in the Sonatrach matter.”

With commissions on deals like this going to the highest levels of power, the Algerian press rarely reports about it — until the subject is broached by the foreign media.

Malti, who was there at the founding of Sonatrach in 1963, estimated that the country was losing between $3 and 6 billion annually to corruption in the oil sector alone.

“If a judge says that an inquiry has opened or even a minister promises to take measures against ‘people working against Algeria’s interests,’ I don’t believe them,” Mohammed Saidj, a professor of international relations at Algiers University, told the AP. “It’s just words to appease a public opinion shocked when it hears about the corruption and billions of dollars stolen by high-level political and military officials, including those close to the president.”

The chances of this situation changing are dim, considering how much the country relies on a single company.

In a chapter on Sonatrach in the 2012 book “Oil and Governance,” John Entelis, an Algeria expert at New York’s Fordham University, described the importance of a company established just a year after Algeria won its independence from France, and wrote, “Algeria’s governing elite rely upon Sonatrach for revenue from which they gain power, patronage, and privileges.”

Entelis told AP that the letter in El Watan shows that Algerians are increasingly able to complain about this system, even if that won’t necessarily change things.

“This is the heart of the Algerian political system — Sonatrach, the DRS, civil society in the form of … willingness to make these things public. Some say this is what enables it to maintain itself instead of collapse,” he said.

___

Paul Schemm reported from Rabat, Morocco. Associated Press writer Karim Kebir contributed to this report from Algiers, Algeria.

Analysis: New law fails to ease oil concerns in Uganda


IRIN NEWS

KAMPALA/NAIROBI, 13 December 2012 (IRIN) – Uganda’s parliament recently passed a law to govern the exploration, development and production of the country’s estimated three billion barrels of oil, a resource whose extraction will directly affect the livelihoods of tens of thousands of people.

While the law streamlines the burgeoning industry, analysts have raised concerns over transparency and over who controls the sector.

“The new law helps set clear guidelines under which the oil sector is to be run and managed, and makes clear who is in charge of what roles,” said Tony Otoa, director of Great Lakes Public Affairs (GLPA), a Uganda-based think tank focusing on oil and governance. “However, there are some concerns about transparency and too much power within the oil industry in the hands of the president.”

The bill was passed on 7 December after weeks of wrangling over its controversial Clause 9, which gives the energy minister wide-ranging powers, including authority over the granting and revoking of oil licenses, negotiating and endorsing petroleum agreements, and promoting and sustaining transparency in the petroleum sector. Many members of parliament (MPs) felt these powers should be held by an independent national oil authority.

“Essentially, the standoff, which has ended, was about the withdrawal of trust from a government that is battered by corruption scandals. Also the way the cabinet operates is that, in the past, the feeling has been that some key ministries, like finance, are effectively run by the presidency after being stuffed by yes-men or -women. The pushback against Clause 9 also comes as the Central Bank opened its vaults to a large withdrawal in 2010 [US$740 million to buy six fighter jets] only for approvals to be sought retrospectively,” said Angelo Izama, a Ugandan journalist and oil sector analyst.

“Loss of trust”

“This loss of trust is behind the resistance to greater control by the executive,” he added. “The executive has not been a bad shepherd of the process so far. Uganda’s negotiating position has been tougher with the oil companies, ironically, without the oversight of parliament. However, public scandals elsewhere have negatively affected the ability of the president to convince lawmakers – especially of his party – that he means well.”

A number of donors – including the UK and Ireland – recently suspended aid to Uganda following allegations of deep-rooted corruption in the Office of the Prime Minister. The prime minister, the former energy minister and the foreign affairs minister were all accused of taking kick-backs from oil companies in 2011, charges that remain unproven but that nevertheless damage the reputation of the government.

“The country lacks trust in the state… Institutions and officials have lost legitimacy, and for such an important bill to vest too much power into a political appointee is a recipe for disaster,” said Stephen Oola, a transitional justice and governance analyst at Uganda’s Makerere University Refugee Law Project.

“Granting and revoking licenses and negotiations are technical in nature. We need an independent commission or authority made up of people of good competence, technical ability and experience, and good morals to guard our oil,” said Frank Gashumba, a local businessman and social activist.

Proponents of Clause 9 say licensing powers are safer in the hands of the cabinet than under an oil authority. “The authority is open, easy to bribe and manipulate. Cabinet is bigger than the authority – members of the executive are answerable to Ugandans because they are elected leaders,” said Kenneth Omona, a ruling party MP.

Those opposed to it say they will challenge the law, which was passed with 149 votes in favour and 39 against; some 198 MPs did not turn up to vote.

“The fight is not complete; the passing of the bill is liable to be challenged in courts of law,” said Theodore Ssekikubo, ruling party MP and chair of the parliamentary forum on oil and gas. “If we fail to go to court, we shall subject the matter to a referendum for all Ugandans to pronounce themselves on this strategic resource. We want to ensure transparency and accountability in the oil sector.”

Transparency

There are also concerns about the law’s confidentiality clause, which limits the amount of information accessible by the public.

“The law is lacking transparency – it imposes confidentiality on officials working within the sector, even after they leave office, so there is no opportunity for whistle-blowing or for the public to have access to information on, say, production-sharing agreements,” GLPA’s Otoa said.

