Cover: Montage of Paintings
Turtle Abstract:
J.VincentScarpace
Oil Industry skylines:
Trisha La Moreaux
Oil spill:
OriginalDialogue
Sierra Leone Fish mammy:
Richmond Garrick (Freetown)
Photograph Credits
Scenes of the coast are copyright © ‘Caroline Thomas’ and were photographed from the UN
Helicopter in November 2011, under contract from UNEP.
i
CONTENTS
FOREWORD ....................................................................................................................................... VII
ACKNOWLEDGEMENTS..................................................................................................................... IX
ACCRONYMS AND ABBREVIATIONS ................................................................................................... x
PART 1 - THE ROLE OF SEA
1.
1
BACKGROUND ...............................................................................................................4
Current state of hydrocarbon prospecting in Sierra Leone4
1.1
Purpose of the Report .............................................................................................................4
1.2
Layout of the Report ...............................................................................................................5
2.
THE SEA PROCESS ...........................................................................................................6
2.1
Role and purpose of SEA .........................................................................................................6
2.2
Conduct of the SEA ..................................................................................................................6
2.3
Methodology ...........................................................................................................................7
2.3
Source Material .......................................................................................................................7
PART 2 PROSPECTS FOR OIL & GAS DEVELOPMENT .....................................................................8
3.
THE OIL AND GAS INDUSTRY......................................................................................... 10
3.1
Nature of hydrocarbons ........................................................................................................10
3.2
Geology..................................................................................................................................10
3.3
Life cycle of oil and gas development ...................................................................................11
3.3.1
Survey and Exploration11
3.3.2
Appraisal of a ‘discovery’12
3.3.3
Development of the oil or gas field12
3.3.4
Decommissioning14
3.4
Management of Off-shore Oil and Gas Exploration ..............................................................14
3.5
The current position in Sierra Leone .....................................................................................15
Downstream processing ....................................................................................................................17
4.
SCENARIOS FOR POTENTIAL DEVELOPMENT ................................................................. 18
4.1
Introduction...........................................................................................................................18
ii
4.2
Scenario A – The Baseline......................................................................................................19
4.3
Scenario B – Small Oil and Gas Field Development ...............................................................20
4.4
Scenario C – Large scale development of one or more oil and gas fields .............................21
4.5
Scenario D – International development of a large oil and gas field ....................................21
4.6
Onshore Development Options.............................................................................................22
4.6.1
Port Support Base ............................................................................................................... 22
4.6.2
Processing Plant ................................................................................................................. 23
Gas Processing .................................................................................................................................... 23
Oil Refining ......................................................................................................................................... 24
5.
INTERNATIONAL CASE STUDIES .................................................................................... 26
5.1
Introduction...........................................................................................................................26
Examples from the Gulf of Guinea ....................................................................................................27
5.2
Mauritania .............................................................................................................................27
5.3
Senegal, Gambia and Guinea-Bissau .....................................................................................28
5.4
Guinea ..................................................................................................................................29
5.5
Liberia ....................................................................................................................................29
5.6
Cote d'Ivoire ..........................................................................................................................30
5.7
Ghana ....................................................................................................................................31
Impacts on the environment .............................................................................................................. 33
Impacts on social welfare ................................................................................................................... 33
Managing expectations ...................................................................................................................... 33
5.8
Nigeria ...................................................................................................................................34
Other African examples .....................................................................................................................35
5.9
The Chad Republic .................................................................................................................35
5.10
Uganda ..................................................................................................................................36
Other offshore examples...................................................................................................................38
5.11
Malaysia.................................................................................................................................38
5. 2
Trinidad and Tobago..............................................................................................................40
5.13
Conclusions............................................................................................................................41
PART 3 ANALYSIS OF ISSUES ..................................................................................................... 42
6.
THE ENVIRONMENT ..................................................................................................... 44
6.1
Introduction...........................................................................................................................44
6.2
The Coast ...............................................................................................................................45
6.2.1
Landward Areas45
iii
6.2.2
The Coastline45
6.3
Offshore waters .....................................................................................................................46
6.4
Biodiversity Status .................................................................................................................46
6.4.1
Reptiles47
6.4.2
Marine Mammals47
6.4.3
Fish47
6.4.4
Birds47
6.5
Water quality .........................................................................................................................47
Section 2
Key Issues for the Environment.....................................................................................48
6.6
Introduction...........................................................................................................................48
6.7
Water quality issues ..............................................................................................................48
6.7.1
Establishing water quality standards in Sierra Leone52
6.8
Air quality issues ....................................................................................................................52
6.9
Fisheries and biodiversity ......................................................................................................52
6.10
Reconnaissance surveys ........................................................................................................53
6.10.1
Impacts on water and air53
6.10.2
Impacts on fisheries and biodiversity53
6.10.3
Safeguard measures53
6.11
Exploratory and Appraisal Drilling .........................................................................................54
6.11.1
6.12
Impacts on water55
Offshore development and production (including transport) ..............................................56
6.12.1
Impacts on Water56
6.12.2
Impacts on air57
6.13
7.
Climate Change......................................................................................................................59
SOCIO-ECONOMIC ISSUES............................................................................................. 60
7.1
Introduction...........................................................................................................................60
Section 1
Key Socio-economic Issues ............................................................................................60
7.2
The National Economy ..........................................................................................................60
7.3
Potentially Affected Economic Sectors .................................................................................61
7.3.1
Fisheries61
7.3.2
Tourism62
7.3.3
Transport and Shipping62
7.3.4
Engineering and Construction62
7.3.5
Other Economic Sectors63
7.4
Population and Demography ................................................................................................63
7.4.1
Population within the Coastal Zone63
iv
7.4.2
Nature of Coastal Communities65
7.4.3
Potential Areas of Social and Local Economic Impact65
Section 2
7.5
Views from the Coastal Communities ...........................................................................67
Regional Meetings .................................................................................................................67
7.5.1
Status of the Meetings67
7.5.2
Issues of Security67
7.5.3
Fisheries67
7.5.4
Economic Assistance to Local Communities68
7.5.6
Creation of Sovereign Wealth Fund68
7.5.7
Job Opportunities and Skills Training68
7.5.8
Status of SEA Recommendations68
7.5.9
Conclusion68
8.
GOVERNANCE AND INSTITUTIONAL FRAMEWORK ........................................................ 70
8.1
Introduction...........................................................................................................................70
8.2
Economics of Oil and Gas Production ...................................................................................70
8.3
The financial challenges of Oil and Gas Development ..........................................................71
8.3.1
The Nature of the ‘Oil Curse’71
8.3.2
The Dutch Disease71
8.3.3
Positive Management of Oil Revenues72
8.4
THE APPROACH IN SIERRA LEONE .........................................................................................73
8.4.1
Hydrocarbons Policy73
8.4.2
The Petroleum (Exploration and Production) Act, 201175
8.4.3
Environment Protection Agency Act, 200880
8.4
Implementing Policies, Laws and Regulations in Sierra Leone .............................................80
8.4.1
The Petroleum Industry80
8.4.2
Government MDAs81
8.5
International Best Practice ....................................................................................................82
8.5.1
UK Experience82
8.5.2
The European Union83
8.5 3
The United States of America83
9.
FINDINGS AND CONCLUSIONS ...................................................................................... 88
9.1
Status of the Industry ............................................................................................................88
9.2
Developing an offshore oil and gas industry .........................................................................88
9.3
Creating the right environment for business ........................................................................88
9.4
Protecting the Environment ..................................................................................................89
9.5
Social Issues ...........................................................................................................................90
9.6
Institutions and Governance .................................................................................................90
v
9.6.1
Applying these principles91
9.6.1.2 Controlling and monitoring development92
9.6.1.3
Transparent and Accountable Decision-Making92
9.7
Financial accountability .........................................................................................................92
9.8
Engaging Civil Society ............................................................................................................93
9.9
Managing Expectations .........................................................................................................93
9.10
Forward Planning ..................................................................................................................93
9.11
Management of the industry ................................................................................................93
9.12
Co-ordination within Industry ...............................................................................................94
10
RECOMMENDATIONS ................................................................................................... 97
Short term Actions ............................................................................................................................97
Acting on the SEA Findings and Recommendations97
Consultations97
Administration97
Medium term Actions .......................................................................................................................98
International Action98
Future Role of the SEA98
Development of a National Oil and Gas Plan98
Feasibility study for a permanent hydrocarbons supply and support base98
Data and Information Gathering98
Responding to Emergencies98
Environmental Safeguards99
Social Welfare Measures99
Education, Training and Technical Skills99
Longer-term Actions100
Financial resource management100
11
MONITORING AND EVALUATION101
APPENDIX 1 – THE PRESIDENT’S ADDRESS120
APPENDIX 2 CONDUCT OF THE SEA122
APPENDIX 3 TRINIDAD & TOBAGO OIL DISASTER CONTINGENCY PLANNING ARRANGEMENTS126
APPENDIX 4 COASTAL CHIEFDOMS131
APPENDIX 5 DETAILS OF SOVEREIGN WEALTH FUNDS133
APPENDIX 6 TERMS OF REFERENCE FOR SUPPORT BASE FEASIBILITY STUDY
vi
131
FOREWORD
In March 2012, His Excellency the PresidentErnest Bai Koroma launched a new process for Sierra
Leone, “The Strategic Environmental Assessment of Potential Oil and Gas Development“, which is
the subject of this report.
The President’s decision has been acknowledged in international symposia1 as probably the first
occasion on which a country has chosen to examine the environmental, social and economic
implications of a major new industry before it has been conclusively shown that the prospects are
commercially viable.
The decision to proceed with this SEA is a measure of the Government’s commitment to ensure that
all development in Sierra Leone is carefully planned to ensure that it is environmentally, socially and
economically sustainable and that it contributes to the long term wealth of our country.
Following presentation of the report to His Excellency the President, its findings will be published
and circulated widely for public comment. I hope that the report will be widely read and its
conclusions and recommendations will be carefully scrutinised.
I also hope that the SEA of Hydrocarbon Development will become a model for other proactive
studies of sustainable development so that we may all benefit from Sierra Leone’s great natural
wealth, skilled people and outstanding environment.
Haddijatou Jallow
Executive Chairperson,
Environmental Protection Agency (EPA-SL)
3rd Floor, Youyi Building
Brookfields
Freetown
Co-Chair
1
of
the
SEA
Steering
Africa Regional Workshop on SEA and the Green Economy; 17-18 January, 2013, Lusaka, Zambia
vii
Group
viii
ACKNOWLEDGMENTS
The Strategic Environmental Assessment of Potential Hydrocarbon Development in Sierra Leone has
been guided by a Steering Group drawn from many ministries and representatives of civil society.
Individual members have participated in six meetings of the group and have willingly given their time
and energy to the process. Their individual and collective commitment and advice is gratefully
acknowledged.
Membership of the SEA Steering Group
Hadijatou Jallow
Environment Protection Agency Sierra Leone
Joseph Mahayei
Min Energy & Water Resources
Robert Koroma
Sierra Leone Ports Authority
Mohamed S. Dabo
Disaster Mag. Dept. Office of National Security (ONS)
Wahab .L. Shaw
Office of Chief Of Staff (OCOS)
Ensah Kamara
Ministry of Tourism and Cultural Affairs
Col S Kanu
RSLAR Maritime Wing
Lt Col H T Conteh
RSLAR Maritime Wing
Adekunle King
Petroluem Unit
Prof. Enerst Ndomahina
IMBO-Fourah Bay College
Capt R.R.Sawyer
Sierra Leone Port Authority
Kemoh. K. Dabo
Ministry of Fisheries and Marine Resources
John Tommy
Ministry of Health and Sanitation
PC .Solokor. J Bockarie
Toli Chiefdom
Gibril Jalloh
ENFORAC
Matilda Williams
MOFED
Lahai Samba Keita
Environment Protection Agency - Sierra Leone
In addition to the work of the steering group, this report recognises the constructive contribution
made by the national representatives of the major oil and gas exploration companies in commenting
on early drafts of the SEA report and taking part in stakeholder discussions. Similarly, there are a
large number of individuals who attended the provincial stakeholder meetings who gave their time
voluntarily and helped to strengthen the report’s recommendations through their wise counsel.
Finally, thanks are recorded to the World Wide Fund for Nature (WWF Wamer) for providing a major
part of the funds which made the work possible and especially Dr Paul Seigel, its Conservation
Director for his insightful comments and guidance; to Oli Brown and the UNEP team who supported
the process; to the EPA staff on the SEA Secretariat and to Peter Nelson of Planning Green Futures
who
devised
the
approach
and
prepared
the
Draft
Report.
ix
ACCRONYMS AND ABBREVIATIONS
ADIA
CBD
CITES
ESIA
EU
FPSO
GCLME
GDP
ICZM
IUCN
NBIM
NHAB
PMA
RAMSAR
SEA
UNFCC
WIWO
Abu Dhabi Investment Authority
Convention on Biological Diversity
Convention on International Trade in endangered species
Environmental and Social Impact Assessment
European Union
Floating Production and Storage Operation Vessel
Guinea Current Large Marine Ecosystem
Gross Domestic Product
Integrated Coastal Zone Management
International Union for Nature Conservation
Norges Bank Investment Management
National Hydrocarbons Advisory Board
Protected Marine Area
Convention on Wetlands of International Importance
Strategic Environmental Assessment
United Nations framework convention on climate change
Working Group International Waterbird and Wetland Research
x
PART 1
THE ROLE OF STRATEGIC ENVIRONMENTAL
ASSESSMENT
xi
2
3
1. BACKGROUND
This Report introduces the subject of potential oil and gas development in Sierra Leone. It considers
how hydrocarbons development should be planned and regulated in order to ensure that the
highest economic returns are achieved, while protecting the environment and securing maximum
benefits in terms of human welfare. These goals have been explored through use of ‘Strategic
Environmental Assessment’ (SEA) which is a participatory process that aims to integrate
environmental and social concerns alongside economic and political issues in policies, plans and
programmes.
Current state of hydrocarbon prospecting in Sierra Leone
The existence of oil and gas bearing rock formations off the coast of Sierra Leone has been known
for more than thirty years. It is only in the last three years, however, that the presence of oil and gas
deposits has been confirmed through the drilling programmes of three survey and exploration
companies. The lead company, Anadarko (USA), has now drilled four wells (Venus, Jupiter and
Mercury 1 and 2 (May 2012). Three wells showed discoveries of hydrocarbons, while the fourth
confirmed the presence of suitable rocks for reservoir formation although only water was contacted.
The findings are now being evaluated in a three-dimensional model to determine whether or not a
commercial find might exist. This process will take a further six months to a year. At the same time
there are other promising areas of search in other adjacent oil exploration blocks. A high level of
interest has been shown by international exploration companies in recent bidding for the remaining
open blocks which are currently being licensed by the government.
The inland areas of Sierra Leone are composed principally of igneous and metamorphic rocks and
related alluvial deposits. These rocks host a wide range of valuable minerals, including diamonds,
gold, iron ore, bauxite and rutile but are unlikely to include hydrocarbons. However, conditions
suitable for the formation of oil and gas do exist in the thick formations of sedimentary rocks found
beneath off-shore waters on the continental shelf. This SEA report is therefore focused entirely on
the coastal belt and offshore waters of Sierra Leone.
1.1
Purpose of the Report
The report draws together the findings and recommendations of work undertaken on behalf of the
Strategic Environmental Assessment (SEA) Steering Group over a period of seven months (from
November 2011 to June 2012). The draft report formed the basis for detailed consultation with
district councils and coastal communities in August 2012 and led to the inclusion of new
recommendations. The revised report was tabled for discussion by the Steering Group in January
2013 and the final recommendations were agreed and incorporated in this volume for presentation
to his Excellency, the President, in his capacity as head of the government and Minister for
Petroleum. It is intended that the final report should also be discussed in Parliament.
Following internal consultation, the government will publish its own conclusions and set out a
programme of action based on review of the SEA.
4
1.2
Layout of the Report
The document is divided into four parts and a number of chapters as follows:
Part 1 – The Role and purpose of Strategic Environmental Assessment
Chapter 1 provides the introduction and context
Chapter 2 describes the SEA process
Part 2 – Prospects for Oil and Gas Development in Sierra Leone
Chapter 3explores the nature of the Oil and Gas Industry
Chapter 4 sets out four Scenarios for Potential Development,
Part 3 - Analysis of Key Issues
Chapter 5explores international case studies
Chapter 6covers the Environment
Chapter 7discusses Social and community Issues
Part 4 - Advice to Decision-Makers
Chapter 8looks at the Institutional and Governance Framework
Chapter 9sets out Findings and Conclusions
Chapter 10provides a List of Recommendations for action.
Chapter 11 summarises future work on Monitoring and Evaluation.
5
2.
2.
THE SEA PROCESS
2.1
Role and purpose of SEA
The SEA of Potential Hydrocarbon Development has been undertaken in order to provide
Government, the Oil and Gas Industry, Civil Society, concerned stakeholders and the public at large
with a clear understanding of what the implications of discoveries of oil and gas might be for Sierra
Leone. The report sets out advice on the development and regulation of the oil and gas industry to
ensure that:



Any development of oil and gas (if it is found in commercial quantities) will be undertaken to
support the national wellbeing and long term economic prosperity of Sierra Leone; providing
benefits for the Nation and responsible investors,
All development is conducted in ways that improve socio-economic conditions for those
communities that might otherwise be adversely affected (for example, fishing and tourism),
and,
All operations are conducted in ways which avoid or minimise any adverse effects on the
environment.
Different models of SEA exist, ranging from ones which focus entirely on physical environment
through to processes which take a holistic approach, combining all elements of sustainable
development. This SEA falls into the latter category, since it is recognised that the majority of
environmental and socio-economic issues affecting oil and gas development are determined and
controlled by the institutional, governance, economic and political framework within which key
decisions are taken.
This role for the hydrocarbons SCA was clearly spelt out
by his Excellency, President Koroma, when he launched
the SEA scoping reportin March 2012 (full
transcript,Appendix 1):
“President Ernest BaiKoroma launched the Strategic
Environmental Assessment (SEA) for potential extraction
of oil and gas in the West African nation last month. The
President said that “the launch demonstrated the
government’s determination to protect coastal
communities and rich marine resources from possible environmental impacts associated with
offshore oil and gas drilling. The SEA’s aim is to ensure that oil and gas reserves are exploited to
secure economic prosperity, while improving social welfare of affected communities and protecting
the environment.”
(www.sierraleonedailymail.com/archives/5139 -15 Mar 2012
2.2
Conduct of the SEA
The SEA was carried out by a team of government officers, supported by a consultant and civil
society using the international guidelines established for Strategic Environmental Assessment by
OECD. The process has been undertaken over seven months, followed by a period of consultation.
It was designed to be fully participatory with regular meetings being held with interested parties and
stakeholders.
6
2.3
Methodology
SEA can be regarded as a family of strategic assessment approaches, as defined by the OECD-DAC
manual “International Good Practice Guidance on SEA” (OECD, 2006). The process ranges from
assessments focusing largely on bio-physical components of the environment through to fully
integrated economic, social and environment approaches with the emphasis on sustainable
development outcomes. It is the latter approach that has been adopted in this case (See Appendix
2).
The World Bank is a strong supporter of a form of SEA which concentrates on identifying the
institutional barriers and opportunities which operate at policy and programme level,in terms of
achieving natural resource development aims. This approach recognises that it is often governance
issues, and the lack of human capacity to manage change, that has the greatest impact on
achievement of development goals.(The World Bank, 2011)
The Hydrocarbons SEA in Sierra Leone has combined elements of the OECD-DAC and World Bank
methodologies. It has also be structured around recommendations from the best practice guide for
offshore oil and gas development in the West African Marine Eco-region “Extractive Industries &
Sustainable Development”, 2010, published by WWF WAMER (West African Marine Ecosystem) and
authored by S.Kloff, C. Wicks and P.Siegel. This highly relevant publication gives an overview of the
West African Marine Ecosystem, reflects on the governance and economic impediments towards
sustainable development and discusses how oil and gas development impacts on the environment.
The SEA falls into three parts;



