Watchdogs of major oil and gas projects fall short on independence, transparency and influence

Washington, D.C. – Groups of experts chosen for panels to monitor major and often controversial oil and gas projects should be more independent and transparent, and work harder to engage with local communities, according to findings from Watching the Watchdogs, a new report published today by international humanitarian organization Oxfam America. The report evaluates so-called independent monitoring expert panels examining ExxonMobil, Hunt Oil and BP projects in Chad, Peru and Georgia.

“Independent expert panels are a great tool for oil and gas companies to identify social and environmental risks as well as opportunities associated with controversial extractive projects,” said Emily Greenspan, policy advisor with Oxfam America and author of the report. “When panels are effective, they can help lessen social conflict and business risk, but when they aren’t, they undermine company efforts to establish trust with affected communities and NGOs.”

After conducting extensive field research on the panels set up to monitor Africa’s Chad-Cameroon pipeline, the Peru LNG pipeline and the BTC pipeline, which passes through Azerbaijan, Georgia and Turkey— all multi-billion dollar projects that received significant support from international lenders such as the World Bank – the report found that some of the panels included members with apparent conflicts of interest and were not very gender or geographically diverse.

For example, Hunt Oil, the company responsible for setting up the panel for the Peru LNG pipeline, violated its commitment that panelists not hold posts with companies engaged in the oil exploration and production industry. BP also took a risk by appointing Jan Leschly to chair the panel responsible for reviewing the BTC pipeline given his ties to BP and to AP MollerMaersk Group, a company engaged in oil and gas activities in the Caspian Sea.

“While our research did not reveal evidence that these potential conflicts of interest necessarily influenced their work, they certainly had the potential to influence the perceived neutrality of the panels, hindering their ability to play a credible watchdog role,” said Greenspan.

Field research also uncovered that the panels for the Chad-Cameroon and BTC pipelines engaged with a wide array of actors, such as governments, NGOs, international financial institutions, and others, and provided in-depth reports that accurately reflected the concerns of community members. Unlike the other two panels, the Peru LNG panel didn’t raise local concerns in any of their report findings despite the fact that community protests in four towns along the pipeline ground construction to a halt for several months, which forced the Peruvian government to declare a state of emergency in that area in January 2009. However in all three cases, project-affected communities had limited awareness of panel findings due to limited internet access, low literacy levels and lack of outreach in local languages. 

“While expert panels largely take a bird’s-eye view of projects, those that effectively engage affected communities and successfully identify and provide recommendations to address the concerns of these communities, develop a more accurate and complete picture of opportunities and risks that might lead to conflict,” said Greenspan.

Unfortunately, influencing the companies and host governments to follow recommendations proved too challenging for panelists in some instances. While BP took the recommendations seriously, the influence of the Chad-Cameroon pipeline panel was quite limited on the Chadian government, which later violated a law designed to ensure oil revenues went to poverty reducing projects. 

“The Chad-Cameroon panel helped to magnify local voices and raise the profile of social and environmental concerns to the global level, but several critical recommendations made by the panel went unheeded,” said Nadji Nelambaye, a representative of the Commission Permanent Pétrole Local, a network of civil society groups in Chad. “To be effective, panelists should proactively look for ways to ensure their recommendations move beyond the written page.”

In order to ensure the greatest influence possible, the report recommends that panels are created early in the project planning process and they must develop strategies to promote their recommendations, like holding local press conferences, maintaining public checklists to track compliance with their recommendations and ensuring local communities see and understand the reports.

“As companies are scouring the corners of the earth for energy resources, transparent and truly independent expert panels represent a useful tool for safeguarding communities and the environment,” said Greenspan. “Such panels should be employed for any high-risk extractive industry project receiving taxpayer support.”

Notes to the Editor:

- Webcast of the event launching the report can be viewed here.