He noted that Uganda still hasn’t joined the Extractive Industries Transparency Initiative (EITI), an international scheme that attempts to set a global standard for transparency in oil, gas and mining, further compounding the sector’s lack of transparency. As a member of the EITI, Uganda and oil companies involved in the country would be required to publish all payments and revenues from the industry.

While Total and the China National Offshore Oil Corporation (CNOOC), two of Uganda’s major oil partners, are listed on Wall Street and are therefore subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act – which requires disclosure of payments relating to the acquisition of licenses for exploration and production of oil, gas and minerals – the Irish firm Tullow Oil, another of Uganda’s main oil partners, is not under any similar obligations.

“I am worried we [legislators] and the public can’t access and scrutinize these agreements. You can imagine the recently negotiated and signed oil agreements have not been accessed by the public, not even by members of parliament,” Beatrice Anywar, former shadow energy minister, told IRIN.

The impact of the oil sector has so far been most acutely felt by communities around Lake Albert, thousands of whom have had to move – some willingly and some forcefully – to make room for an oil refinery, which is expected to take up 29sqkm and displace some 8,000 people.

Land issues

“The government is prosecuting the refinery resettlement by the book. However, managing public expectations and the process of multiple decision makers in Uganda’s complex land legal system [Uganda has multiple land systems, including customary, leasehold and freehold] has contributed some volatility to the process… What is adequate compensation? And who determines that? Is it the market or should this be done by the government?” said journalist Izama.

“As a partner to the oil companies, it’s questionable too if the government can make the best decisions for the affected people as it would look to keep project costs fairly low,” he continued. “It is still a dilemma which is jurisprudential as well as political.”

He noted that much of the oil is in game reserves and a sensitive basin with lakes, rivers and a rare biodiversity, and borders the Democratic Republic of Congo, which could also pose challenges for peaceful production; there has already been some tension between the two countries over their boundaries within Lake Albert.

“The process of consensus-building is still weak, and regardless of how it’s arrived at, displacements will create uncomfortable realities, including land and job pressure.”

According to Otoa, Uganda’s lack of a comprehensive land policy makes compensation issues more complex. “We need clear land policies to ensure people are properly compensated – there is a Resettlement Action Plan in place, but it has not been implemented, and a draft land policy has not been actualized, leaving these communities vulnerable,” he said.

He noted that the lack of education among the local population, both in the oil-rich areas and the rest of the country, had contributed to the continued problems in the sector.

“We have focused too much on educating MPs on the implications and importance of good oil governance. We need to move to people-centred approaches and encourage dialogue in the public sphere, which will lead to people demanding accountability from their MPs and the government,” he added.

Ultimately, Izama said, responsible actions by the government will be the difference between Uganda’s oil making a significant impact on the country’s economy or causing conflict and greater poverty.

“Pressure on public institutions prior to commercial oil production is an effective way of counteracting the resource curse. If this public engagement falters, if the transition [from President Museveni to his successor] is volatile, some of the scenarios of the so-called oil curse are possible,” he said. “Overall the tensions are high, but responsible actions by public and political institutions like the past debate show progress is possible.”

Portland Cement launches vetting of suppliers


Business Daily

February 20th, 2012

Troubled East African Portland Cement Company is seeking to overhaul its list of suppliers amid a boardroom wrangle that the government has linked to fraudulent procurement.

In a newspaper advertisement, EAPCC is seeking to vet afresh 98 suppliers of goods and services, saying only companies scoring highly as per its evaluation criteria will be pre-qualified.

“All existing suppliers who wish to be retained in the database (of suppliers) must apply and submit up to date information requested in the current pre-qualification data sheet,” read part of the advertisement.

Analysts say the fresh vetting of the company’ suppliers could be driven by a need to clean up its procurement department in light of the accusation of fraud.

“The company could be moving to ensure their long-running relationship with suppliers is not tainted with fraud and that it gets value for money,” said Robert Nyamu, the head of forensic audit at Deloitte Eastern Africa.

Mr Nyamu said the review of pre-qualified suppliers helps companies to shake off old suppliers who may collude with senior management to push through fraudulent contracts.

Among the items and services EAPCC is seeking to pre-qualify suppliers for include raw materials such as coal, bauxite, and clinker whose recent supply contract sparked off the ongoing court battles.

Industrialisation minister Amason Kingi—who sought to suspend EAPCC’s board on December 22—has accused it of spending Sh1 billion on goods without following competitive bidding and, in another instance, overruled the tender committee to vary the terms of a clinker contract. “Those purchases were made by direct procurement or restricted tendering,” read part of an affidavit by Mr Kingi.

The affidavit, for instance, said the board changed the terms of a contract to supply 140,000 tonnes of clinker after the supplier — Sanghi Industrial -— requested to increase the price from $58.90 per tonne after supplying only 67,000 tonnes.

The irregular purchases were made between August 15 and November 30, 2011, according to the affidavit.

The company’s directors, who have been temporarily reinstated by the high court, have hit back at Mr Kingi, saying the minister wants them out over a multi-billion shilling tender that the government allegedly wanted to go to a local supplier. They said the award of the Sh1.8 billion kiln upgrade contract to a South Korean firm, had upset government officials.

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