2.3
an initial data gathering and scoping exercise to identify relevant issues, followed by,
analysis of these concerns, and,
the distribution of advice to those organisations and individuals with responsibility
for taking decisions on the SEA recommendations.
Source Material
There is a very extensive international literature on the environmental and socio-economic impacts
of oil and gas development, and a significant amount of material relating specifically to West African
experience. In addition, there are a number of good practice guides prepared by international
agencies and the petroleum industry which offer practical solutions to potential problems. Finally,
there are many examples of regulatory processes and procedures which can be drawn on to ensure
that Sierra Leone is adequately prepared to manage the environmental effects of hydrocarbon
development. These various source materials are listed in appropriate sections of the bibliography to
this report.
The SEA has also been informed by site visits to the coastal region at Sulima, Bonthe, the Sherbro
and Sierra Leone River Estuaries, and a study tour of the western coast and emerging oil town of
Takoradi in Ghana.
7
PART 2
PROSPECTS FOR OIL & GAS
DEVELOPMENT
Contents of this Part
Chapter 3
Understanding the Oil and Gas Industry
Chapter 4
Future development scenarios
8
9
3.
3.
THE OIL AND GAS INDUSTRY
3.1
Nature of hydrocarbons
Hydrocarbons are chemicals which combine varying proportions of hydrogen, carbon and oxygen
and occur naturally in the environment, although they can also be manufactured synthetically.
These chemicals include tars, oils and gases. The heaviest products, like tar and bitumen, are solid,
while oils range from very dense crude to lighter ‘sweet’ natural petroleum in liquid form. Volatile
hydrocarbons include methane, ethane and other natural gases.
These substances are derived from organic deposits that have been subjected to high pressure and
temperature deep in the earth. The formation of oil and gas began during periods of the earth’s
history when there were very high temperatures and vast equatorial forests which provided the
source of carbon. Decaying forest products were washed by rivers into swamps, lakes and coastal
estuaries and then buried under great depths of silt, mud and sand. In later geological eras,
limestone and other rock types were laid down on top of the organic sediments, and the stratified
layers were compressed, heated and folded or faulted during movement of the earth’s continental
plates. The process of oil formation is still continuing and the source rocks are often referred to as
the hydrocarbon "kitchen".
Where conditions allow, oil and gas in the original ‘source’ rocks migrates from the kitchen by
natural seepage through overlying layers of porous material until it reaches the surface or sea bed
and is dissipated in the air or water. However, during its migration, oil and gas is sometimes trapped
under a seal of impervious rock and forms an underground reservoir. It is normal for gaseous
materials to accumulate at the highest level underlain by oil, which in turn may float on water.
Although the term ‘reservoir’ is in common usage, the oil and/or gas is often trapped in pores
between grains of sand and the reservoir is more like a sponge than a lake.
The process of oil and gas exploration involves searching for likely reservoirs using a combination of
seismic sensing (to detect variations in the density of buried rock formations) and selective drilling.
Penetration of a reservoir can occasionally result in a ‘blow-out’ when the drilling pipe provides a
conduit for venting gas under very high pressure, but the process of drilling wells has advanced
considerably and exploration companies begin by placing a cap on the wellhead which allows its
closure if there is a risk of explosion.
Initially, oil and gas was exploited almost entirely from land based deposits but as world demand has
risen attention has been directed to off-shore deposits. In the last decade this has led to the
opening up of deep water deposits. (Offshore Magazine, 2012; GBI Research , 2012)
3.2
Geology
The discovery of oil and gas along the continental shelf of West Africa has led to a reinterpretation of
the submarine geology in this area. (Davidson, 2005; Core Laboratories, 2010: Nibblelink, 2011;
Patersons, 2011). Traditionally, oil and gas has been exploited from domed anticlinal structures
created by earth folding and salt intrusions. Hydrocarbons accumulate in these structures within
porous rocks like sandstone which are capped by impervious shale. Attention has now shifted to
offshore prospects in deep water where new types of rock formation are attracting interest. These
10
include ‘fan formations’ where rivers in the Cretaceous era carried large amounts of organic matter
which was deposited in estuarial fans. This material was subsequently buried by accumulation of
other sediments on top. These fan formations have been detected by seismic survey along the steep
shelf which divides continental rocks from the ocean bed.
An important area of research has been the mapping of submarine stratigraphy on both sides of the
Atlantic Ocean, because the geological events that gave rise to hydrocarbon deposits occurred
during the period when the landmasses that now constitute Africa and South America formed one
continent and were starting to move apart.
As oil prices have risen, on-shore reserves have started to decline and technology has advanced;so
attention has increasingly switched to coastal and off-shore waters in both East and West Africa.
Ten years ago the maximum depth of water in which drilling ships could operate was around 7000
feet (~2100 m) but wells are currently been developed at depths of 12,000 feet(~ 3660m) and this
capability is still being extended
3.3
Life cycle of oil and gas development
Development of Oil and Gas goes through an extended cycle of activities, beginning with survey and
exploration, appraisal, oil/gas field development; production and ultimately de-commissioning. This
section sets out some of the principal characteristics of the industry.
3.3.1 Survey and Exploration
Oil and gas exploration in marine waters is a systematic process which begins with two dimensional
(2D) seismic surveys. High pressure air jets are fired from survey vessels at regular intervals along
transects which are recorded using geographic positioning from satellites (GPS) to accurately fix the
location of the charge. Receptors, towed in long strings behind the survey vessel, pick up pressure
waves which are reflected from the sea bed and the underlying rock strata. Variations in the
strength of these pressure waves allow the presence of those rock structures which typically host oil
and gas deposits to be detected.
Two Dimensional surveys only show the horizontal shape and extent of an anomaly. The next stage
in exploration involves closer inspection, again using seismic equipment, but this time each anomaly
is targeted with Three Dimensional seismic survey to explore the depth of the rock formation. Many
thousands of kilometres will be covered in the initial 2D surveys, reducing to specific areas of 3D
work.
Very detailed geological interpretation of the seismic survey results is required before an exploration
company will invest in borehole drilling, which is the only way of proving whether hydrocarbonbearing rocks are present. Deep sea drilling can cost over $1million a day and an average borehole
drilled to 15,000 feet (~4570m) may take up to six weeks costing 40-80 million dollars. In
exceptional circumstancesthe first borehole to be drilled in a new prospecting area may encounter
enough oil or gas to confirm a commercial deposit. More often, however, the first few wells may be
barren or will merely confirm the presence of appropriate host rocks withonly traces of
hydrocarbons, but no actual reservoir. Nevertheless, even when no oil or gas is encountered,
recovery of drill cuttings will provide valuable geological information which can help to refine
subsequent searches. The high degree of uncertainty attached to oil and gas exploration in offshore
environments is clearly indicated in the review of experience in West African countries contained in
Chapter 5.
If a borehole strikes hydrocarbon bearing rocks, the first level of information will confirm the depth,
or thickness, of the strata (in feet) and, based on the pressure of the oil or gas, an indication of the
11
potential flow in barrels of oil or cubic feet of gas per day which could be recovered from the well.
This does not confirm how much oil or gas is present, how large the reservoir is, or how much effort
will be required to recover useable quantities. Consequently, the exploration company will declare a
‘discovery’ which it is obliged to do under its licence, and then cap the well so that it can be
reopened at a later date.
3.3.2 Appraisal of a ‘discovery’
Based on all the information now available, the exploration company will need to plan the appraisal
stage of the potential oil or gas field. This is likely to include sinking a number of additional
boreholes within the area of the prospect to delimit its physical extent and the average depth and
characteristics of the reservoir. In addition to assessing the size of the reservoir, samples are taken
to confirm the nature and quality of the oil and/or gas. The raw material may vary from very heavy
crude oil which is viscous and difficult to extract, to light sweet crude which flows readily and is ideal
for converting into petroleum products. Similar variations in natural gas will determine its potential
value.
Physical appraisal of an oil or gas field will be followed by further technical and economic evaluation
to decide whether commercial extraction is practical, both in terms of the engineering complexity
and financial implications. There is no certainty that a proven hydrocarbon deposit can be exploited
at any given time because this will depend on recovery costs set against prevailing world prices for
the given products. The fact that it may be uneconomic to exploit a field under existing conditions
willnot automatically rule out recovery at a later date, ifoil prices continue to rise.
3.3.3 Development of the oil or gas field
Once the appraisal work has been completed the operating company will have a reasonable idea of
how large the oil/gas reservoir is, what percentage of the oil/gas is recoverable and how the field
will need to be exploited. The process of developing the oil/gas field involves drilling a number of
production wells at intervals designed to maximise recovery and the linking of wellheads on the
seabed by a series of pipelines which will convey the oil or gas to a central collection point.
Two options exist for recovering the oil and gas from the sea bed – either pumping to the surface
through a flexible pipeline which terminates in a floating platform (either a Floating Production and
Storage Operation vessel (FPSO) or a structure anchored to the sea floor) or bypumping through a
large pipeline buried on the sea bed which conveys the products to a shore-based terminal.Gas is
easier to transport by pipeline than oil, and the latter option is only available where there are very
substantial reserves of light crude oil which flows relatively easily. If only modest quantities of oil are
discovered off the coast of Sierra Leone it is likely that this would be transported by ship from an
offshore production site to an existing or new terminal.
The choices for landing oil and gas are determined by the quantities involved, technical feasibility of
the delivery options, including distance from shore, and the prospects for further discoveries and
development in the region.
Where a small oil or gas field is discovered, requiring only a few wells for its exploitation, the most
likely option will be to establish a floating platform (FPSOor rig) where the recovered oil or gas is
given primary treatment before being transferred into bulk carriers and transported to remote
markets for processing and refining. If the field is large, or a number of commercial reservoirs are
discovered, the preferred option may be to link the field to onshore facilities where it is easier to
treat the products.
12
Two types of FPSO (A circular vessel and a converted ship)
Offshore operations: Throughout the life of an offshore oil or gas field, there is a continuous need to
supply and maintain the infrastructure and crews working on the offshore structures. These supplies
range from food, water and all normal commodities for daily living through to massive engineering
components weighing hundreds of tonnes. Consequently, the offshore operations need to be
supported by supply ships and helicopters from appropriate shore facilities.
Onshore operations: If the quantities of oil or gas are large enough, onshore development may
include the construction of a refinery to produce a range of hydrocarbon products, as is planned in
Ghana. In isolated cases, such as the new discoveries off the coasts of Mozambique and Tanzania so
much gas has been found that there is no prospect of the countries requiring the full amount for
internal use. In these circumstances onshore facilities will be designed to serve international markets
by re-exporting the products by sea.
Oil and gas prospecting is taking place along the continental shelf off all parts of the Sierra Leone
coast, although attention has so far concentrated on the licenced blocks to the south of Freetown
and the first discoveries lie offshore between Bonthe Island and the border with Liberia.
As noted above, if commercial quantities of oil and/or gas are found it is likely that the first level of
production would involve use of a floating production, storage and offloading vessel (FPSO)
permanently moored off the coast. The products would be exported to refineries in other countries
initially. However, from both the governments and an industry perspective there would be strong
interest in establishing permanent support facilities onshore to reduce operating and transportation
costs. A number of criteria would have to be weighed in the balance to determine the location of
any shore-based facilities, some of which are listed below
Port Facilities: Supply vessels are large ships and require a minimum draft of 8-9 metres. They must
be secured with permanent moorings / anchors adjacent to a jetty or wharf. Vessels may need
servicing and repair and if moored for any length of time they will require adequate shelter,
protection and security.
Storage Areas: Oil exploration requires the import of a large quantity of heavy and bulky equipment
including drilling pipes, replacement lifting gear and motors, well head valves and structures, wire
and chain hawsers, drilling mud and chemicals etc. These materials need to be transported by land
or sea and stored in secure compounds.
Transport: A high proportion of oil and gas related equipment is of a very specialised nature and will
be imported by sea from international supply bases, for example in the Gulf of Mexico or from
Norway or Scotland which have been servicing the North Sea off-shore industry for more than forty
years.
13
Fabrication: Hydrocarbon production requires a high degree of specialised fabrication and welding
(of structures, components and pipes) and there is scope for these jobs and skills to be established in
in-country in the longer term although initially most specialised labour will be imported. The
challenge for a new oil and/or gas producing country is to get the necessary commitment from
operators to finance local training schemes.
A combination of the activities listed above will define the need for onshore support to an emerging
oil and gas industry. Whether these facilities are provided within, or close to, an existing port like
Freetown or are developed in an entirely new location will depend on the scale and likely growth
rates of the industry, the availability of suitable berthing / harbour facilities and the development of
land-based infrastructure. These are critical issues that have been explored in the SEA.
Crew / Personnel Accommodation: Workers on oil rigs and FPSOs spend up to six weeks at a time at
sea and expect a high standard of accommodation during their subsequent two week leave period.
They may choose to fly back to their respective homes which, given the international nature of the
oil industry, may be anywhere in the world or, alternatively, remain in-country if the facilities are
good. The expectation is that the oil industry will increasingly use the top category hotels in
Freetown and elsewhere for this purpose.
3.3.4 Decommissioning
All oil and gas deposits are finite and, after a period of production which may run from five to fifty
years, the time will eventually be reached where the field is exhausted and needs to be closed down.
This will require the recovery of accessible well heads, valves and pipelines laid on or in the sea bed
and the permanent capping of the wells to ensure that no contamination of the seabed occurs from
slow but persistent seepage once the field is abandoned.
3.4
Management of Off-shore Oil and Gas Exploration
The rights to explore for, and produce, petroleum from coastal waters are regulated by all
governments using a system of licence blocks which are generally rectangular in shape and defined
by coordinates set out from the shore. A total of 11 blocks were initially defined in Sierra Leonean
waters which averaged 4000 square kilometres. Following the formation of the President’s
Presidential Task Force and publication of the 2010 Petroleum Policy, the size of block was reduced
to approximately 2000 square kilometres in order to increase the element of competitive bidding.
The initial licensing of off-shore blocks prompted interest from several of the international
companies who have played a dominant role in opening up the oil and gas industry in the northern
sector of the Gulf of Guinea, together with a number of local companies. A degree of consolidation
has taken place in the number of exploration companies and licence holders from the initial round of
licencing.
In December 2011, the Government of Sierra Leone
announced another round of bidding (which closed at the
end of March 2012) for the remaining 9 open blocks.The
location of these blocks is shown in Figure 3.1. A high level
of interest has been shown by international companies in
acquiring these licenses and the Government is now
evaluating the bids with the guidance of the Petroleum
Directorate.(Source: Extracted from SL Petroleum Directorate
advertisement in national newspapers (Awareness Times, Monday
January 15th 2012)
Figure 3.1 Open Offshore Petroleum Blocks
14
3.5
The current position in Sierra Leone
Two international companies Anadarko (USA) and TullowOil (Ireland/UK) have led the way in
exploring the southern section of Sierra Leone’s coastline. In 2009, Anadarko drilled a successful
borehole (Venus B-1) at a point 40 kilometres off the Sierra Leonean coast to a total depth of
approx. 18,500 feet in about 5,900 feet of water and encountered more than 45 net feet of
hydrocarbon pay.
A second well (Mercury-1), drilled to a depth of 15,950 feet in 2010 also encountered oil bearing
deposits in two Cretaceous fan systems. This well lies in licence block SL-07B-10 and is situated
approximately 40 miles east-southeast of the Venus 1 well. The first strike in the Mercury-1 well was
in a shallow fan formation and passed through 21 feet of 24 degree medium crude oil, while the
second encounter at greater depth contacted a 114 feet thick reservoir of light sweet crude oil
(gravity 34-42 degrees).
The drilling ship was relocated in June 2011 to sink an exploration well at the company’s
Montserrado prospect off the coast of Liberia approximately 53 miles south east of the Sierra
Leonean discovery. This prospect is potentially linked to the Sierra Leone fan formation.
On February 21 2012, Anadarko and its partners (Tullow and Repsol) announced that a third well in
Sierra Leone (Jupiter-1) had encountered 98 net feet (30 metres) of hydrocarbons in upper
Cretaceous age reservoirs. The Jupiter well is located 15 miles (25 km) west of the Mercury-1
discovery. It was drilled to a total depth of 21,212 feet (6465 metres) in a water depth of 7,215 feet
(2,199 metres). The new discovery has confirmed that there is an active “working petroleum system
generating and preserving high quality oil and gas”. This well has been capped and preserved for
possible future re-entry to
allow for further evaluation.
In a continuing programme of
exploration planned a year
ago, Anadarko and its partners
moved the drilling ship
“Transocean Discoverer Spirit”
15 km north-east of Jupiter-1
in order to drill Mercury-2
which
targeted
several
reservoir levels, including
possible extensions to the
reservoirs found in Mercury-1.
The well confirmed the
presence of reservoir rocks but
did not locate additional
hydrocarbon reserves.
Figure 3.2 Location of the wells drilled by Anadarko
15
Figure 1 _ Map of Oil and Gas Licence Areas off the West African Coast
Source: African Petroleum Annual Report 2010
Figure 2
Close-up of Sierra leone Discoveries
Source: African Petroleum Annual Report 2010
16
The existing Kissy Oil Jetty and Storage Tanks
Downstream processing
The discovery of oil and gas provides a potential source of revenue for the host country, varying
between 40-80% of the gross value, depending on the terms that are negotiated with the oil or gas
producer. However, in the long term, it is the capacity to process oil and gas and to use the products
for building new petrochemical industries, which offers the most attractive economic prospects (see
Chapter 5, Malaysia). Many countries have developed basic refining capacity to turn crude oil into
useable products, even when they have no reserves of their own, and countries like Senegal and
Cote d’Ivoire have augmented their own limited resources with imports of Nigerian Light Crude for
many years.
Sierra Leone hasa currently disused oil refinery located on land adjacent to the Kissy Wharf. The site
was formerly owned by the Sierra Leone Petroleum RefiningCompany limited (SLPRC) which was
established in 1970 as a joint-venture between the Government of Sierra Leone and five
international oil companies (BP, Mobil, Texaco, Shell and Agip) with the government holding a 50%
share. The refinery originally had a capacity for processing 450,000 tonnes of crude oil a year.
Products included premium motor spirit, dual-purpose kerosene, aviation turbine kerosene,
automotive gasoil, fuel oil, bunker fuel oil, liquid petroleum gas, marine diesel oil, and special
distillates. A detailed financial study (Smith, 1995) showed that production varied widely from year
to year, affected by the timing of delivery of crude oil and political tensions caused, in part, by fuel
shortages and price increases. In the 1970s the refinery employed 138 people, all of Sierra Leonean
nationality.
Lack of investment and maintenance during the war yearsresulted in increased inefficiencies. The
SLPRC was eventually acquired by the Government and advertised for lease through competitive
tender involving submission of expressions of interest (EOI) in May 2011. The successful tenderer is
currently undertaking technical and environmental impact studies to determine what will need to be
done to redevelop the refinery.
17
4.
SCENARIOS FOR POTENTIAL DEVELOPMENT
4.1
Introduction
With the present level of knowledge it is simply not possible to say what level of development of oil
and gas may be realised in Sierra Leone in the years ahead. The prospects range from a ‘worst’ case
under which no commercially viable deposits are found through to a ‘best’ case in which very large
reserves are discovered which put the country on the path to being an oil-rich nation. Uncertainties
of this nature affect all countries which are in an early phase of prospecting and nations like Liberia,
Cote d’Ivoire and Kenya are all in a very similar position. ChapterFivegives a number of clear
examples of countries in West Africa where initial prospects turned out to be less favourable than
was first anticipated, but also examples where continued exploration after initial failure has
subsequently been rewarded with commercial discoveries.
Other countries like Mozambique, Uganda and Ghana, which have had firm prospects confirmed in
the last ten years, have progressed beyond the stage of complete uncertainty to the point where
production has begun. Even here, however, it is not possible to say what the future holds in terms
of new exploration areas. Finally there are many parts of the world where oil and gas have been
exploited for more than 50 years and the industry is described as ‘mature’ or even ‘in decline’. Even
in these situations potential new discoveries could extend the life of the oil and gas fields for many
more decades; the North Sea and Gulf of Mexico are just two locations where long-standing oil and
gas operations may be extended into much deeper off-shore waters.
Given these levels of uncertainty some people might argue –“What is the point of trying to plan for
the future - why not just wait and see what happens?” The answer to this question is very simple:
most of those countries that failed to plan for their future have little or nothing to show for their
efforts, even after many decades of oil and gas production.
It is for this reason that four scenarios have been created to project what might happen in Sierra
Leone given different levels of oil and gas development. The scenarios are entirely hypothetical and
it is unlikely that any one of the four will turn out to represent reality but they do provide the basis
for a discussion about the measures that need to be taken in making a long term national plan for
hydrocarbons. The scenarios are:




The Baseline (No development)
Small oil and gas field development
Large scale development of one or more oil and gas fields
International development of a large oil and gas field
The scenarios are presented in diagrams for illustrative purposes which do not bear any relationship
to specific license blocks or operators’ activities. In addition, the coastline of Sierra Leone has been
modified to avoid the suggestion that specific locations are involved.
Each scenario is discussed first in sections 4.2 – 4.5 in terms of offshore operations. The nature of
potential land-based supporting activities is discussed in later sections.
18
4.2
Scenario A – The Baseline
Assumed Reserves and Production Rates:
In this hypothetical example it is assumed that no
commercial deposits of oil or gas are developed
within the next ten years. Existing knowledge about
the distribution of potential submarine geological
structures that may host hydrocarbons along the
West African continental shelf is sufficiently
advanced to suggest that at some time in the future
commercial oil and gas deposits will be found off the
coast of Sierra Leone. However, these discoveries
could be some years away and the current phase of
exploration could fail to identify a sufficiently large
or accessible reservoir(s) to justify development
under current economic conditions. It is important,
here to recall Ghana’s experience in which it took a
hundred years of exploration before the current
Jubilee oilfield could be successfully developed. Similarly, exploration off the coast of Cote d’Ivoire,
Liberia and Sierra Leone failed to find commercially exploitable deposits in the 1980’s-1990’s.
Ownership: In a situation where no substantial discovery was made in offshore licence areas, the
existing exploration licence holders would eventually reduce their liabilities by either surrendering
their licences back to the government or by selling their interest to new entrepreneurs who might be
willing to take a higher level of risk in continuing to explore the areas. In either case the value of
revenue from the exploration licence blocks would fall and the level of commercial interest would
decline.
Depending on experience elsewhere along the West African coast, it is possible that interest would
be rekindled at a later date by discoveries in different geological strata or possibly deeper water, but
in the short term it would be important for the government to manage expectations on the part of
local communities and other stakeholders who may have been encouraged into thinking that all
their economic problems are about to be solved through the discovery of hydrocarbons.
Other Opportunities: Regardless of the successful discovery of oil and gas there are two major
economic activities that should be promoted along the coast. These are fishing and tourism
development. If oil and gas is shown to have limited potential this will be all the more reason for
focusing major development on the fishing and tourism sectors.
19
4.3
Scenario B – Small Oil and Gas Field Development
Assumed Reserves and Production Rates:
In this scenario it is assumed that discovery of oil
and/or gas made within one of the existing licenced
blocks is confirmed through detailed appraisal, to
represent a modest oil field which can be exploited
with existing technology under current economic
conditions. For the sake of discussion the reservoir
is assumed to contain the equivalent of 400 million
barrels of oil. Allowing for 80% recovery and an
extraction rate of 45,000 barrels a day, around 1.6
million barrels of oil would be produced each year
for up to twenty years, although production rates
would decline as the reservoir was depleted.
Ownership: The rights to development of this oil
field would rest with the holders of the exploration
licence, or any major company who buys into the
consortium, subject to the rules applying to
acquisitions operated by the Petroleum Directorate.
Production and Storage: It is
assumed that the oil field
would be exploited by natural
flow or pumping from a
number of production wells
that are linked on the sea bed
to a central riser from which
the oil is transferred to a FPSO.
This vessel would be designed
to operate for the full life of
the field. The FPSO would have
the capacity to store up to
500,000 barrels of oil (11 days
production) and this would be
transferred by flexible pipelines to ocean tankers which would berth alongside. On average, one
shipment of oil would take place every 5 days, based on use of tankers with 200,000 – 500,000
tonnes capacity.
Marketing: Loaded tankers would transport the crude oil to markets that had been confirmed
under long term agreements between the producer and user. Given the proximity of Ghana’s
upgraded oil refinery at Tema(or the new refinery planned in Ghana's western region) this is one
possible destination, but contracts could also be signed with European, American or Asian refineries.
In the long term, oil could also be delivered by tanker to other shore-based refineries in West Africa
including Senegal, Sierra Leone and Cote d’Ivoire. The potential to use the re-commissioned Kissy Oil
Refinery in Freetown would depend on the quality of the oil produced and the level of upgrade
planned for the existing facilities by the new owner.
Servicing off-shore operations: The development of a small oil field, fifty kilometres off-shore, would
justify the creation of a permanent support base on the mainland from which all the off-shore
industries’ supply needs could be met.
20
4.4
Scenario C – Large scale development of one or more oil and gas fields
Assumed Reserves and Production Rates:
In this scenario it is assumed that three separate oil
and/or gas fields are found within Sierra Leonean
waters. One of these fields is assumed to be a large
resource containing in excess of 1 billion barrels of oil.
(I.e. equivalent to the initial discoveries in Ghana's
Jubilee Field). The other two are assumed to be
smaller, containing 500 million and 250 million barrels
of oil equivalent respectively.
Ownership: It is assumed that the large reserve would
be owned and operated by an international oil major.
The two smaller fields are assumed to be owned by
consortia including private companies and the Sierra
Leone National Petroleum Company.
Production and Storage: A large field, or group of separate reservoirs, could produce 100,000 –
150,000 barrels of oil and additional quantities of gas each day. In this scenario it is assumed that
there are sufficient reserves of oil and gas to warrant construction of a 50 km. submarine pipeline to
bring hydrocarbons ashore on the coast of Sierra Leone. This would require the development of onshore storage facilities and the potential for development of a gas processing train and possibly a
crude oil refinery (similar to the facility currently being constructed in Ghana).
Marketing: If afull scale gas processing plant and refinery were to be built, a proportion of the
products would be sold to internal markets in Sierra Leone. However the outputs from even a small
refinery would exceed the country’s needs for a number of years until industrial capacity had been
developed, so much of the production would need to be sold to world markets. In the event that a
large field justified the development of a refinery this would need to be sized so that it could also
handle the outputs from the smaller fields as well.
4.5
Scenario D – International development of a large oil and gas field
Assumed Reserves and Production Rates: Scenario D
has the same characteristics as Scenario C with the
important distinction that the oil and gas reserves are
assumed to lie across the international boundary with a
neighbouring country (in the case of Sierra Leone, this
could be Guinea or Liberia). This is a possible outcome
based on the current exploration programmes since the
hydrocarbon bearing rocks are found all the way round
the Gulf of Guinea and some of the most promising
geological formations straddle national boundaries. In
the hypothetical example explored here, it is assumed
that the oil and gas reserves of a large field are evenly
divided between Sierra Leone and Liberia.
21
Ownership: In this scenario it is assumed that the oil and gas would be owned by the two States in
strict proportion to the amount of reserves within their respective territorial waters. Separate
licences to operate the fields could require a complex agreement with different private and stateowned companies, but a development plan would need to be agreed that ensured that the total
reserves were exploited in the most efficient and sustainable way possible.
Production and Storage: The recovery and transfer of oil and gas to one or more FPSOs would be
one option especially if the international agreement required that both States should have control
over their respective hydrocarbon outputs. However, efficient management of the entire resource
could provide a very strong case for linking the fields by pipeline to a single processing plant on
shore. The question that would then need to be addressed would be in which country?
Marketing: The principles governing marketingand sale of products would match those in Scenario
C but with the added requirement to satisfy the legal and policy objectives of the two States.
4.6
Onshore Development Options
Three levels of onshore development are implied by the scenarios presented in the preceding
sections. These are, first, the creation of a dedicated port / support base for offshore operations
which would be required for all levels of development, second, the establishment of a gas processing
plant and possibly, third, a new oil refinery.
4.6.1 Port Support Base
In terms of government intentions, the petroleum policy recognises the importance of dispersing
economic activities associated with oil and gas so that the benefits are felt outside the established
commercial and industrial areas around Freetown and the mining areas. However, this goal also
needs to be reviewed against the practical necessities of providing a safe harbour, free of congestion
with deep enough water to allow sizeable supply vessels to
berth alongside a large storage area.
Currently survey vessels use the Queen Elizabeth II wharf in
the Port of Freetown for provisioning. It would be
technically feasible to provide a dedicated area for use of
oil-related shipping but only at the expense of existing
commercial cargo handling, including commodity imports
like rice, containers and vehicles. A major disadvantage of
the Port is the poor access for large road vehicles due to
traffic congestion in Kissy.
An alternative would be to develop a self-contained supply base on the opposite shore of the Sierra
Leone River. There is plenty of land available in
the Lungi area for creating a large equipment
storage yard and this could be linked by a
dedicated private road to a new jetty. In
addition to being free of existing road traffic
constraints this option would give immediate
access to and from Lungi International airport,
which is the most logical location for
developing a helicopter base which is needed
to fly crews to and from the offshore platforms.
This would, however, require special dredging.
22
The location of port support facilities within the Sierra Leone River Estuary has the advantage of
being able to use existing infrastructure including roads, an international airport, electricity, water
and other essential services. On the other hand, if the main centre of offshore activity were to be
developed in southern waters, close to the Liberian border, there would be a strong case for
considering locating the on-shore handling facility in the Sherbro estuary, or alternatively creating a
purpose-built structure off the Moa River estuary.
In both cases, the development would have to be entirely self-contained and would begin with a
green-field site. Construction materials and equipment could probably be delivered by sea to a
temporary jetty, but major road improvements would be needed to link the supply base to the main
road network between Freetown and Bo. Up to 100 kilometres of reconstructed road would be
needed to service a facility on the Sherbro Estuary, while closer to 150 kilometres would be needed
to reach a supply base near Sulima.
An important consideration would be the location of these facilities. The installations would need to
be sited close to the coast at a point where at least 9 metres depth of water is available in a
sheltered harbour. The most likely locations would be within the Sierra Leone River Estuary or the
Sherbro River.
The provision of infrastructure and support services is one of the key factors determining project
viability and it is reasonable to assume that the major international companies who are currently
engaged in exploration and appraisal in West Africa will be giving detailed consideration to the
question of how to develop and exploit any commercial discoveries. However, these complex issues
are addressed in each company’s head offices and not on the ground in Sierra Leone. Consequently
it is difficult to form an opinion of the industry’s attitudes towards siting shore-based
infrastructure.At the same time, these are issues that are of great importance to Sierra Leone and
the sooner a dialogue is started with companies holding significant licences the better.
4.6.2 Processing Plant
During the initial stages of establishing a new oil field there are strong economic arguments for
undertaking basic processing, including separation and primary treatment of oil and gas on board a
floating processing and storage vessel. This allows the basic products to be exported to modern
refineries that have all the necessary facilities for handling crude oil of varying quality and
consistency. A decision on whether or not there is an economic case for developing a land-based
gas processing plant and/or refinery would have to await confirmation that a sufficiently large
reserve of oil and/or gas exists to justify the investment costs together with a full technical appraisal
of the types and quality of the crude oil/gas and the complexity of the refining processes needed to
turn these raw materials into commercial
products.
Gas Processing
Gas produced from deep submarine wells is
invariably a complex mixture of gaseous
hydrocarbons. This natural gas often carries
water and products which liquefy at lower
temperatures and can block or corrode pipelines.
Following initial processing at the well head
natural gas would be piped ashore and refined by
removing condensates, sulphur and carbon dioxide and finally nitrogen, in processing plant referred to
as gas trains. The products include propane, methane and ethane. Natural gas, can be fed directly
23
into a national distribution grid if this exists, or liquefied at a temperature of -1500 C to -1600C in order
to dramatically reduce its volume and allow for international export.
A relatively small level site of a few hectares is required for gas processing and this is usually sited as
close to the shore and pipeline landfall as possible. The example shown here is in Western Australia
Oil Refining
In general, countries with mature hydrocarbon production and processing industries are reluctant to
build new refineries, preferring to modify or expand existing plant. However, in Africa it is often the
case that existing refineries have been mothballed, are in very poor condition, have low throughput
capacity and lack sophisticated equipment for complex processing. Refineries in Sierra Leone and
Cote d’Ivoire both fall into this category. Ghana is one of the few countries that have embarked on
new oil refining capacity by upgrading its existing refinery at Tema and taking the decision to award
a contract for US$ 6 billion to a South African company for a new refinery in the west of the country.
Ghana is also in the process of installing a gas processing plant and gas-fired power station.
A modern oil refinery is designed to separate out a wide range of products from crude oil which
contains a complex mix of
chemicals. It requires a
large site area ranging
from 200-500 hectares,
together with road and/or
rail and sea transport
infrastructure.
Despite the technical
difficulties of trying to
anticipate future needs
for
processing
and
refining hydrocarbons it is
important
that
this
happens at the earliest
opportunity.
Reports
suggest that In Ghana,
development
of
the
Jubilee field is being constrained by the need to return gas which is driven off under high pressure
from the extraction wells to the submarine reservoir in the absence of any way of storing and
treating it, combined with the embargo on gas flaring. (Cape 3 Services, 2012). It takes time to build
long pipelines and to set up shore-based gas processing facilities, but the process of returning gas to
the submarine reservoir is also very costly and cannot be continued for more than a year or so
before it starts to affect the productivity and long-term stability of the reservoir.
An important strategic issue in Sierra Leone relates to the plans for investment in the former Kissy
Oil Refinery, and the nature of any new processing capacity that is planned to coincide with the
potential production of oil from Sierra Leone’s offshore reserves.
These considerations highlight the importance of beginning a dialogue between government
planners, the industry and other key stakeholders to assess in more detail the likely outcome of the
different scenarios set out in this report.
24
25
5.
INTERNATIONAL CASE STUDIES
5.1
Introduction
The purpose of this chapter is to set out the wider regional and geopolitical context within which
future decisions on the development of the hydrocarbons sector in Sierra Leone will need to be
made. It begins with a general discussion about the drivers behind oil and gas exploration in West
Africa and is followed by a number of case study examples, including the Gulf of Guinea states.
The current level of interest in exploring for oil and gas in the coastal waters of Sierra Leone has
been stimulated by discoveries in deep coastal water in a number of locations of West Africa
including the Niger Delta and Ghana. This region has been identified by the major world economies;
principally the United States, China and India as one of the most promising for bolstering declining
reserves from onshore reservoirs. (CNPC, 2011; Fernandez, 2011; Kojima, 2010). America, in
particular, expects to increase its supply of oil from West Africa.
Exploration is now taking place in deep water off the majority of, if not all, West African countries.
Levels of investment by the major oil companies are determined by the policies of individual host
governments, the extent to which they create favourable investment climates; issues of security and
long-term stability; and the degree of success which is achieved by the industry as a whole. A single
discovery stimulates interest but does not, by itself, lead to an oil rush. On the other hand, the
consistent pattern of successive commercial finds on the scale which has been taking place off
Ghana acts as a magnet in attracting new investors. It is partly for this reason that Ghana is now one
of the leading oil and gas regions in West Africa.
Sierra Leone is one of many countries in Africa which has the potential to become an oil rich nation.
Amongst West African countries which have developed a new oil industry since 1980 may be
included Chad, Mauritania, Equatorial Guinea, Cote d'Ivoire and Ghana. In East Africa, South Sudan,
Mozambique, Tanzania Uganda and Kenyahave already developed, or are in the process of
developing, national oil and gas industries.
By studying these examples it is possible to identify both the opportunities and challenges which
Sierra Leone will face as it seeks to develop its own hydrocarbons sector. The following sections give
a brief analysis of conditions in a number of West African countries:







Mauritania
Senegal
Guinea-Bissau
Guinea
Cote d'Ivoire
Ghana and
Nigeria
In addition, two other African states have been included because they exhibit some of the critical
issues which need to be taken into account in long-term planning for oil and gas development. These
are Chad and Uganda.
26
Finally, two non-African countries are considered because they illustrate the way in which
environmental and health and safety issues have been addressed in major oil economies. These are
the Republic of Trinidad and Tobago in the Caribbean and Malaysia in the Pacific.
Examples from the Gulf of Guinea
5.2
Mauritania
Mauritania is a large desert country with a very small population of 3 million people. It, nevertheless,
has very considerable national resources including iron ore, gold and silver, and the richest fishing
grounds of West Africa. Despite these assets the country remains very poor. Most people remain
heavily dependent on livestock and agriculture for subsistence. The country has suffered severely
from the ‘Dutch disease’. Back in 1974, mining generated two thirds of GDP and constituted 80% of
exports. A further 8% of GDP was contributed through EU loans to the fishing sector. At the same
time agriculture employed 50% of the workforce but contributed only one sixth of GDP. As a result
there was a major expectation, on the part of the populace that foreign aid, the proceeds of mining
and a potential oil boom would resolve all economic failings. The subsequent spasmodic
development of offshore oil and gas in Mauritania has been severely affected by political, economic
and technical constraints.From 1993, when nominal democracy was restored, until 2005 the
government is reported to have secretly managed off-budget expenditures from oil revenues which
were substantially in excess of those reported to the IMF (Wider Research, 2007).
Offshore oil reserves were first discovered in 2001. These comprised the Chinguetti oil field located
about 90 km offshore from the country's capital Noukachott, the Tiof and Tevet oil reservoirs and
the Banda gas field. Initial development was undertaken by an Australian company, Woodside, as its
first African venture. The production contract between Woodside and the government was made on
the understanding that the company would invest $600 million in the oil sector. Woodside
subsequently negotiated a $200 million reduction in its investment with ZeidaneHmeida, the then
Minister for Mining, Energy and Oil in 2004. In 2005 the government was overthrown by a military
coup. The coup leaders, anxious to secure funds, arrested and imprisoned Hmeida for allegedly
sacrificing Mauritania’s interests by lowering Woodside’s taxes. The Military Junta also questioned
the validity of the amended contracts.
Matters were resolved a year later when Woodside paid a special $100 million project bonus to the
junta through a third party intermediary, an oil magnate from Qatar with business interests in
Mauritania. Woodside also agreed to scrap the amended contracts. Hmeida was released and
charges against him were dropped. However the issue of alleged corruption raised concerns in
Australia's Parliament and raised questions about the engagement of Australia’s Foreign Ministry
and Development Agency. An Australian Federal police investigation was carried out into
Woodside's activities in Mauritania. The investigation was concluded in May 2008 and Woodside
was exonerated, with no evidence being found of bribing Mauritanian officials.
In August 2008, a second military coup in Mauritania led to a political crisis for the second time in
less than five years. This resulted in the suspension of assistance from most international partners,
including the World Bank.
While major political controversy surrounded the development phase of off-shore oil production
Woodside nevertheless successfully opened the oilfield in 2006 with production of close to 75,000
barrels per day. Almost immediately, however, technical difficulties arose in exploiting the field
which led to a reduction of 23,000 barrels per day by the end of 2006. Production from the field
continued to decline with an output of only 7000 barrels per day in 2011.
27
In the light of its experience, Woodside decided to cut its losses and, having renegotiated its
contracts with the government, it sold the underperforming Chinguetti oilfield to Petronas Australia
Pty Ltd for $418 million in September 2007. Petronas is owned by the government of Malaysia. (See
section 5.11).
Woodside was heavily criticised in 2004 when it proposed to use a single hulled converted tanker to
serve as its FPSO. The vessel in question was 28 years old and had previously been blacklisted by
Greenpeace (Germany) for poor safety standards. The complaint, lodged with Woodside by local and
international campaigners, noted that in Australia the company works only with new double hull
FPSOs. It was further noted that the United States has banned single hulled vessels in American
waters and similar measures have been taken in the European Union. (Oilwatch Alerts, 2004).
Despite the difficulties outlined above, Woodside’s former Corporate Affairs Director has highlighted
the positive work done by the company (www.theage.com, 2008). This included working with the
USA and British Aid Agencies in order to convince the military junta to sign up to the Extractive
Industries Transparency Initiative aimed at limiting the misuse of oil revenues. There is no doubt
that the Mauritania adventure was a bruising but informative experience for Woodside, which came
to the country with good intentions. It was the first company to provide Mauritania with advice on
how to develop an oil industry, it helped frame environmental legislation and it funded projects in
local schools".
Woodside was the first company to carry out a detailed EIA on an offshore prospect, although it was
initially criticised over some elements in the assessment. International donors and conservation
bodies subsequently encouraged the government to carry out a strategic level examination of the
issues affecting oil exploration and the rich biodiversity of the offshore zone. A major study was
initiated,entitled “A partnership to mainstreamMarine and Coastal Biodiversity into the Oil and Gas
Sector Development in Mauritania” (UNDP, 2008).
Mauritania is currently encouraging renewed interest in deep water exploration. It has granted
separate exploration licences to Kosmos Energy and to Chariot Oil and Gas UK. (Offshore Magazine,
April 2012).
5.3
Senegal, Gambia and Guinea-Bissau
Petroleum exploration began in Senegal in 1952 since when nearly 150 wells have been drilled. A
number of small fields were discovered during the 1960s and 1970s but all were designated as
uneconomic to exploit at that time. This included discovery of between 600 million and 1 billion
barrels of bio-degraded heavy crude oil in the Casamanth salt basin. Recent re-examination of
historic exploration indicates that more than 80% of former wells were drilled in leaking sections of
onshore and shallow water reservoirs. Despite these failures,the national oil company Societe des
Petroles du Senegal (Petrosen) has developed a gasfield,DiamNiadio 14, with estimated reserves of
3,000,000,000 m³. The gas is used in the countries’ gas power stations.
Senegal is one of only four countries in West Africa (the other is Cote d'Ivoire) to have developed the
downstream hydrocarbons industry through development of the SAR refinery in Dakar. The refinery
has a processing capacity of 1,000,000 tonnes of oil a year and is 90% owned by the private sector.
Light crude oil is imported from Nigeria for processing to support local demand although this
exceeds the refinery capacity. The company also imports, by quarterly tender, jet, gas oil and high
sulphur fuel oil.
Guinea-Bissau did not enter the oil exploration phase until the end of 2001. Only 10 wells have been
drilled offshore during 40 years of exploration often disrupted by civil unrest. The country was
involved in an extended dispute with its neighbour, Senegal over the international boundary
28
separating the two countries and affecting the Dome Flore and Dome Gea discoveries. An initial
ruling from an independent tribunal was disputed by Guinea-Bissau in 1985 but a final judgement
from the international court of justice was accepted in 1991. Based on the judgement a jointly
owned administration,the Agence de Gestionet de Cooperation entre la Guinee-Bissau et le Senegal
(AGC).
was formed between the two countries. Initially Dakar was awarded 85% of the oil interests and
Bissau 15%. This figure was revised in August 2000 in the light of new resource information to give
Bissau a 20% share. In June 2011 Noble Energy Incentered a joint venture which is exploring the AGC
Profund (deepwater) block off Senegal – Guinea-Bissau. Drilling is taking place in water 8500 feet
deep at the point nearly 65 miles offshore.Political and civil unrest has, at times, seriously hampered
inward investment in Guinea-Bissau. International diplomatic sources have claimed that part of the
recent dispute involving use of Angolan and ECOWAS forces to assist the government has been
triggered by the commercial interests of Angola and Nigeria in future involvement in the oil and gas
sector.
The Gambia forms part of a continuous coastal basin stretching from Mauritania through Senegal
and Gambia to Guinea-Bissau. Exploration isnow taking place offshore Banjul in Gambia by a
partnership of Fusion Oil and Gas NL (90%) and the government (10%). Satellite studies have shown
an alignment of petroleum seepage anomalies which suggests that there is a productive petroleum
system in offshore deep waters.
5.4
Guinea
Offshore exploration started in the late 1960s when ESSO drilled six wells. In 1974 work continued
under a new partnership between the American oil company BRI and Yugoslavian NEFTEGAS.. In
1976 SOPIT commissioned the oil company of France (0CF) to carry out test drilling 140 km west
south-west of Conakry. The expected presence of oil and gas was not proven. More detailed view
physical research was carried out by the joint Guinean-American company SGG in 1981 – 1982. The
results were regarded as showing little promise. Over more than 40 years, intermittent drives to
promote offshore development have been encouraged by the government. In total, more than 10
international companies have worked in Guinean waters.
For a number of years the government of Guinea licensed offshore oil exploration to one company,
Hyperdynamics but in September 2009, under a new memorandum of understanding,
Hyperdynamics relinquished 64% of its search area, although the company still retains 11,160 mi.².
The MOU also gives Hyperdynamics the right of first refusal on all other blocks. Hyperdynamics is
now working with partners,Repsol and Dana Petroleum.
5.5
Liberia
The search for offshore oil and gas began in the 1970s when the Liberia Geological Services became
the Bureau of Hydrocarbons situated in the Ministry of Lands, Mines and Energy. Three unsuccessful
wells were drilled in the 1980s. They showed traces of oil but were not commercially viable
operations largely ceased during the Civil War. NOCAL was established in 2000 that it did not
become active until the change of government in 2005. A total of 17 exploration blocks have been
created in off-shore waters. Both African Petroleum (block LB-9) and Anadarko (lb-15) have
completed wells which show the existence of a working petroleum system. In February 2012, African
Petroleum confirmed a commercial oil find and, in the recent licensing awards, exploration
concessions have been granted to Chevron and Exxon Mobil, confirming the interest of the largest
international operators.
29
The prospect of offshore oil and gas development has raised political tensions in Liberia. In 2011, the
President appointed her third son as chairman of the National Oil Company of Liberia (NOCAL). This
appointment was challenged by the country's main opposition party, the Congress for Democratic
change (CDC) on the grounds that the post should have been advertised and filled competitively. A
key part of the current debate is over the terms of production sharing contracts being negotiated
between NOCAL and exploration companies. (GNN Post, May 2012).
In September 2011, a very critical report was published, entitled "Curse or Cure? How Oil can Boost
or Break Liberia's Post-war Recovery", (Global Witness, 2011). This document concluded that
“Liberia was not ready for oil”. It argued that a comprehensive reform of the country's oil and gas
industry was needed now and that change will become increasingly difficult as more companies
begin operating and have a vested interest in maintaining the status quo. The report acknowledged
that considerable gains had been made in improving governance in the natural resources sector,
including passing the landmark Liberian Extractive Industry Transparency Initiative (LEITI) law. It
nevertheless states that "even before oil has been discovered, considerable problems have begun to
emerge, including corruption, worrying company practices and the failure to follow the law."
The Liberian government has been quick to respond to these and other criticisms with strong
pledges to enhance transparency and the involvement of civil society in its oil sector development.
In April 2012, Global Witness acknowledged the serious commitment from government as a
welcome move. In February 2012 NOCAL confirmed that it would be entirely transparent about the
operations of oil companies and management of money
received by the national oil company. On 11 April 2011,
NOCAL submitted its annual budget to the Liberian legislature
and, on 19 April 2012,the company announced that it would
commission an independent audit of its finances for the past
three years in order to "open up the books and put them in
order".
NOCAL has gone on record in stating that:
"managing expectations in emerging oil and gas countries can
be one of the biggest challenges, if not the one requiring most
attention. This is because it is widely believed that oil
resources can transform any society economically. This myth,
coupled with the prolongation of oil production, establishes the need to continuously informed
citizens on how long the country must wait before entering into the global elite society of oil and gas
producing nations."
Following criticism, NOCAL has published plans to transform into a fully-fledged oil company,
following the model of the Ghana National petroleum Corporation (GNPC). As part of the strategic
vision, the Petroleum Law and a NOCAL act are being reviewed, and international maritime
boundaries are being delimited (NewDawnLiberia.com ,UriasGoll, Nov, 2011).
5.6
Cote d'Ivoire
Cote d’Ivoire has produced oil from offshore reserves since the early 1980s although operations
were largely halted, under the clause of force majeure, during the recent conflict over the 2010
presidential election. There are more than five oil fields and a similar number of gas fields located off
the coast including Baobab, Espoir, Acajou, Lion, Panthere, Foxtrot, Kudu, Eland and Ibex. The
30
average size of each oilfield is in the range of 20 to 45 million barrels of oil although Baobab is larger
than 150 to 200 million barrels. The gas fields have potential yields of 82 420 billion ft.³
The majority of these fields are located in relatively shallow water (100-600 metres) but the search is
now extending into deeper water paralleling the experience of discoveries in Ghana and Sierra
Leone. In June 2012, Anadarko announced a successful discovery.
5.7
Ghana
Developing the resource: Oil and gas exploration in Ghana has been undertaken in four main stages.
Between 1896 and 1967 all activity took place on land. The first phase of offshore exploration was
carried out between 1968 and 1980. During this period 31 wells were drilled resulting in three
discoveries. These were at Cape Three Points, Saltpond, and North and South Tano. Between 1981
and 1995, research was consolidated and the legislative framework was improved through
preparation of new laws and a model petroleum agreement. The Ghana National Petroleum
Corporation was established in 1985. After 1996, intense off-shore exploration took place with more
than five operating companies. In June 2007, the Dana petroleum exploration agency announced the
discovery of oil by its partners,Kosmos Energy and TullowOil.
Development of the Jubilee Field involves a geological system incorporating the Kosmos“West Cape
Three Points” and Tullow“Deep water Tano” licence areas. The new field is therefore being
developed by an integrated Project team based in Dallas, Texas (source Mr Moses Boateng, MD
GNPC – 5TH African Petroleum Forum, London, April 2008). By October 2008, more than 17 wells had
been drilled in the Jubilee phase 1 development area. In addition, six other prospects were under
investigation in adjacent licence blocks. In October 2008, total phase 1 development budget was
estimated at US$3.2 billion. Of this sum almost half (US$1.5 million) was for sinking the wells. On
average, each completed well cost US$88 million. By April 2012, the reserves of the Jubilee Field had
been revised upward to 1.2 billion barrels of oil equivalent. New discoveries are being made in
adjacent areas at the present time confirming the region is one of the most productive in West
Africa.
The lead operator,TullowOil, began a second phase of development in February 2012 which will
involve construction of eight new production wells with associated producers and water injectors.
The cost of this new programme is estimated at US$1.1 billion. The production sites from the
Jubilee, DeepwaterTano and associated fields will be linked in an integrated subsea cluster in order
to feed oil to a single FPSO. As part of the SEA the consultants made a visit to Takoradi in Ghana in
order to meet with key players in the industry and discuss the effects of the oil and gas programme.
(See Box 5.2)
Box 5.1 Development of the Ghana Jubilee Field, March 2012
The supply base
TullowOil has its national headquarters in Accra, with a regional office in Takoradi. It maintains two
separate support bases, one at the airport and the other within TakoradiPort.
A 200 m section of quay has been leased from the Ghana Port Authority for provisioning supply
vessels and loading equipment destined for use within the oilfield. Storage for cement and other
essential materials is maintained on the quay in purpose-built tanks. An area of the port is also set
aside for use in storing and fabricating pipes and other equipment prior to their transfer to the rigs.
31
TakoradiPort cannot provide sufficient space for all storage requirements. A separate pipe yard
covering 20 to 30 acres has therefore been leased on industrial land adjacent to the airport. The
airport is primarily a military establishment although commercial flights are increasingly using the
runway to support development of the oil industry. Tullow Oil maintains a fleet of two fixed wing
aircraft and five helicopters at the airport; the latter being used for transporting workers to and from
the rigs. Two flights a day allow 16 personnel to be taken out to the rig with a similar number being
returned to shore. These flights coincide with scheduled airline movements to and from Accra. The
oil wells lie roughly 60 km offshore and can be reached in 45 min by helicopter from the
Takoradiairport base. Shore supplies are transported from the port by ship in nine hours from
Takoradi and six hours from Abidjan.
The government has plans to extend the outer breakwater of Takoradi harbour in order to create
additional berths for vessels connected with the offshore oilfield. At the same time however a
private venture initiative is moving ahead with the construction of a separate port by dredging a
national channel at Funkowhich is a few miles west of Takoradi.
For development companies there are many challenges in deciding when and how to develop a new
field. Due to the surge in worldwide demand for deep sea drilling equipment, the lead time for
acquiring the necessary drilling rigs can be two years or more. Attracting a world-class well
engineering team is also critical to success.
Box 5.2 Managing Environmental Issues associated with the Oil and Gas Industry
A number of companies have set up in Takoradi in order to take advantage of new business being
stimulated by oil and gas development. One of the most successful is Zeal Environmental. This
business began 30 years ago providing metallurgical and chemical advice to the mining industry.
Much of its work involved handling and treating hazardous and toxic waste including cyanide and
mercury. The company saw an opportunity with the expansion and increase in trade through
Takoradi port long before oil and gas became a significant industry. The company began its marine
association by developed services for treating bulk wastes carried by merchant ships and dealing
with disposal of solid and liquid waste. The company was therefore well-placed to offer similar
services to international oil operators when Takoradi became the supply and support base for
development of the Jubilee oilfield. Zeal Environmental also manages all waste produced from
exploration in Cote d Ivoire and Liberian waters.
The company has now expanded from its original team of 22 to120 employees and currently handles
all waste management issues for the oil and gas industry. Chemicals and bulk waste are brought
back to shore from the drilling rigs in sealed containers and are transferred to a purpose-built
disposal site for screening. The waste streams include:
 hydrocarbons
 drilling fluids,
 drill cuttings,
 use filters
 medical wastes, and
 Electrical waste.
Processing plant is used to separate hydrocarbons from water. Recovered oil is stored for reuse
while metal drums are crushed and recycled. Hazardous waste is rendered inert by burning in a
high-temperature incinerator which was imported from America specifically for this task.
Zeal Environmental is currently preparing an EIA to support its plans for developing a 50 acre
32
engineered landfill site to take bottom ash from the incinerator and other hazardous waste. This
would be the first facility of its kind in Ghana.
Services of the type provided by Zeal Environmental would be required in Sierra Leone if Scenario B,
C or D were to be realised (see chapter 4).
Zeal Environmental has played an active role in preparing communities along the coast to handle any
potential oil spill. Initially, the company approached all companies active in the oil exploration field
and secured a retainer in order to undertake training programmes for each fishing village. The
training has involved community leaders and local chiefs and has ensured that the local workforce
have the necessary know-how to handle basic equipment in the event of any oil reaching the
beaches.
A detailed record is kept of all waste processing operations, including removing the contents of
every waste container. Monthly reports are submitted by Zeal Environmental to the operators and
to the Ghana EPA. These records are held for two years before archiving. The role of the EPA is
described very positively by the company's chief executive "the EPA is not like a police regulatory
body, they are highly constructive and actively engaged in management of the oil industry”.
Impacts on the environment
The direct environmental impacts arising from oil and gas exploration and development appear to
be well managed by both the industry, private practice and the regulatory authorities. However,
indirect impacts are more difficult to oversee. A large amount of speculative development is taking
place in Western Ghana, especially in the vicinity of Takoradi. Private entrepreneurs are clearing
many new sites from existing agricultural land, including productive coconut plantations, in order to
create level platforms of 1 to 5 ha in size. Some of these sites have immediate use for storage, but
others remain vacant awaiting potential lessors or purchasers. Other developments, including a large
scale prestige housing development, are designed exclusively for an elite market of professionals
and business personnel from Accra and other major centres. These are promoted as “oil
related”developments but are unlikely to play a significant role in the industries’ growth and
development. They, nevertheless, form part of a massive injection of capital into the growth zone of
Takoradi.
Impacts on social welfare
The media and professional journals regularly make reference to significant societal and social
changes which are taking place as a result of the oil boom. Key concerns include:





lack of employment opportunity especially for the youth,
steep increases in house prices and rents, which affect poorer sectors of society,
increases in food and material prices and accompanying shortages,
increased hardship for single mothers due to rising costs and lack of job opportunity,
consequential increases in prostitution, drug trafficking and crime.
All of these issues are being carefully monitored by the government and serious efforts are being
made by the oil industry to provide training opportunities and create local employment. It is,
nevertheless,widely agreed that Ghana was unprepared for the speed with which the oil industry
would develop and the difficulties this would create in terms of preparing infrastructure and
appropriate services.
Managing expectations
33
Ghana has a rapidly developing civil society and an effective group of independent research
institutes, including the Institute of economic affairs (IEA). This Institute published a new Petroleum
Transparency and Accountability Index (IEA-P-TRAC Index) in 2011. The index has been criticised for
failing to take account of recent progress in the extractive industries transparency initiative (EITI) in
Ghana but it does provide a yardstick for measuring future performance in the oil and gas sector,
especially by government.
Four key components of transparency in petroleum governance are researched. These are:




revenue transparency,
expenditure transparency,
contract transparency, and,
transparency in the management of petroleum funds.
The latter area was judged the weakest with a score of 44% indicating the need for substantial
improvement. However, under both revenue transparency and expenditure transparency results
were much better (64.3 and 63.9% respectively). An average score of 66.7% was awarded for
contract transparency.
5.8
Nigeria
Crude oil was discovered in Nigeria in 1958, leading to an oil boom in the 1970s accompanied by a
minor industrial revolution and the parallel decline in agricultural production. In 2008, Nigeria
depended on oil revenue for 95% of its national income and foreign exchange earnings. The country
is the world's 11th largest oil producer, pumping over 2 million barrels a day. All of this production
comes from the densely populated Niger Delta wetlands (Adebanji,2010).
For more than 40 years the Niger Delta has seen uncoordinated development of a massive network
of oil production wells and pipelines. Poor management, lack of regulation, deliberate sabotage, and
illegal tapping of pipelines has resulted in environmental pollution on a scale unprecedented in the
world's history of hydrocarbon extraction. As a direct consequence, the Niger Delta has become one
of the most unstable areas of Nigeria "where access to oil revenue is the trigger of violence (Global
Security, 2006).
Between 2006 and 2009, intense armed conflict within the Delta paralysed oil production activities
and led to a massive decline in oil revenue. In the process, shortage of natural gas for the country's
power stations let to a dramatic fall in electricity generation. This, in turn, reduced industrial
capacity and led to a contraction of the national economy. The causes of conflict have been
attributed to:



lack of strategic planning for oil exploration and production,
shrinking environmental space for livelihood activities
regional imbalances and skewed resource allocation.
The latter point is significant because all oil wealth is shared across the Federal States and any
arrangement to commit a high level of resources to developing the Niger Delta would have to be
made at the expense of other regions,that have greater influence on national policy and are unlikely
to vote for the necessary investment.
In October 2009, the government took a number of strategic steps to address these concerns by:

declaring an amnesty from criminal prosecution for all Niger Delta militia members,
34


undertaking to restructure the oil industry, by amending the outdated 1969 Petroleum Act
with the aim of increasing local participation, providing a more stringent regulatory
framework and by empowering local communities through equity,
strengthening the role of the Niger Delta Development Commission.
Despite these announcements, many commentators remain sceptical about the government’s real
level of commitment to reform.
This has led to calls for strategic environmental assessment to be used in supporting an integrated
economic reform programme by:





examining environmental issues and impacts associated with policies, plans and
programmes in the oil and gas sector, (the seven-point agenda and vision 2020 initiative),
evaluating and comparing impacts against those of alternative options,
assessing legal and institutional aspects relevant to these issues,
developing broad measures to strengthen environmental management while considering
potential cumulative impacts,
ensuring public participation and the interests of stakeholders.
Other African examples
5.9
The Chad Republic
The Resource: Chad started producing oil in 2003, after several promising discoveries in the 1970s.
It is already the region’s second-largest producer with 210,000 barrels per day (2006). The country
has two oilfields in the Doba Basin and crude oil is exported through the Doba – Kribi pipeline. Other
new fields are being explored and Chad's proven reserves are now estimated at 900 million barrels.
Development partners: Chad's resources were initially developed by an Australian company. In
2000, the operations were taken over by Exxon Mobil, following a crucial World Bank financing
decision. Between 2000 and 2003, an American led consortium invested US$3.7 billion in
constructing a 650 mile pipeline from Southern Chad to the coast in Cameroon. The oil pipeline
agreement was described as “a model scheme for assisting developing nations to climb out of
poverty and avoid corruption”. Under the agreement, the Parliament of Chad passed the 1999
Petroleum Revenue Management Act. This contained key clauses on transparency and required that
Chad's 12.5% share of direct revenues from oil production should be credited to a London based
Citibank escrow account (monitored by an independent body). In order to support poverty reduction
programmes, a “future generation" fund was established to hold 10% of annual oil revenue.
In terms of the original planned distribution of oil revenues, the oil producing region, Eastern
Logone, was to receive 5%, while 15% was allocated to the Federal government. The remaining 80%
was originally earmarked for priority sectors of development, including: public works, health,
education, rural development and environmental projects. In addition, Chad also receives indirect
revenue from taxes and charges which are unsupervised and used for government expenditure.
By December 2005, Chad had exported 134 million barrels of oil and earned almost $400 million in
direct revenue; $256 million of which was used to fund poverty reduction programmes. Gross
domestic product (GDP) grew from 11.9% in 2003 to 29.7% in 2004. After the first full year of oil
production, in 2005, Chad’s trading account was transformed from a negative balance of -31.8% in
2004 to a positive balance of 34.7% in 2005. Despite this dramatic progress, Chad continues to be
35
plagued by instability, corruption and destitution. Eight million of the 10 million inhabitants live in
poverty and average life expectancy is less than 44 years. In 2005, Chad was ranked alongside
Bangladesh as the two most corrupt nations in the world by Transparency International.
In 2005, President Deby changed the constitution in order to secure a third five-year term of office.
Parliamentary unrest at this decision was accompanied by a build-up in military activity, with many
soldiers defecting to join a coalition of rebel groups, partially funded by Sudan. Faced with the threat
of rebellion, the President turned to the oil revenue funds in order to buy arms. In December
2005,the Petroleum Revenue Management Law was revised, deleting the “future generations” fund
and doubling the federal government's allocation of reserves to 30%. The World Bank responded by
suspending disbursements of $124 million of loans to Chad and by freezing $125 million of assets
held in the Citibank escrow account in London. President Deby’s government then threatened to
stop pumping oil, much of which was destined for American markets. By April 2006, an interim
agreement had been reached allowing Chad's government to retain 30% of oil revenues but with no
resolution of the “future generations” fund.
In 2008, UNDP ranked Chad as the 170th of 179 countries in terms of poor performance on its human
development index. Meanwhile, Transparency International showed Chad as 173/180 in its list of
most corrupt countries. It has been stated that development of oil has only contributed to inherent
instability in the country. It has fuelled the Civil War, especially in the east, and has enabled the
government to avoid engaging with the opposition in reform and in developing long-term solutions
to internal political crises (Kroslak, 2009). Tensions with Sudan led to the government's decision to
increase military spending from $14 million to $315 million in the period 2000 to 2009. Chad now
has one of the best equipped armies in sub Saharan Africa but it still cannot feed its own people.
The International Crisis Group forOpen Democracy has made three recommendations for improving
conditions in Chad. These are to:



persuade the government to engage in a national dialogue about how to make Chad's oil
wealth beneficial to its population (building on the agreement reached in August 2007
between the government and opposition parties).
strengthen internal oversight mechanisms regarding the use of oil revenue.
seek cooperation between the three international partners (France, the United States and
China in placing greater pressure on the government and stimulating a process of national
reconciliation. China, in particular, is in a position to encourage both Sudan and Chad to
come to an agreement to stabilise relations between the two states and halt support for
rebels in each other's country.
5.10 Uganda
Oil was discovered in Uganda as recently as 2006, following the commencement of exploration in
1997. Heritage Oil and Tullow Oil (UK) established the existence of commercial reserves in sediments
lying deep below Lake Albert. Current estimates suggest that those areas already explored may
contain 2.5 billion barrels of oil. These oil resources were created by geological processes associated
with opening of the African Rift Valley, similar in nature to the separation of the American and
African continents, which have created the offshore continental shelf reserves of West Africa.
Current estimates from the Ministry of Energy and Mineral Development suggest that total reserves
may exceed 6 billion barrels when the whole of Lake Albert has been explored.
Local communities around Lake Albert are deeply concerned about the possible effects of oil spills
and leakage on fishing grounds and possible security threats since the exploration area lies on the
border with the Democratic Republic of Congo. Representatives of the Bunyoro kingdom, whose
traditional territory includes Lake Albert, are demanding a 50% share of oil revenues.
36
A major political issue in Uganda has arisen over the form of production sharing agreements which
were signed between the government, Heritage Oil and Tullow Oil between 1997 – 2004.Opposition
groups and activists believe that the government is seeking to hide information which should be in
the public domain under Uganda's Access to Information Act. Three lawsuits were levelled against
the government by the African Institute for Energy Governance, Green Watch and the Daily Monitor
newspaper. The government’s position is that it is bound by confidentiality clauses in the
agreements and cannot publicise these documents, although it remains committed to using oil
proceeds in order to fund the country's development. Parliamentarians and civil society
organisations have combined in calling for contract transparency. The largest opposition
party,Forum for Democratic Change, intends to petition Transparency International over the
government's failure to disclose production sharing agreements and its reluctance to subscribe to
the Oslo-based Extractive Industries Transparency Initiative. (International Bar Association, 2012)
An important point at issue is the level of payment which is likely to be received by the State under
the terms of contract. The government anticipates a yield of between 67.5 and 74.2% of total
revenue will flow to Uganda. An independent analysis for Heritage Oil by Credit Suisse suggested a
lower figure of between 55% and 67%. Campaign groups, led by PLATFORM, assess the returns to
the government at between 47.4% and 79.5% of overall revenues: depending on the price of oil, the
size of fields, development costs and other factors (Carbonweb.org,2012).
In reviewing submissions on the validity of Production Sharing Agreements, which are lengthy and
highly complex legal documents, it is important to note the distinction between criticisms of legal
loopholes on the one hand and challenges that are being made, primarily on political grounds, by
opponents of government policy. In a recent twist to the debate about whether the government of
Uganda has been too lenient in setting payment terms for oil revenue, Tullow Oil has confirmed that
it has secured more favourable terms for developing oil resources in the adjacent area of Turkana
District in Kenya. Ironically, this has led to accusations that the Government of Uganda is being too
demanding in setting its conditions for oil production while Kenya is ‘buying’ development assistance
for its emerging oil industry, at the expense of its neighbour.
In Uganda, part of the continuing oil debate relates to a historic legal dispute between the
government and TullowOil over the payment of interest due on activities during the initial
exploration phase. Heritage Oil and Tullow Oil maintain that while the payments are due they should
be made by their successors, who are taking over the assets and productive phase of the oil
extraction programme. This reflects the fact that it is common practice for exploration companies to
sell on their interests, once a commercial find has been confirmed, to larger international operators
who have the management structures and financial investment capacity to support construction and
production programs which invariably run into billions of dollars.
Yet another recent development in Uganda has arisen over long term plans for the country to join
forces with Kenya in order to construct an oil pipeline to the new port of Lamu which is being built
by Kenya on the Indian Ocean. This would provide Uganda with a direct export route for its own oil
as well as allowing imports. However, the Government of Uganda is also proposing to build an oil
refinery so that it can meet its own needs for petroleum products and this has led to down-sizing of
the planned pipeline. The Country Manager of Tullow Oil was recently interviewed and asked ‘will
the oil companies be involved in building and operating the new refinery?” His response was highly
relevant to Sierra Leone’s own situation:
“Our agreement with the government covers purely the upstream (oil production) side. But one of the
things we have to get to by the end of the year, between ourselves and the government is – what is
the overall, holistic approach to development of the basin? Because right now we’re doing
development plans for the fields without knowing what the government’s development plans are
around the refinery, and the capacity of that refinery.
37
We know the general location of a refinery – but where exactly - not sure. Timeframe? – again not
sure. Investors? – etcetera. Depending on the scenario it is possible that the oil companies might
want to take a stake in the refinery since that would at least secure us some influence over the
commercial chain – but it is not part of our current licence. We also need to know what commercial
terms the government is thinking of. If the government is refining its own crude it would like the
input price to be as low as possible. We need that input price to be commercial if we’re to justify the
investment in production facilities. Our goal is to reach a consensus picture with the government on
what a basin-wide development will look like over the next five-ten years”. (EoinMekie, General
Manager, Tullow Uganda, May 2012)
This quotation is taken from a detailed interview which appears, verbatim, on an editorially
independent website “Oil in Uganda” which is owned by Action Aid International, and part funded by
the Ford Foundation. The website carries a wide range of informative articles representing all
viewpoints on the oil debate and it is a highly valued contribution to media coverage. The specific
purpose of the website is “to promote transparent, constructive and well-informed public and policy
debate, in the belief that this is essential for oil management that is fair, prudent, accountable and
beneficial to all Ugandan citizens including future generations”.
The situation in Uganda is considerably advanced over the current position in Sierra Leone, but if
commercial discoveries are made in the next few years there will be an urgent need to address
similar questions from oil companies, political parties and civil society in Sierra Leone.
Other offshoreexamples
5.11 Malaysia
Malaysia has been included in this review, because it is one of the Asian countries which has
adopted tiered standards for environmental protection within its coastal waters.
The country covers an area of 330,000 km², 80% of which are covered by tropical rainforest. It has a
wide range of flora and fauna and offers excellent beaches and brilliant scenery, constituting one of
the Asia region's key touristic destinations.
Malaysia is a major oil and gas producer. It generates 2% of the world's natural gas, 13% of world
liquefied natural gas and is ranked 25th in oil production, generating more than 750,000 barrels per
day. The state owned oil company, PETRONAS, is an international operator with activities in 30
countries and more than 30,000 employees. The business covers both upstream and downstream oil
production activities, including operation of four oil refineries, one of which is in South Africa. It has
an important production sharing contract with Exxon Mobil, covering development of new offshore
oilfields for the next 25 years (International Business, 2012).
It is believed that the majority of Malaysia's undiscovered oil and gas reserves lies in deep water and
may total more than 8 billion barrels of oil equivalent. Malaysia has a controlling influence over the
Strait of Malacca which is the main shipping channel between the Indian Ocean and Pacific Ocean.
Ninety per cent of its trade is carried by sea and its maritime cargo handling capacity is expected to
grow by 750,000,000 tonnes by 2020. Its shipbuilding industry will play a major role in servicing deep
water oil and gas development. (International Business, 2012).
Malaysia has an offshore exploration area of 565,000 km². Seventy one licence blocks are currently
being explored with a further 40 open blocks. Three hundred and twelve fields have been
38
discovered, of which 61 are producing oil and 27 are producing gas. Sixteen of the fields are in deep
water and the first oil from this source was produced in August 2007. A second field came on stream
in 2011. All operators are required to enter into production sharing contracts with Petronas. These
contracts follow international good practice. One type of contract covers exploration and
development phases while another regulates production and operation. All contracts oblige the
contractor to bear the full cost of financing and covering risk in developing a field, in return for a
share of the total production. An operator can accelerate cost recovery, if it performs within cost
targets and timescales.
Government incentives to attract foreign investment include the establishment of duty-free
industrial zones. The countries six oil refineries provide feedstock for a petrochemical industry with
investments estimated at RM 58 billion (US$ 18 billion),in 2010. There are 43 petrochemical
companies producing a total of 39 products. (Market Watch, 2012).Malaysia has an 880 mile long
natural gas pipeline network capable of transporting 2,000,000,000 ft.³ of natural gas. Corporate tax
for industry in general is set at 25%, but companies engaged in petroleum activities and production
pay 38% corporate tax.
Oil and gas activities are subject to the Environmental Quality Act 1974 (as amended 1987) and all
activities in territorial waters are administered by the Department of Environment. The same
legislation is administered by the Ministry of Trade and Consumer Affairs in outlying areas of the
EEZ. Environmental quality monitoring and reporting are incorporated within the national legislation
and are applicable offshore. Operators are required to present management plans containing an
outline of policy, the budget environmental requirements, monitoring programs, impact and
pollution control measures and an environmental contingency plan. Development is subject to
subsidiary regulation which requires a compliance audit to be undertaken by auditors registered
with the Department of Environment. (Oil and gas Forum, 2012). Malaysia is signatory to four
international agreements applying to offshore operations. These are:




the MARPOL convention,
UN Convention on the law of the sea,
Basel Convention,
Convention on wetlands of international importance (RAMSAR)
Malaysia takes pollution issues seriously and has joined with other key regional maritime nations to
enhance her legal status and regime for dealing with pollution at sea. The Straits of Malacca is highly
susceptible to vessel-based marine pollution especially discharge of oil and grease. In 2010, more
than 75,000 vessels passed through the Straits. Tank cleansing,ballasting and bunkering are all
activities which contribute to oil and grease pollution. Pollution discharges are regulated under the
1974 act in relation to ambient environmental quality standards or acceptable conditions. This
presupposes a baseline standard which is stipulated in the act.
For Marine and coastal waters the parameters used for measuring water quality are:








Escherichia coli (E. coli)
oil and grease
total suspended solids
arsenic
cadmium
total chromium
copper,
lead and mercury.
39
In situ measurements include temperature, pH, dissolved oxygen, conductivity, salinity, the ability,
and the presence of tarballs. Severe penalties exist under the Act for illegal discharge or spilling of oil
into Malaysian waters. The same conditions apply to release of any environmentally hazardous
substances whether in liquid or gaseous form.
The Exclusive Economic Zone Act, 1984 has been amended to include the provisions OF UNCLOS,
1982. Part IV of the Act deals with protection and preservation of the marine environment and
asserts Malaysia's sovereign rights to protect its natural resources. Section 10 of the EEZ makes it an
offence to discharge any oil or equivalent pollutant into the EEZby any vessel, land based source
installation, device or aircraft or by dumping. Under section 14, if the Malaysian coastline or any
related interest, including fishing, is damaged or threatened with damage as a result of a discharge
or escape, a direction may be issued to any person to take action to remove or mitigate the damage
or threat. Additional measures have also been added to Malaysia’s Merchant Shipping Ordinance
1952, as amended 1991.
The latest development in Malaysia has been the creation of the Malaysian Maritime Enforcement
Agency, under an Act of 2004. This provides for the establishment of a single marine enforcement
agency, with the task of ensuring the safety and security of the Malaysian Maritime Zone. The
Maritime Enforcement Agency reports directly to the Prime Minister's Department (Mustafa and
Ariffin, 2011).
Malaysia is a leading member of the ASEAN working group on coastal and marine environment. This
body oversees a coastline of 173,000 km with fish production amounting to around 14% of the world
total, 35% of the world’s mangrove forest and about 30% of global coral reefs. Various action plans
have been produced since 1999 aimed at enhancing protection and encouraging inter-sectoral
coordination at national, regional and international level. The body is also responsible for developing
and implementing the ASEAN Maritime water quality criteria and for identifying Marine Heritage
areas and national protection areas for critical habitats (ASEAN, 2005).
5. 2
Trinidad and Tobago
The islands of Trinidad and Tobago are included in this review because the existence of their
emergency response plan for dealing with oil and gas hazards at sea was already known to the Sierra
Leone Maritime Unit.
Trinidad and Tobago is one of the wealthiest countries in the Caribbean, thanks to the existence of
large reserves of oil and gas. Initially, dependence on oil made the Republic a hostage to world crude
oil prices. During the 1980s and early 1990s, the dramatic fall in the price of oil led to the build-up of
a large foreign debt, widespread unemployment and labour unrest. During this period, drug
trafficking became a major activity, leading to gang related violence and a high murder rate. All of
these trends threatened the island’s tourist industry. However, during the 1990s, oil production
transformed the island economy, raising per capita GDP to US$28,4000 by 2009 and placing the
country in the top 66 high income countries in the world. In November 2011, the OECD removed
Trinidad and Tobago from its list of developing countries.
In the last decade, Trinidad and Tobago's economy has diversified and stabilised, despite the fact
that oil production has fallen from its peak of 200,000 barrels per day, in 1980, to around 91,000
barrels per day, in 2011. Trinidad and Tobago is now a regional financial centre for the Caribbean,
with a strong trade surplus and an important tourism sector. Currently, the islands are experiencing
another minor oil boom, with the discovery of two new oilfields in deep water. The new reserves
add 10% to existing estimates of 800 million barrels. The government has heralded these discoveries
as evidence that the country will continue to enjoy the benefit of oil production. Other
commentators have cautioned against premature enthusiasm stating, for example, "the government
40
should not fan the flames of people's expectations on paltry discoveries that alter the reserves and
production potential s only marginally". (Shah, April 2012).
The story of oil development in the Caribbean has not been straightforward, and a recent
commentary provides a salutary lesson for Sierra Leone:
"Finding oil is challenging especially for small economies with small populations. It raises questions
about security, stability, governance, accountability, the control of corruption and the management
of rapid change. It also requires uniform macroeconomic management, a tough and independent
regulatory environment and the creation of a well-managed sovereign wealth fund or the like to
invest wisely in the nation’s future. It also challenges every politician's relationship to their electorate
in respect of the equitable distribution of oil wealth through the provision of social programs and the
management of taxation. For this reason, if oil in substantial quantities were to be found in one or
other of the Caribbean countries they would be wise to study closely for best (or worst) the
experience of countries or regions as diverse as Norway, Ghana, Alaska, or Nigeria.
For the Caribbean there are also important issues relating to the environment and tourism. As the
Bahamas is finding, there is a need, before agreeing to exploration, to reconcile – ideally through an
independent and respected national body – the conflicting interests of tourism, the environment and
an industry which while essentially safe, were always carried with it recognised risks.". (Jessop, June,
2012)
5.13 Conclusions
This review provides some salutary lessons about the issues which need to be considered when
developing a new hydrocarbons sector within any national economy. Some of the key points which
arise are listed below:

The presence of oil and gas can exacerbate political and economic tensions which are
already present. This can be seen in the case studies for Mauritania, Guinea-Bissau, Liberia,
Cote d'Ivoire, Nigeria, Chad and Uganda. Rapid increases in state revenue can follow
successful development of an oil or gas field but the benefits are rarely experienced by the
population at large in the short term. This leads to a strong sense of grievance and can
become a cause of civil unrest.

Major oil and gas reserves often straddle international boundaries, requiring a high level of
diplomacy and negotiation to ensure that extraction agreements benefit both countries. This
is illustrated in the case studies of Senegal – Guinea-Bissau and Cote d'Ivoire and Ghana.

Revenues from oil and gas production must be managed within the economy in ways which
prevent distortion of investment policy and a decline in activity in other essential fields like
agriculture. These problems have arisen in Mauritania, Chad, Nigeria and Trinidad and
Tobago.

Consistency is required in the way in which successive governments manage the oil and gas
industry. This emphasises the importance of having comprehensive legislation and
regulations in place. Where a change of government leads to a radical review of existing
contracts and agreements this can undermine the confidence of investors and lead to
stagnation in development, as seen in Mauritania but also many other West African
countries.
41

A high level of optimism in the initial stages of development can quickly turn to
disappointment, if rates of production fall below anticipated targets. The examples of
Mauritania and Ghana illustrate such concerns.

The benefits of a coordinated approach, including the use of strategic environmental
assessment in planning the development of oil and gas resources, can be clearly seen in the
comparisons between the experience in Nigeria and Ghana.
PART 3
ANALYSIS OF ISSUES
Contents of this Part
Chapter 6
The Environment
Chapter 7
Socio-Economic Issues
Chapter 8
Institutional Issues
42
43
6.
THE ENVIRONMENT
6.1
Introduction
Environment can be defined as theactualphysicalsurroundings of an organism or, in the case of
human beings, a combination of these natural influences and the socialorculturalbackgroundfactors
which affect everyday living. In practice, natural, social and cultural attributes of the human
environment are inextricably linked, but for ease of description the SEA discusses the physical
environment in this chapter and social, cultural and local economic factors in the next chapter.
As part of the scoping process for the SEA a decision was taken to focus on air, land and water issues
within the sphere of operations affected by hydrocarbons exploration which include the coastal
region and continental shelf of Sierra Leone. The environmental conditions found in inland areas of
the country are not discussed.
SECTION 1 BASELINE DESCRIPTION
This chapter is divided into two sections; Section 1 sets out the baseline description and section 2
covers the main issues.
Two principal zones of interest can be defined; the coastal zone, and the deeper offshore waters
which form the margin to the continental shelf.
44
6.2
The Coast
The coastal zone of Sierra Leone can be divided into four parts:




the northern part, including the territory of Kambia and Port Loko Districts, which stretches
from the Guinea border to the outskirts of Freetown on the south side of the Sierra Leone
River Estuary,
The Peninsula, from Freetown to Kent,
Yawyi Bay, between the Peninsula and Bonthe,
Bonthe Island and the southern coast to the Mano River Estuary and Liberian border.
Much of the coastline, apart from the rapidly
developing sections of the Peninsula remains,
physically, in relatively pristine condition and is of high
nature conservation value, although human activity has
significantly reduced populations of rare marine
species,including turtles and manatee which are hunted
for food.
In order to review different types of impact, a
distinction is made between environmental conditions
which exist in landward areasextending up to 5
kilometres from the sea, and those which apply to the rivers, estuaries, beaches and shallow coastal
waters under 25 metres in depth.
Each of these zones has distinct environmental characteristics, but they also provide a complex and
interrelated set of ecosystems where impacts on one zone could have significant implications for the
others.
6.2.1 Landward Areas
Areas inland from the coast are not targets for oil and gas exploration because the geology is
unsuitable but some landward locations could potentially be considered for onshore development of
oil and/or gas storage and processing or for supply and maintenance depots to support offshore
operations. These types of activity would be sited as close as possible to the sea to minimise
transport distances and an arbitrary limit of 5 kilometres has been chosen to define the zone of
interest.
6.2.2 The Coastline
The coastline of Sierra Leone is over 500 kilometres in length with a number of indented bays, rivers,
estuaries and islands including Sherbro, Turtle and Banana islands. Extensive mangrove swamps
exist along the shore interspersed with sandy beaches, mudflats and isolated rock outcrops(FAO,
2010). These habitats and the shallow inshore waters provide shelter, feeding grounds and/or
nesting sites for shrimp, fish, birds and marine mammals.
Mangrove occupies approximately half the coastline and covers 100,000 ha (FAO, 2007) although
approximately half of all mangrove was cleared between 1980 and 2000, due to the high demand for
firewood and charcoal. As a result, much of the mangrove is secondary regeneration. In recent
years, the full importance of mangrove has been demonstrated as an absorbing buffer zone to
coastal erosion and the impact of sea surges caused by severe storms and tsunamis. Another
45
important feature of mangrove is its capacity to colonise mudflats and trap sediment; on coastlines
that are highly vulnerable to rising sea level caused by global warming and climate change,
mangrove offers a natural way of building sea defences.
Seagrasses are also found the mouths of river estuaries,
providing shelter for fish and mammals.
Rocky substrates provide habitats for a range of soft
corals, hydrozoans, acsidians and sponges but the
presence of off-shore cold water currents and turbidity
inhibits development of true coral reefs.(Ukwe et al.
2006)
Beyond the wave impact zone, the seabed, which is
largely sandy, shelves gently into the Atlantic reaching a
depth of 200 metres at the top of the continental shelf.
The width of the continental shelf is roughly 13 kilometres
in the south at Sulimaand increases toabout 125
kilometres in the north; Bonthe Island marking the
transition between narrower and wider sections.
The width of the Continental Shelf is very significant in
terms of hydrocarbons exploration because current geological knowledge suggests that any
substantial oil or gas discoveries will be made along the break of slope.
6.3
Offshore waters
Oil and gas exploration is taking place along the break of slope which separates the continental land
mass from the deep ocean floor. This is one of the most important areas for biodiversity, where
deep sea coral reefs are found. In addition, the mixing of oceanic currents with on-shore waters
create rich feeding grounds for pelagic fish.
There has been limited oceanographic research into conditions of the sea bed in deeper offshore
waters and it is one of the areas in which exploration for hydrocarbons offers opportunities to
improve scientific knowledge, although, at the same time, the operations also pose substantial risks,
as discussed in Chapter 4.
6.4
Biodiversity Status
Sierra Leone is one of 15 countries that constitute the Guinea Current Large Marine Ecosystem
(GCLME). The coast of West Africa is one of the most favourable areas for fish breeding and
development due to the nutrient rich waters that well up offshore from the Guinea Current.
Sierra Leone joined the six founding members of GCLME after the cessation of war in 2002 and has
not yet formally adopted Marine Protected Areas (MPA), which have equivalent status to National
Parks under the International Union for Nature Conservation (IUCN) guidelines. However, in 2010,
the then Minister of Fisheries announced formation of a working party, with the aim of declaring
four MPAs coveringthe Scarcies River Estuary, the Sierra Leone River Estuary, the Yawry Bay,
Kagboro Creek, and the Sherbro River Estuary. In addition, the Sierra Leone River Estuary is
designated as a Ramsar site under the Ramsar Convention on Wetlands of International Importance.
Identification of these protected areas is being assisted by funding from the EU "Institutional
Support to Fisheries Management Project".A Pilot Project for Sustainable Coastal Zone Management
in Sierra Leone has also been launched.
46
Some of the principal features of these important habitats are described below.
6.4.1 Reptiles
Five species of marine turtles nest on the beaches (green, olive ridley,loggerhead, leatherback and
hawksbill) with the primary nesting sites being located on the Sherbro and Turtle islands, These
animals are easily discouraged from using traditional nesting sites by human activity.
6.4.2 Marine Mammals
Sierra Leone’s marine mammals have not been studied in sufficient detail to confirm their current
status and population stability. However, cetaceans including Humpback whale, common dolphins
and Clymene dolphins are frequently found in coastal and estuarial waters, while the sirenean
(African manatee) is recorded in smaller river estuaries.
6.4.3 Fish
The natural fisheries of Sierra Leone are very rich, due to the high nutrient content of water carried
by the Guinea Current which sweeps the coast from south to north and the contribution of
freshwater flows from the estuaries during the rainy season. Bonga (Ethmalosaspp) is caught
throughout the year, while the ‘Spanish’ (Sphyraena barracuda) is landed during the dry season.
Other fish species that are regularly caught include kutar, snapper, shinenose and bonita.
6.4.4 Birds
There are twenty three species of seabird of globally important conservation status which frequent
Sierra Leone’s coastal waters, including White-necked Picathartes, Lesser Flamingo, Damara Tern,
Lesser-crested Tern, Avocet, Water Dikkop, Greater Flamingo, Northern Shoveller, Terek Sandpiper,
Curvew sandpiper and Great snipe. These birds congregate around the mouths of rivers and
estuaries on mud and sand foreshores which provide good feeding and roosting areas.
According to WIWO (see website below) there are 89 species of marine and coastal birds. Also,
Sierra Leone lies on the Eastern Atlantic Flyway making it very important, internationally.
http://www.imf.org/external/pubs/ft/scr/2011/cr11195.pdf
6.5
Water quality
Water quality in the Marine environment varies both in terms of location and by season. Open and
exposed sections of coast are generally of very good quality, but the main rivers and estuaries carry
heavy silt loads and are frequently contaminated with pollution originating on land. Quality
deteriorates during the rainy season as a result of the massive influx of freshwater carrying
sediment, domestic waste, fertiliser and heavy metals.
Increased organic loads are considered to have contributed to the recent seaweed invasion which
occurred along Sierra Leone's coastline in 2011. Growth of seaweed may also have been stimulated
by the presence of iron and other heavy metals released into the water column as a result of
dredging operations.
Some detailed hydrographic studies have been undertaken in recent years, as part of EIA's
supporting infrastructure development, including a survey of Port Lokel in the upper Sierra Leone
estuary. However there has been no systematic survey of coastal waters. A recent report (Johnson,
2011)describes shortcomings on pollution management in terms of:
47





lack of up-to-date information on the status and trends of Sierra Leone's coastal and
maritime water quality,
uncontrolled introduction of pollutants into the coastal environment,
lack of an integrated approach to management of coastal and marine areas,
lack of sufficient support to marine and coastal environmental research, and,
lack of an effective monitoring, control and enforcement mechanisms against marine
pollution.
In very deep offshore water, there is even less information about water quality. However research
undertaken by the interim Guinea current organisation suggests that there has been significant
deterioration in water quality in recent decades. This may have contributed to a decline in fish
stocks, although the principal cause is, almost certainly, overfishing.
Section 2
6.6
Key Issues for the Environment
Introduction
As noted in the preceding sections, Sierra Leone has an exceptionally fine coastline, although it is
coming under pressure, particularly on the Western Peninsula, from largely un-planned urban
development. These assets include rich biodiversity, and excellent beaches, both of which have the
potential to support a major tourism industry. Inshore coastal waters provide important fishing
grounds for artisanal fishers, while industrial fleetsare active in deeper water. This environment is
extremely sensitive to degradation from changes in water quality and pollution. The deep water
conditions found on the continental shelf have been studied in neighbouring countries over the last
15-20 years, but very little research has taken place in Sierra Leone’s waters, due largely to the
unfavourable conditions caused by former political instability and war.
In this section an initial discussion is provided on broad generic issues before reviewing the potential
impacts of each stage in the development of hydrocarbons as follows:





6.7
Reconnaissance, exploration and appraisal
Offshore development and production (including transport)
Onshore support services
Onshore processing
Decommissioning
Water quality issues
Countries with well-developed environmental health and safety regulatory systems have been able
to develop a good understanding of marine water quality around their shores. As a result, they are in
a position to describe trends and determine what the likely effects of new oil and gas development
(or other marine development) will be. A good example is the province of Hong Kong in China, which
is heavily dependent on marine trade and commerce; is located in a very sensitive marine
environment; and has a population of over 47 million,with enormous outputs of industrial and
domestic waste. (See box 6.1). The Environment Protection Agency has been monitoring a wide
range of water quality parameters for more than 20 years.
48
Box 6.1 Hong Kong Water QualityMonitoring – an Overview
“The Hong Kong Environment Protection Department regularly monitors the water quality in 1,700
square kilometres of marine waters. Its on-going programme covers 94 water, and 60 sediment,
sampling stations in the open sea, semi-enclosed bays and typhoon shelters. Through its activity, the
Department assesses the health of ourmarine waters, ensures that they are in compliance with its
statutory Water Quality Objectives, tracks long-term pattern changes in water quality and uses the
collected data to plan pollution control strategies. Also of concern is predicting the challenges
ahead. The ultimate benefit will be to your health, and to the health of everyone around you.
The Monitoring Process
The monitoring process is carried out on board a scientific vessel – the Dr Catherine Lam – which is
equipped with state-of-the-art technology. At various locations, scientists measure a range of
parameters, such as temperature, pH, salinity, turbidity and dissolved oxygen. Water and sediment
samples are also collected and sent to laboratories for analysis of over 60 parameters, such as
nutrients, metals, organics and coliform bacteria. In the last twenty years, the scope of analysis has
tripled, ensuring that our awareness of water quality keeps pace with the development of society.
Water quality monitoring is generally conducted once a month, and sediment quality monitoring is
conducted twice a year.
Monitoring of Marine Sediment
In addition to water testing, the quality of the
marine environment can be assessed by the
monitoring and testing of sediment. Sediment is
the ultimate resting place of all pollutants in the
sea. Marine pollutants occurring at levels that are
too low to measure in water can be identified in
sediment. Such toxic contaminants not only
affect a variety of organisms living within or on
the surface of the sediment, they can also build
up in the food chain, for example in fish or
shellfish, and be harmful to humans or animals.
The EPA tests sediment in different parts of Hong
Kong for over 60 physical, chemical and biological
parameters.
Using
detailed
Government
guidelines ('Environment, Transport and Work
Bureau Technical Circular ETWB(W) No. 34/2002 Management of Dredged / Excavated Sediment'),
the EPA compares any contaminants in sediment
against a 'Lower Chemical Exceedance Level' and
an 'Upper Chemical Exceedance Level'. Based on
these two levels, sediment is categorised into
three types ranging from 'not contaminated',
through 'slightly contaminated', to 'heavily
Measuring electrochemical potential of
contaminated'. This categorisation is important
marine sediment collected by a grab
when it comes to activities like sediment
sampler
dredging or removal, because it affects how
those involved in such activities must handle and
dispose of the sediment. Sediments are sampled twice a year, and data is usually based on mean
five-year values”.
49
Oil producing countries in Europe, America and the Caribbean also have sophisticated marine
monitoring stations and laboratories.Based on international experience, a number of countries have
adopted their own standards for marine water quality.Figure 6.2illustrates part of the Malaysian
marine water quality guidelines, which specifically distinguishes between the standards required in
marine environmentally protected areas, oil production areas and open water. Other guidelines are
set out by the IMO, and in the MARPOL convention.
Figure 6.2
Malaysia Marine Water Quality Criteria and Standards
Parameter
CLASS 1
CLASS 2
CLASS 3
CLASS E
BENEFICAL
USES
Preservation,
Marine
Protected areas,
Marine Parks
Marine Life,
Fisheries, Coral
Reefs,
Recreational and
Mariculture
Ports, Oil & Gas
Fields
Mangroves Estuarine
& River-mouth
Water
Temperature
(°C)
≤ 2°C increase
over maximum
ambient
≤ 2°C increase
over maximum
ambient
≤ 2°C increase
over maximum
ambient
≤ 2°C increase over
maximum ambient
Dissolved
oxygen (mg/L)
>80% saturation
5
3
4
Total
suspended
solid (mg/L)
25 mg/L or ≤
10% increase in
seasonal
average,
whichever is
lower
50mg/L (25 mg/L)
or ≤ 10% increase
in seasonal
average,
whichever is
lower
100 mg/L or ≤
10% increase in
seasonal average,
whichever is
lower
100 mg/L or ≤ 30 %
increase in seasonal
average, whichever
is lower
Oil and grease
(mg/L)
0.01
0.14
5
0.14
Mercury*
(µg/L)
0.04
0.16 (0.04)
50
0.5
Cadmium
(µg/L)
0.5
2 (3)
10
2
Chromium (VI)
(µg/L)
5
10
48
10
Copper (µg/L)
1.3
2.9
10
2.9
Arsenic
(µg/L)
3
20(3)
50
20 (3)
(III)*
50
Parameter
CLASS 1
CLASS 2
CLASS 3
CLASS E
Lead (µg/L)
4.4
8.5
50
8.5
Zinc (µg/L)
15
50
100
50
Cyanide (µg/L)
2
7
20
7
Ammonia
(unionized)
(µg/L)
35
70
320
70
Nitrite
(µg/L)
(NO2)
10
55
1,000
55
Nitrate
(µg/L)
(NO3)
10
60
1,000
60
Phosphate
(µg/L)
5
75
670
75
Phenol (µg/L)
1
10
100
10
Tributyltin
(TBT) (µg/L)
0.001
0.01
0.05
0.01
Faecal coliform
(Human health
protection for
seafood
consumption) most Probable
Number (MPN)
70 faecal
coliform 100mL1
100 faecal
coliform 100mL-1
& (70 faecal
coliform 100mL-1
)
200 faecal
coliform 100mL-1
100 faecal coliform
100mL-1 & (70 faecal
coliform 100mL-1 )
Polycyclic
Aromatic
Hydrocarbon
(PAHs) ng/g
100
200
1000
1000
*IMWQS in parentheses are for coastal and marine water areas where seafood for human
consumption is applicable.
Source: www.doe.gov.my/.../water-marine-marine...marine-water/malaysia
51
6.7.1 Establishing water quality standards in Sierra Leone
The challenge for Sierra Leone lies in the fact that there is no hard data on water quality in the
critical zones along the continental shelf. From first principles, it may be assumed that the distance
from shore (over 50 km); fast flowing currents and great depth of water (in excess of 1000 m or 3300
feet), will ensure a high degree of mixing and dilution of the pollutants. This should ensure that
water quality meets, or exceeds, the highest standards for the Atlantic.
Upwelling of cold currents provides ideal conditions for plankton growth and creates rich fishing
grounds. In these circumstances, two different strategies for marine protection could be employed.
The first would argue that, with the vast quantity of water involved, any minor pollution incidents
would rapidly be dispersed and therefore a relaxed position could be adopted on water quality
standards. The second approach, adopting the precautionary principle, would argue that these
exceptional environmental conditions (which are so important for maintaining biodiversity and
sustaining productive fisheries) should be preserved with minimal or no absolute deterioration.
In making a judgement on the standards required, the Environment Protection Agency will need to
consider the wide range of factors influencing seawater quality, including:



contributions from terrestrial sources,
rapid increases in marine traffic passing along the coastline of Sierra Leone, which is giving
rise to increasing numbers of small oil slicks, and,
the likely scale of hydrocarbon activity.
Further detailed examination of the issues is needed before a set of standards is finally adopted to
govern the offshore hydrocarbons industry, but, as a starting point, it would seem wise to adopt
international standards.
6.8
Air quality issues
Air quality issues need to be considered in two distinct locations: firstly the marine environment, and
secondly, the terrestrial environment.
In the case of the marine environment, most activities will take place on the continental shelf where
there is very little air pollution at present. International standards on air emissions for diesel
generators and other power plant should be employed as a matter of course. Providing this is done
there should be no significant air pollution from these sources. The most significant source of air
pollution, however, would arise from gas flaring if this were allowed and this subject is addressed in
more detail below.
6.9
Fisheries and biodiversity
Fishing is not only an important part of Sierra Leone's economy, but it also plays a vital role in
sustaining livelihoods throughout the country, maintaining the protein balance and forming part of
the culture and way of life for more than half a million people who live in the coastal region. The
most important areas for fish spawning and feeding are already known and include the mangrove
forests and areas of upwelling currents off the continental shelf. These areas need to be protected in
the long-term national interest.
Oil and gas exploration and production are not necessarily incompatible with the maintenance of
fish stocks: it is a fact that fish and other marine animals are attracted to submerged and buried
structures like oil rigs, because they provide a degree of protection in open water. However,
development of a number of offshore rigs can result in extensive exclusion zones within which
fishing is not allowed for safety reasons. This has obvious economic implications. There is also an
52
increased likelihood of regular small-scale pollution incidents, leading to a localised deterioration in
water quality.
Impacts on other marine life are discussed in the sections which follow. In general, international
evidence points to the fact that routine operations of offshore oil and gas extraction, if wellmanaged, do not automatically lead to deterioration in environmental conditions and a consequent
loss of biodiversity. This is clearly shown from the condition of coastal ecosystems around the
Shetland Islands where oil and gas extraction and production have played an important part of the
economy for the last 40 years (see Section 8.3.3). However, even in the best managed environments,
where a high degree of supervision is maintained, standards can slip. A recent article in the UK
Guardian cites numerous failures in 2010/ 2011 where minor oil spills have occurred in the North
Sea.
More serious threats to marine life come - not from routine activities - but from exceptional and
very rare events. These issues are discussed in subsection 6.12.
The following sections review potential physical environmental impacts from the initial seismic
surveys, through to confirmation of a commercial discovery as a result of detailed appraisal. Each
topic is introduced by a question.
6.10 Reconnaissance surveys
Survey Operations
Seismic activity can disturb marine life – What is the scale and magnitude
of likely impacts in Sierra Leone and how can these be managed?
6.10.1 Impacts on water and air
Use of seismic equipment has no significant effect on air quality, although it does generate sound
and pressure waves in water, which can have secondary effects on living organisms.
6.10.2 Impacts on fisheries and biodiversity
A substantial number of reports have been produced as part of environmental impact assessments
for seismic and other reconnaissance surveys in different parts of the world. However, there have
been significantly fewer scientific research studies that have actually investigated known areas of
impact. It is widely acknowledged that the use of air pulse guns and sonic equipment causes
temporary shock and avoidance tactics in marine organisms, fish, turtles, octopus and cetaceans.
Some studies suggest that these effects are restricted to a few hundred metres radius of the survey
equipment, while others point to much wider impact zones.
Seismic surveys may disorient marine organisms, disrupt feeding patterns and drive animals away
from their natural habitat. Most studies imply that while adverse impacts may occur these are
limited in time and area and can be viewed as of minimal or no significance. These individual
assessments do not take into account cumulative impacts resulting from repetitive and overlapping
surveys. There is evidence that lasting damage to fish hearing can result from seismic activity
6.10.3 Safeguard measures
The industry approach to mitigation is to carry out a ‘ramping-up‘warning sequence, prior to the
start of the main survey, to give marine animals the chance to move away from the survey area.
This preliminary warning needs to be followed by a careful visual survey by skilled observers to
ensure that there are no whales within the survey area.
53
6.11 Exploratory and Appraisal Drilling
Drilling Operations
Drilling causes localised disturbance to the sea bed and water column.
What procedures exist for assessing the environmental impact of
individual and cumulative drilling operations?
All stages of oil and gas exploration, appraisal and production involve the use of drilling; the only
difference being in the increasing size and number of boreholes that are sunk in later stages.
The physical operations which take place in drilling can be separated into:




on-board activities,
discharges to open sea,
operations on the seabed, and,
subsea excavation.
On-board activities: sinking an oil well in deep water is a highly sophisticated engineering operation.
The vessel carrying drilling equipment must be positioned accurately in relation to the borehole
position and held on station for up to 3 months. Heavy equipment must be lowered to the seabed in
order to cap the eventual well and prevent any blowout. Large diameter hollow drill pipes must be
joined together in strings and connected to the well head. Sinking the well involves rotation of the
cutting head which need to be periodically replaced, depending on conditions and wear and tear.
The diameter of the outer casing may be up to 24 inches (2 feet) initially, with successive sections
tapering down to 8 inches by the time the borehole reaches its maximum depth.
Immense power is needed from on-board generators to drive the cutting head. Large quantities of
reagents and drilling mud are pumped down the borehole in order to lubricate the moving parts and
particularly the drill head, which cuts into the bedrock.
Fluids pumped down the borehole are returned to the surface, with the addition of rock debris and
cuttings. These components must be separated out, before the mud can be recycled and reused.
These engineering activities are inevitably dirty and the working environment on deck must be
carefully contained and scrupulously clean to ensure that all wastes are captured and treated. Oil,
grease, chemicals and water must be carefully separated in the process.
Discharges to open sea: large quantities of seawater are used to provide cooling, and are discharged
back to the sea after appropriate treatment. If the well intercepts a zone of pressurised water, deep
within the underlying rock strata, it may be necessary for this fossilised water to be released into the
sea. Boring a well involves removing the rock cuttings and pulverised debris, which may amount to
many tonnes of material in a deep borehole. When this material is discharged from a drilling vessel
back to the sea, it will settle out as a plume, with the heaviest material (fine sand) falling close to the
drill site, while finer silty material is dispersed more widely.
Operations on the seabed: initial preparation for the construction of a borehole usually involves
clearing loose material on the seabed in order to provide a firm base for the capping equipment
which is lowered into position. The site is prepared using grabs, jets or submersible dredging plant.
Subsea excavation: the drilling process is controlled from the support structure (vessel or rig) and is
managed with a high degree of precision. Orientation and direction of the cutting head can be varied
so that the drill track follows a curve rather than a straight line, which allows different strata to be
intercepted. The direction and alignment of the borehole is predetermined through careful analysis
54
of three-dimensional seismic results, and elaborate models of the potential reservoir site which are
constructed on the basis of all available evidence by specialist teams of geophysicists working at
head office.
Potential hazards are predetermined, based on experience. These hazards include the possibility
that the borehole may intersect pressurised gas, oil or water which would threaten the integrity of
the capping devices and valves, leading to a blowout on the seabed.
6.11.1 Impacts on water
Potential impacts on water stem from the intentional, or accidental, release of water, contaminated
with oil or other chemicals, and the physical discharge of sediments. The environmental effects have
been studied in oil and gas operations around the world for many decades
It is international best practice for spent drilling mud, which has accumulated a range of undesirable
chemicals to be transferred into containers and returned to shore bases for treatment and disposal.
In Ghana, after five or six years of extensive marine operations, there is still only one company with
the facilities to properly dispose of these residues.
Drilling a hole, 3 or 4 km deep, with a diameter ranging from 8 to 24 inches, involves the extraction
of many tonnes of pulverised rock cuttings. In very sensitive environments, this debris is collected on
the rig and then shipped to shore for disposal. In the majority of cases, the rock cuttings are released
directly into the sea forming a plume of sediment which disperses and settles on the seabed to the
borehole. Heavier particles are deposited in the immediate vicinity while lighter fractions may be
carried a few hundred metres from the well site. The deposition of fine silt may blanket any algae
and other organisms living on the seabed, although the disturbed area will usually be re-colonised in
a short period of time. Clearly, such operations would be unacceptable in an area containing rare
and vulnerable corals, or other marine life.
When the drilling operation penetrates a submarine hydrocarbons reservoir the effects will depend
on the concentrations and constituencies of oil, gas and water present. Typically, gas will
accumulate above the oil layer which may, in turn be underlain by a zone of fossil water (although
the reservoir may also be dry without contact with water). These constituents are invariably under
great pressure, due to the depth, and temperatures may be as high as 2000C. There is a risk that
penetration of a highly pressurised system may cause an explosive release of gas which, in extreme
circumstances, could overwhelm the safety seals installed at the well head, which is located on the
sea bed.
Once a reservoir has been penetrated, the drill cuttings will include oil residues, gas and water which
need to be recovered and treated on board the drilling vessel. It is normal for a borehole to be sunk
through a number of potential reservoirs until the underlying source rocks are reached (from which
the oil and gas is actively being released). Having completed a borehole, the drill pipes are
recovered and the hole is plugged with cement, if there is no intention of returning at a later date
for further analysis or production. A well that shows promising signs of recoverable oil or gas may
be sealed temporarily to allow re-entry.
While modern drilling practice ensures that the majority of boreholes are sunk with no significant
environmental impact, the more holes there are, the higher the risk that errors or accidents will
occur and the same applies to the daily process of treating drill cappings and fossil water. There is,
therefore, a need to carefully consider the cumulative effects of a large number of boreholes within
sensitive marine areas.
55
6.12 Offshore development and production (including transport)
The process of developing a submarine oil field requires a high level of precision engineering, the use
of enormous amounts of material, principally pipes and valves, highly specialised equipment,
including submersibles and remote sensors and heavy lifting gear. Literally hundreds of kilometres
of pipe may need to be laid in trenches on the sea bed to connect widely dispersed wells to a central
collecting point and valves weighing 50 tonnes or more may need to be positioned with tolerances
of only a few centimetres at a depth of 1500 metres. The transport of workers, equipment and
supplies to floating rigs is a continuous process, with ships and helicopters travelling daily to and
from the shore support base and the oil field(s).
All of these activities consume fuel, oil and water and generate waste and pollutants which need to
be returned to shore and processed wherever possible. This requires the development of technical
support services.
6.12.1 Impacts on Water
All shipping and heavy engineering operations carried out at sea involve the risk of minor accidents
and the discharge of pollutants. There is, therefore, a need for constant vigilance over housekeeping
by the oil and gas operators, supported by both routine maintenance visits and occasional spot
checks by the regulatory authorities. The review undertaken by the SEA steering group indicates that
none of Sierra Leone's regulatory agencies, including the maritime services, are in a position to carry
out regular monitoring due to the absence of vessels equipped for deep water service and other
equipment. These shortcomings need to be addressed before the off shore oil and gas sector
programme becomes fully developed.
56
6.12.2 Impacts on air
Localised air pollution may be caused by the use of diesel generators and ships’ engine fumes. These
hazards need to be managed very carefully on health and safety grounds in accordance with well
established guidelines set out by MARPOL and others. The most serious risk of air pollution arises
from any need to burn off gas extracted from subterranean fields.
Gas flaring
Gas flaring is a necessary operation during initial testing of a well but it is
potentially environmentally damaging. How can the extent of gas flaring
be minimised and properly controlled?
One of the undesirable consequences of opening up a new reservoir can be the need to release gas
in order to reduce pressure. Historically, surplus gas was simply burnt by flaring it into the
atmosphere. Under present international best practice the flaring of gas is minimised and under the
Sierra Leone Petroleum Act this will only be permitted in special circumstances. Nevertheless, as
evidence shows from the Ghana Jubilee Field,it can be difficult to balance the objectives of opening
a new field as quickly as possible in order to generate much needed oil revenue,with the aim of
achieving sustainable development in the longer term, by retaining gas. Flaring gas not only
constitutes a serious source of air pollution and greenhouse gas emissions, but it also represents a
loss in revenues.
The best way of ensuring that gas flaring is minimised is to ensure that plans are put in place to
recover and process gas from the outset.
Production well and
pipeline management
Operator error is responsible for many accidents involving damage to
deep water wells. What measures should be taken to minimise the risk
of accidents?
Extraction of oil and gas requires a range of different techniques that are likely to change over the
life of the oil field. Initially, gas and oil may be recovered under natural pressure but as the reserves
are drawn down pressure may need to be increased by pumping gas back into the reservoir. The
underlying rock strata may also need to be physically fractured to increase flow rates. Similarly, the
amount of water recovered from boreholes may increase with time. All of these activities need to
be planned with great care and give rise to various risks in terms of localised pollution,as is the case
in any major industry. Consequently, there is a need for close monitoring and inspection,both by the
operator and by the regulator.
Production and
Storage at Sea
FPSOs and other production platforms are designed to be in use for 20
years or more. Vessels are often converted from former ships. What
measures can be taken to ensure that all vessels are designed,
constructed and maintained to the required standards?
It is clear that the best way of planning the future of Sierra Leone’s oil and gas industry is to ensure
that a dialogue is established from the outset between the Government, the Industry’s leading
operators, and civil society leaders so that all strategic decisions are discussed transparently and
objectively. A significant number of FPSOs are created by converting former oil tankers into static
and non-motorised storage and production vessels. There are also international engineering
companies who build bespoke FPSOs to meet the marine conditions and levels of production of
particular oil fields. There are a number of international bodies including the IMP who specify safety
standards in the off-shore oil industry sector and any FPSO moored in Sierra Leonean waters will be
required to meet the highest safety standards. The SEA Steering Committee is firmly of the view
that only double hulled FPSOs should be used in Sierra Leonean waters.
57
Emergency Response The offshore oil and gas industry has well-established procedures for
Procedures
handling emergencies at sea, but these procedures rely, in part, on
having adequate equipment to hand and on governments’ own response
time. Are the existing provisions adequate to protect Sierra Leone’s
sensitive coastline and in shore waters?
Each petroleum licence holder is required to submit plans for managing emergencies and these are
carefully vetted by the Petroleum Directorate, the Environment Protection Agency and others.
However, international experience has shown (see Chapter 7) that even the most advanced
regulatory regimes in the world (including the UK, EU and USA) have had to upgrade their
emergency response procedures in the light of recent worldwide emergencies in deep water oil and
gas fields.
At the present time, the southern coast of Sierra Leone is particularly vulnerable to any emergencies
that couldnot be fully controlled (for example a large oil slick carried onshore by coastal winds and
the Guinea current). Much of the coastline is inaccessible by road and can only be reached on foot
or by boat. The Government’s capacity to intervene is limited.
Avery good model of a National Oil Spill Emergency Response Plan is provided by the Government of
Trinidad and Tobago (See Appendix 3). The islands of Trinidad and Tobago have had a national oil
spill contingency plan in place since the 1970s. The first draft was finalised in 1977, updated in 2004
and the current draft is dated 2012.
The plan defines the Ministry of Energy and Energy Affairs as the lead agency for handling all oil spill
responses on land and sea, while the Trinidad and Tobago Coast Guard is the nominated response
agency.A formal structure has been created by the Trinidad and Tobago Government to ensure
proper coordination of any significant incident and responses to spill incidents are planned according
to a pre-determined assessment of risk. Particular attention is paid to the key fishing areas around
the islands with environmental sensitivity mapping of areas requiring critical protection.
Routine Testing of the Emergency Response System is carried out each year anda clear sequence of
actions and responses have been defined for the use of dispersants at sea.
Development of Oil
Jetties and on shore
Terminals
Selection of sites for oil jetties and terminals, and their subsequent
construction and operation needs to be handled with great care and
rigour in order to meeting economic planning and social and
environmental criteria. How will this be achieved?
Chapter 4 outlines scenarios for the future development of the Oil and Gas industry and emphasises
that these plans will need to be developed over a period of time, measured in years, as more is
learnt about the level of oil and gas reserves likely to be found in Sierra Leone waters.
In the first instance, the onus will lie with individual operators to come forward with their own
detailed proposals and to publish these, in conjunction with full scale feasibility study findings and
detailed environmental and social impact assessments and management plans. However, there may
well be a number of discrete proposals from different operators and it will be essential for the
Government to coordinate a collective response from its different ministries, departments and
agencies, in terms of choosing the best sites for development.
A key recommendation from this SEA is the need to establish a joint standing committee for
planning and monitoring the activities of the oil and gas industry. This committee will need to meet
at regular intervals and ensure that a proper national planning framework is developed, through
collaboration between the industry, government and civil society
58
Oil and Gas
Processing
Downstream activities for the processing of any oil or gas discovered in
Sierra Leonean territorial waters will raise a large number of social, local
economic and environmental issues. How can these be managed?
In the event that large scale oil and gas processing is developed in Sierra Leone there will be a need
to introduce the latest international standards and guidelines, and equip the relevant regulatory
authorities with the necessary staff, technical know-how and financial resources to monitor
development. Reference to international practice quickly identifies a wide range of guidance,
manuals and standards but an essential requirement will be to introduce the necessary training
programmes and full technical support for the staff of regulatory agencies from other expert
organisations.
6.13 Climate Change
Studies of the potential impact of climate change in Sierra Leone have suggested that up to 26 km²
of coastline could be inundated by rising sea level. This is not a dramatic change. However, other
influences of rising air and water temperature could be much more profound, including impacts on
the pattern and location of cold water upwelling of the continental shelf which dictates where the
principal feeding grounds are for many commercial fish species.The scale of oil and gas development
envisaged under scenarios B, C and D would not, in themselves, have a dramatic effect on climate
issues. It is nevertheless a fact that all exploitation of fossil fuels is adding to the sum of global
warming. Responsibility for combating rising carbon dioxide levels in the atmosphere rests with all
nations, including both consumers and producers of hydrocarbons. This responsibility adds weight to
the case for Sierra Leone adopting a "future generations’ fund" to ensure that the national capital of
the country, which is depleted through extraction of non-renewable energy resources, is converted
into long-term social and equity capital which benefits all Sierra Leoneans.
59
7.
SOCIO-ECONOMIC ISSUES
7.1
Introduction
For a million people who live in the coastal zone their economic, social and cultural life depends
upon livelihoods that are intricately bound up with the sea. The Strategic Environmental Assessment
identifies a wide range of social issues that need to be addressed through Social and Environmental
Impact Assessments of individual development proposals including:
 Identification of potentially affected economic sectors,
 direct and indirect effects on communities, and,
 employment opportunities in the oil and gas industry.
In this report the aim is to describe the basic structure of Sierra Leone’s economy and, in particular,
the characteristics of the coastal zone and the nature of the coastal communities. In Section 1 the
state of the national economy, employment and population characteristics are described, together
with welfare and livelihood issues.Section 2 summarises the interests and concerns of coastal
communities as expressed through a series of consultative meetings held in Mathru Jong (14th
August), Pujehun, (15th August), Kambia (17TH August) and PortLoko (18th August 2012). A total of
169 local councillors, district council officers, and representatives of the local communities attended
these meetings.
In addition to the formal meetings at provincial level, a study tour was made to southern coastal
communities in April, 2012 to meet local people in Sulima and on Bonthe Island. The SEA team also
participated in two television programmes held earlier in the year which introduced the concept of
SEA and invited comments from listeners. The overall response strongly emphasised the importance
of proper planning in advance of any future development.
Section 1
7.2
Key Socio-economic Issues
The National Economy
Sierra Leone is gradually rebuilding its national economy after the devastating effect of ten years of
war between 1992 and 2002. From a decline of -17% in GDP in 1997, the economy (including the
effects of inflation) reached -10% in 1999 and moved into positive growth in 20002. Throughout the
period 2001 to 2011 real growth has remained relatively steady at +5% a year, although a significant
part of this growth reflected the process of reconstruction and was concentrated in the informal
agricultural, fishing, mining, and services sectors that make up the bulk of the economy. 3 Formal
2
3
Index Mundi
World Bank /ADB
60
economic activity is confined primarily to large scale mining, construction, retail services, tourism,
and government employment4.
Table 7.1
Key Sectors of the Sierra Leone Economy (2005)
Sector
Agriculture
Mining
Manufacturing
Electricity
Construction
Wholesale-Retail
Transport
Finance
Government
Total
%age
48.4
7.2
2.5
0.4
2.6
13.8
6.9
9.6
8.6
100
Million $
1582
235
82
13
85
451
225
314
281
3268
Source: Compiled from data contained in the references above
The value of the economy in 2011 was estimated at US $ 5 billion5 and is projected to climb to US$
7.2 billion by 2016. Table 7.1 sets out the value of the main sectors in percentage and absolute
terms, based on 2005 figures.
None of the studies reviewed for this report have commented on the prospects for economic growth
based on potential oil and gas development, although the influence of the mining sector is already
expanding rapidly as a result of the opening of the major iron-ore mines operated by African
Minerals and London Mining. In 2012, the government anticipates that an additional 55 million US$
will be injected into the economy, following commencement of production from Tonkolili, and
Marampa mines.
Varying estimates have been published for the anticipated growth in GDP in Sierra Leone in 2012,
ranging from 8 to 50%. In May, 2012, the International Monetary Fund concluded a review of Sub
Saharan African economies with the observation that Nigeria and Sierra Leone are expected to be
the highest performers, with growth rates of 14% and 38.5% respectively. The main impetus for
growth in Sierra Leone comes from the onset of iron ore production and the final outturn for the
year will be heavily dependent on the expansion of Tonkoliliproduction ,whichmay be lower than
originally forecast due to technical issues. (Reuters, May 2012).
7.3
Potentially Affected Economic Sectors
Development of hydrocarbons could provide a major stimulus to the national economy providing it
is well-handled. On the other hand, poor management could result in serious threats to the
economy and the country’s political stability, as has happened in so many countries around the
world. (See Chapter 5).All sectors of the economy would ultimately be affected by significant oil
and/or gas discoveries,but four can be singled out as being more open to change than others in the
short term; these are fisheries, tourism, shipping /port related activities and construction.
7.3.1 Fisheries
4
5
African Economic Outlook
SL Economy Watch
61
Marine fisheries in Sierra Leonean waters can be divided into two basic types; coastal artisanal
fishing using canoes and other small craft; and deep sea industrial fishing.
It is estimated that around 142,000 tons of fish
are caught annually (120,000 tons by the artisanal
sector and 20,000 tons by the industrial sector).
Combined, both sectors employ 300,000 to
400,000 workers, fishermen, processors and
marketers. Despite its much smaller annual catch,
the industrial fishing sector, (which operated 88
recorded vessels in December 2008), is capable of
causing significantly more damage to the
environment than artisanal fishing through
habitat destruction (by bottom trawling), discards
and pollution.
Source © 2012 Conservation Society of Sierra Leone
Fisheries are highly vulnerable to oil pollution, both from the standpoint of safeguarding breeding
areas and protecting fish harvesting.
7.3.2 Tourism
Tourism has been described as ‘key to long-term growth and competitiveness in Sierra Leone6’
(World Bank, 2009). It contributed US$ 57 million (7% GDP) in 1995 dropping to only US$ 1milion in
1999 (1% of GDP) during the war. By 2005 activity had increased to US$ 64 million (5% GDP).
Another study (World Bank 2006) projected that Sierra Leone tourism could reach US$ 150-200
million by 2015. Cluster analysis shows that the most promising sectors for tourism development in
Sierra Leone will involve international beach holidays and a variety of both coastal and inland ecotourism experiences. Many challenges need to be overcome to secure significant growth in tourism
activity including improvements to infrastructure (travel and accommodation) but the major threats
to the industry include current haphazard urban development along what have been described as
the finest beaches in West Africa (and indeed the World), and potential marine pollution.
7.3.3 Transport and Shipping
The Sierra Leone River Estuary provides one of the best natural harbours in Africa and its existence
led to the establishment of Freetown as a major provisioning port and staging post in colonial times.
The Port of Freetown was extensively developed in the 1950’s but has received limited investment
subsequently. Government is promoting the privatisation of the port facilities, and there has been
significant investment elsewhere by African Minerals and Chinese backers at Pepel Port to support
reopening of bulk iron-ore exports. African Minerals is investing over US$ 3 billion in the recently
completed 200 km rail link to Tonkolili. Government has also announced plans for upgrading Lungi
International Airport and its transport links to Freetown.
Oil and Gas development will require substantial upgrading of the Countries’ marine and on-shore
transport and shipping sector, but also has the potential to contribute directly to the process. It is
therefore one of the key sectors in the economy which will be influenced by commercial discoveries
of hydrocarbons.
7.3.4 Engineering and Construction
6
Competiveness Assessment of Tourism in Sierra Leone
62
A fourth sector of the economy which needs to be examined is the engineering and construction
industry. Sierra Leone’s experience, which is replicated in most, if not all, developing countries, is
that the necessary skills and expertise to promote a new industry are not immediately available
locally. Many Sierra Leonean engineers and miners left the country when its former industries
closed in the war;in consequence, reopening of these enterprises has often required the recruitment
of international labour from North America, Europe and Asia. There are complex economic, social
and political issues relating to patterns of inward investment and availability of skilled labour which
apply as strongly to oil and gas development as they do to other forms of mineral and infrastructure
development.
7.3.5 Other Economic Sectors
Four areas of economic activity have been singled out for special attention but all sectors of the
economy will be affected, and are already being influenced, by hydrocarbons activity in Sierra Leone.
The oil and gas industry requires very sophisticated international financing arrangements directly
impacting on banking, investment services, legal and accountancy services. Every negotiation over
licence rights, royalties, landing fees etc. needs to be conducted in an open and objective manner in
accordance with the Extractive Industries Transparency Initiative (EITI) of which Sierra Leone is an
active partner.
7.4
Population and Demography
The current population of Sierra Leone is approaching 6 million7 (the World Bank, 2012) and is
growing at the rate of 2.5% per annum.
Sierra Leone has experienced massive levels of internal migration as a result of the civil war, with the
population of Freetown rising from around half a million inhabitants in the 1980s to over 2 million in
2011, as people sought refuge from the violence in rural areas overrun by rebels. Trans-boundary
migration also took place across the porous borders with neighbouring Liberia and Guinea. Further
population movements are likely to take place in response to any economic sector which offers the
prospects of significant employment, as exemplified by mining. The Petroleum Policy and Act both
recognise that rapid movement and growth could be unsustainable, if it was prompted by an
uncontrolled oil boom.
7.4.1 Population within the Coastal Zone
This SEA is focused on potential development in coastal areas as a result of off-shore oil or gas
development. It is therefore relevant to concentrate attention on the six districts that cover the
coastline:
 Kambia
 Port Loko
 Western (Urban and Rural)
 Moyamba
 Bonthe, and,
 Pujehun
These six districts account for 46% of the national population (2005 figures). However, if the urban
area of Freetown is excluded, the population drops to 1.5 million or 31% of the national total.
7
The World Bank, 2012Data World Bank, World Development Indicators Last updated: Jan 24, 2012
63
Large parts of each of the six districts lie more than 25 kilometres from the coast, so a narrower area
of interest has been defined by selecting the 20 rural chiefdoms whose administrative areas lie
within this zone. (See Appendix 4) Based on the 2004 census returns, the population of this coastal
zone is estimated at 614,000 people. In addition there are three chiefdoms from the Western Urban
district which would add a nominal 260,000 people to the coastal zone. For the purposes of the SEA
it is assumed that between 500,000 and 1,000,000 people live within the coastal zone, all of whom
could be potentially affected by the direct impacts of oil and gas development ( i.e. between 8% and
16% of the total population).
64
7.4.2 Nature of Coastal Communities
Towns along the coast are widely dispersed and
include Lungi, York, Kent, Shenge, Bonthe and Sulima,
in addition to Freetown and its suburbs. There are
also many smaller fishing villages often situated in
small clearings within mangrove forest or lying
immediately adjacent to protecting dunes. These
settlements cannot be reached by road transport and
are serviced either on foot, by boat or by motorbike.
7.4.3 Potential Areas of Social and Local Economic Impact
At the present time, the only direct contact between offshore exploration operations and the
mainland is through Lungi Airport and Freetown Port when crew changes take place on drilling ships.
Seismic survey vessels have used Freetown harbour in the past, but most supply and provisioning of
exploration vessels takes place when they return to their home ports in other countries, including
Abidjan in Cote d’Ivoire, Takoradi in Ghana and Europe.
As the level of exploration activity increases, there will be potential economic incentives for supply
facilities to be developed onshore in Sierra Leone. The existing port of Freetown offers the
advantages of deep water and existing infrastructure, although the port is sometimes used to
capacity and road access is severely congested.
It is possible that interest could be shown in the development of other sites within the Sierra Leone
River Estuary, or in the mouths of Sierra Leone’s other major estuaries, which also have the benefit
of deep water and sheltered conditions. These possibilities will need to be discussed with informed
sources and specialists in the oil and gas industry, as part of the continuing SEA process.
It will be apparent that any location which is chosen as a base for supplying or supporting an
offshore oil and gas development would rapidly attract ancillary industries, businesses and
development. These activities represent primary, or secondary, investment which is stimulated
directly by the hydrocarbons industry. However, over time, other economic activity will be induced
(for example vehicle hire, retailing, entertainment, accountancy and legal services). Housing
development is likely to be a high priority, in order to meet the need for temporary (and permanent)
accommodation so that, over 5-10 years, ‘boom-town’ conditions may be created.
These
circumstances have been carefully examined in many countries (for example Louisiana in the
Southern United States, and the lessons will need to be taken into account in planning the
development of Sierra Leone’s hydrocarbons industry.
In addition to direct social and economic impacts, there are likely to be both positive and negative
indirect impacts on other sectors of the economy. The capacity of the oil industry to pay high wages
and top prices for materials, food, and other consumables may result in severe competition with
other sectors of the economy that operate with much lower profit margins. So, businesses like
quarrying, road construction and engineering, which also rely on welders and fabricators, could find
themselves without essential labour.
There are also possible side-effects of a
growing oil and gas industry on natural
resource management and production. The
fishing industry is entirely dependent on fish
65
stocks and maintenance of high water quality. Risks of cumulative impacts fromsmall scale oil spills
on water quality and fish taste will need to be considered, as well as the consequences of a
catastrophic event on the scale of the BP Deepwater Horizon Maconda Well blow-out in the Gulf of
Mexico in 2010.
TABLE 7.2
SOCIO-ECONOMIC ISSUES RELATING TO THE POTENTIAL OIL AND GAS INDUSTRY
IJN SIERRA LEONE
Topic
Issue / Concern
Response
Accessing
Information
How do isolated
communities find out
about what is being
planned?
A primary task for the SEA is to communicate
through the radio, television and other media to all
coastal communities and to arrange briefing
meetings.
A key output from the SEA will be the setting up of
regular briefings to local people.
Getting local
peoples’ views
heard
How can communities
ensure their concerns are
listened to?
The SEA will help to sensitise all sections of
government, including parliament, MPS and
Chieftains about the nature of oil and gas
development and make sure that local people have
ways of getting their points of view considered.
Understanding
potential
impacts of oil
and gas
exploration
How can we (the public)
find out what is likely to
happen during oil and
gas exploration?
Prospecting companies are required to submit an
environmental and social assessment (ESIA) to the
Environment Protection Agency (EPA). They are also
required to consult with the public while they are
doing these studies.
Procedures will be put in place through the SEA, and
work of the EPA, to make sure that communities are
given relevant information about the oil and gas
exploration drilling programmes.
Confirming the
existence of a
commercial oil
or gas field
How will we (the public)
know if oil and / or gas is
found in commercial
quantities?
Hydrocarbon exploration companies are required to
publish any commercial find under Sierra Leone’s
law and international good practice.
Understanding
potential
benefits of oil
and gas
development
How will the public and
communities benefit
from oil and or gas
development?
One of the functions of the SEA is to set out the
benefits that would follow a successful oil or gas
strike. Benefits will include new sources of
employment and stimulation of the local economy
in areas chosen for development
Understanding
potential costs
arising from oil
and gas
development
How might oil and gas
affect us (the public and
local communities)
adversely?
Poor management of offshore wells, vessels and
pipelines could create pollution – affecting fishing,
tourism and the environment. The SEA has spelt out
the measures that are needed to ensure that all
risks are properly controlled and in the event of an
accident – what steps will need to be taken to
The government will make an early announcement,
as soon as it receives official confirmation of a find.
66
minimise adverse effects.
Section 2
7.5
Views from the Coastal Communities
Regional Meetings
During August 2012, a series of meetings were held in regional centres representing the main coastal
communities of Sierra Leone. These meetings were attended by representatives of the local
communities and district councils, members of the SEA Steering Committee, the consultant and staff
of the Environment Protection Agency. The meetings were held in Mathru Jong, Pujehun, Kambia
and Port Loko.
Many of the issues raised were common to all areas and the following review highlights these
collective concerns.
7.5.1 Status of the Meetings
At two of the four meetings some misunderstanding arose initially because it was assumed by
participants that the SEA team were representatives of a particular oil and gas company. This
misunderstanding arose because two companies (Anadarko and Talisman) had previously held
disclosure meetings to discuss the Environmental Impact Assessments (EIAs) for their exploratory
drilling programmes. Members of the SEA steering committee stressed their total independence
from the oil companies and their responsibilities on behalf of Government.
7.5.2 Issues of Security
A number of delegates referred to the experience of Nigeria and its war-torn delta and stressed the
need for Sierra Leone to avoid conflict over oil and gas exploitation. While the risk of raising
expectations to unreasonable levels was seen as a potential catalyst for unrest, others cautioned
that the situation in Nigeria was different from that in Sierra Leone. Firstly, the potential oil and gas
reserves in Sierra Leone lie more than 40 kilometres offshore – unlike the Nigerian Delta where
extraction takes place on land. Secondly, Sierra Leone has already started to prepare itself to
manage a new hydrocarbons industry through its legislation, new institutions like the Petroleum
Directorate and EPA and the work of the Strategic Environmental Assessment.
7.5.3 Fisheries
Without exception, all communities were primarily concerned about what they saw as the threat of
oil and gas operations to their main livelihoods, based on fishing. Steering Committee members, the
Consultant and EPA staff highlighted the distinction between thevery remote, but serious, risk that a
major pollution incident could contaminate a large area of sea and coastline and the ‘normal’ daily
operations when there would be no impact at all on fishing activity.
Most artisanal fishing takes place by canoe within 5-7 kilometres of the shore and these coastal
waters lie more than 40 kilometres inshore of the oil rigs or any future production platform or
vessel. Even semi-industrial vessels rarely venture out to the continental shelf. Consequently, a
future oil and gas industry would be unlikely to affect fishing activitydirectly. However, given the
long life cycle for developing, operating and eventually closing an oil or gas field, constant vigilance
will be required to ensure that even minor pollution incidents are avoided, for example from the
discharge of bilge oil, or poor management of supply vessels.
67
7.5.4 Economic Assistance to Local Communities
An issue which was raised at each of the four regional meetings concerned the measures that would
be taken by the industry and government to provide economic support to communities that might
be affected by hydrocarbon development activities. Many people assumed that the provisions of
the Mining Act and Regulations would also apply to Oil and Gas development and, in particular,
arrangements for making payments for surface rent and establishing community funds. The SEA
team noted that hydrocarbon development is covered by the Petroleum Act and policies and will
eventually be covered by its own regulations.
Since hydrocarbon exploration is taking place in open sea, identification of which communities might
be impacted, either favourably or negatively, is not easy to accomplish at this stage. Nevertheless,
Talisman had already voluntarily offered funds to Bonthe Council with the aim of encouraging local
skills, training and the establishment of local oil and gas committees. The analysis of coastal
communities and population set out in this SEA also provides a framework for considering future
benefit sharing with local communities.
The Chair of Pujehun District Council did not accept that the situation regarding community
payments was different between onshore mineral extraction and offshore hydrocarbon
development. He emphasised that his council would insist on direct payments being made by any
company operating within the offshore territorial extensions of Pujehun District.
7.5.6 Creation of Sovereign Wealth Fund
Discussion took place about the sharing of financial benefits between national, regional and local
level, with strong support for the idea of earmarking part of the government’s income from oil and
gas development to meet the needs of future generations.
7.5.7 Job Opportunities and Skills Training
The SEA presentations to all regional meetings emphasised the limited opportunities for job creation
during the initial exploratory stage of oil and gas development and highlighted the importance of
developing one or more supply bases to support the offshore industry if it eventually develops.
The importance of developing tertiary level courses at university for training engineers, geologists
and other specialists was highlighted, although there was an interesting debate concerning the
extent to which highly specialised postgraduatehydrocarbon courses could be supported in Sierra
Leone.
7.5.8 Status of SEA Recommendations
The broad thrust of the Draft SEA recommendations was warmly supported by all the regional
meetings, although it was proposed that the SEA steering committee should be expanded to reflect
regional interests with the appointment of one or two district representatives. It was also suggested
that the recommendations should be grouped into three priorities (short, medium and long term
actions) and this was agreed by those members of the Steering Committee who were present.
7.5.9 Conclusion
The SEA programme has been widely welcomed and supported through the regional meetings and it
will be important to follow up the initial contacts with regular review meetings. The briefing
68
sessions will be followed up by formal public consultations once the SEA report has been received by
government and its recommendations have been considered.
69
8.
GOVERNANCE AND INSTITUTIONAL FRAMEWORK
8.1
Introduction
International experience has shown that most of the issues relating to both the beneficial and
adverse environmental social and economic impacts of natural resource development are very well
known. However, this knowledge, by itself, does not prevent disasters (like the Deepwater Horizon
blowout) from occurring, or ensure that oil revenues benefit the national economy and human
welfare. Only detailed attention to management systems, legal frameworks and corporate and
individual responsibilities can provide the necessary safeguards.
These facts have led the World Bank to postulate that for strategic assessment of policies, plans and
programmes (SEA) an approach is needed8 which gives as much attention to the institutional context
of decision-making, as it does to the environmental and social impacts.
This SEA has, therefore, devoted a substantial part of its analysis to the way in which the potential oil
and gas industry in Sierra Leone will be administered and regulated by Government, with the
support of civil society. It has also considered the steps that will need to be taken for self-regulation
by the industry itself, in accordance with international good practice.
8.2
Economics of Oil and Gas Production
It will be apparent from what has been written in Chapters3,4 and 5about the exploration and
appraisal processes, that hydrocarbon extraction is one of the most expensive types of natural
resource development there is. As a result, complex financial systems have to be created to govern
the oil and gas industry.
Initial exploration is undertaken by a combination of the major international companies (who have
their own research programmes) and smaller companies who specialise in the exploration business
and then sell on part, or all, of their finds to the large operators.
When a new hydrocarbons province is found, as in the case of the Ghana oil and gas field, the survey
companies who prove the extent of the resource will usually sell part of their stake to larger
operators or assemble a consortium of investors,who have the financial status to raise the billions of
dollars necessary to exploit the reserves.
The private sectors’ interest in developing oil and gas for commercial gain is, of course, mirrored by
the national interest of governments, who own the seabed and underlying deposits on behalf of
nation states and wish to see these resources contributing to their countries’ future prosperity.
These two major interests, along with world markets, create the main tensions in determining under
what economic conditions, rules and regulations, oil and gas production will take place.
Unfortunately, however, the oil and gas industry is also notorious for the involvement of corrupt
individuals and institutions, who manipulate the economic system for personal gain (N.Shaxson,
May,2008).
Governments usually do not have the resources to finance initial exploration for oil and gas and they
therefore encourage survey companies, by offering favourable terms, including shared ownership of
8
World Bank 2011
70
any oil or gas deposits that are found, coupled with beneficial arrangements for off-setting the high
costs of exploration against future tax payable on recovered oil and gas.
It is standard international practice for the laws, policies and regulations governing licencing of
hydrocarbons exploration to require a licence holder of a large exploration block to relinquish a
proportion (often one half of the area) after the first few years of exploration. This is designed to
avoid large blocks of un-surveyed territory being tied up for a number of years by a single operator.
Once a discovery has been made, a company will seek to delimit the extent of the reservoir while the
exploration licence is valid, thereby enabling it to release the portion of the licence area which
shows less promise. However, experience has shown that very often the relinquished proportion
may contain part of the same reservoir or hold other anomalies.
8.3
The financial challenges of Oil and Gas Development
There have been so many cases of corrupt practice in the development of oil and gas around the
world that many commentators refer to ‘the oil curse’ when a new discovery is made. However,
while oil and gas discoveries certainly do present opportunities for dubious financial practices there
are also some examples where careful management of oil reserves has made individual countries
and the majority of citizens wealthy, rather than just a select few. This section describes some of the
ways in which both good and bad practice occurs.
8.3.1 The Nature of the ‘Oil Curse’
There is a natural reaction for everyone to assume that when a country first strikes oil or gas, this
new found wealth will solve all social and economic ills, including illiteracy, poor health conditions,
food security etc. However, unless the sudden influx of new money is carefully controlled by
government, it is easy for macro-economic conditions to deteriorate. Higher purchasing power in
the emerging oil industry and heavy demands for goods and services that are in short supply can
lead to rapid inflation, which then takes the price of food and household goods beyond the reach of
ordinary citizens. Concentration of the economic gains within the hands of a small elite can also fuel
political tensions and instability. The question of how best to develop an oil and gas industry is, of
course, a legitimate area for political debate, but all parties need to conduct such discussions in an
objective and open manner.
8.3.2 The Dutch Disease
Another example of bad practice is often referred to as the Dutch Disease because of the
Netherlands experience in the 1980’s. Prospects of a major windfall from natural gas recovery led
the government to promote economic policies which focused entirely on the development of the oil
and gas industry, to the exclusion of investment in other traditional and critical sectors of the
economy like agriculture and scientific innovation. The financial sector became used to high annual
returns from gas sales without having to make any significant effort, and the entire country was
lulled into a false sense of security, which rapidly disintegrated when the gas started to run out. By
this stage the profits had been spent and economic decline followed for more than a decade. This
example shows the consequences of poor planning by government and industry, but there are many
other cases where governments have either been naïve, or have deliberately adopted high risk
policies, encouraged by the hydrocarbons sector.
71
8.3.3 Positive Management of Oil Revenues
Norways’ Oil: Fortunately there
are other examples where
governments have made farsighted
and
responsible
decisions that have led to
lasting gains from oil and gas.
The best of these include the
case of Norway which, as a
country of only 5 million
inhabitants, has become the
wealthiest per capita nation in
the world. Norway and the
United
Kingdom
jointly
developed the North Sea oil and gas resources from the 1960’s onwards. The Norwegians
established a national oil fund in 1990, formerly known as “The Petroleum Fund Norway.” It is
managed by Norges Bank Investment Management (NBIM), and is subject to ethical guidelines laid
down by the Petroleum Fund’s Advisory Council on Ethics. This fund, subsequently renamed the
“Government Pension Fund – Global,” commonly referred to in the country as the “oil fund,” has
overtaken the Abu Dhabi Investment Authority (ADIA) as the world’s largest sovereign wealth fund,
according to the Monitor Group, with nearly NOK 3,100 billion (roughly USD 570 billion) in the fund
as at June, 2011.
Shetlands’ Oil: A much smaller but equally successful venture to ensure that oil revenue would have
lasting benefits was undertaken by the Shetland Islands Council off the north coast of Scotland in the
1970’s. This small County Council with 20,000 inhabitants was advised by its Chief Executive to apply
to the British Parliament for powers to levy a tax on every barrel of oil that was to be landed at a
new port of SullomVoe, created specifically to support offshore oil production. After two years of
political debate, the Shetland Islands Council Act was finally passed, giving the authority powers to
set up separate funds from central government revenues, or council taxes. Over more than 20 years,
the Shetland Island Council has banked oil industry funds in special trust accounts which reached a
maximum value of £250 million in 2009. The trust funds have been used to create leisure centres,
care centres for the elderly, the Islands’ own renewable energy heat and power-company,
agricultural and fishing industry developments, new roads, investment in education and major
environmental improvements on the islands.
72
The SullomVoeOil Terminal opened in 1978 and at its peak had a throughput of over 55 million
tonnes annually. It is still Britain’s biggest oil exporting port, handling around 25 million tonnes of oil
a year, from oilfields in the North Sea and the Atlantic. About 600 jobs depend on the terminal, the
tugboats, pilot launches and port administration - with more in Lerwick Harbour, servicing the
offshore oil and gas platforms. Originally designed for production from the huge oil and gas fields of
the northern North Sea, SullomVoe also serves the new “Atlantic Frontier” fields, west of Shetland.
It is no coincidence, given the pioneering spirit of the Shetlanders, that the terminal is one of the
world’s cleanest oil ports due, in part, to the strict regulations enforced by the oil companies and the
council itself, which is also the port authority for the terminal. Scientific monitoring, since 1972,
shows little or no effect on the islands’ abundant and varied marine life. An important part of oilfield
servicing is waste disposal. In Lerwick, a plant for recovering used drilling mud is sited next door to a
domestic waste incinerator, which also processes refuse from the oil platforms, while supplying
townspeople and businesses with district heating. There are also enterprises recycling scrap metal
and glass.
8.4
THE APPROACH IN SIERRA LEONE
Although the private sector is playing the lead role in exploration for hydrocarbons it is the
Government of Sierra Leone which holds principal responsibility for the way in which the industry
will develop in the future. This chapter looks at the way in which Government is empowered to
manage and regulate the hydrocarbons industry and also considers the role of other stakeholders,
who have powers and responsibilities under relevant legislation.
In addition to considering the legal framework, the second part of the chapter discusses the extent
to which the key players or ‘stakeholders’ are able to meet their obligations based on the current
state of knowledge; staff, technical and financial resources and overall capacity.
In the last three years the Government of Sierra Leone has taken a number of steps to regulate its
emerging oil and gas industry. These measures include:



Preparation of a hydrocarbons policy,
Introduction of a new Petroleum Act (2011),
Establishment of the Petroleum Directorate.
8.4.1 Hydrocarbons Policy
The Government of Sierra Leone introduced a new petroleum policy in July 2010. The document is
short and easy to read, covering 18 pages. It contains thirteen sections which are summarised
briefly below.
Need for a Petroleum Policy: The policy emphasises that oil and gas are non-renewable resources
which need to be managed for sustainable social and economic development. Challenges that need
to be met include the very specialised knowledge and skills needed in the sector and the huge profit
margins which can lead to dependence on oil revenues, appreciation of the exchange rate and
increased volatility in commodity prices and environmental costs – increasing the chances of internal
conflict. In 2009, the President set up a Presidential Task Force to review petroleum activities and
restructure the Petroleum Resources Unit (PRU). Extensive consultation took place over a draft
policy, which was subsequently endorsed by cabinet.
Resource Ownership and Legal and Regulatory Framework: Ownership of petroleum is stated to be
‘pivotal to government’s policy and necessary to prevent potential conflicts in the future’. The legal
73
frameworks supporting the industry shall protect the rights of all and profitability to both investors
and citizens and the nation’s petroleum activities shall be conducted with due diligence and
efficiency’.
Fiscal Regime: The policy defines the core principles according to which the fiscal regime is to be
developed. This makes for transparency and predictability to the government, investors, the citizens
and those regulating the industry. Key requirements include:











Optimal revenue collection,
The highest possible local value addition and maximum environmental protection,
A transparent and predictable fiscal regime for the collection, verification and utilization of
petroleum revenues for the benefit of current and future generations,
Development of the petroleum sector and use of revenues to be coordinated closely with
the country’s’ National Development Plan without crowding out the other sectors of the
economy,
Correct petroleum revenues to be collected and accounted for, and measures to prevent
excessive volatility of the national budget and key macro-economic variables.
Introduction of a royalty and income tax, and explicit Progressive Revenue Sharing
Mechanism,
Establishment of fiscal terms by laws and regulations, rather than by individual contracts
Revenues to be managed to create new wealth, balanced growth and sustainable
development, including creation of a Petroleum Fund … to serve as a source of future
funding to sustain the economy after the oil boom.
Provision for investors to get a reasonable return on their investments,
Publication of rules and procedures to minimise miss-reporting and transfer pricing abuse,
and ensure fair conditions for procurement of goods and services,
A fiscal regime commensurate with adopted EITI principles and international best practice in
terms of financial reporting and auditing
Good Governance, Transparency and Accountability: The policy provides a strong opportunity to
infuse the legal regime with the values of good governance, transparency and accountability. Under
this policy there is a commitment to keeping key stakeholders, including the legislature,
communities and civil society, regularly informed about key developments in the sector. Specific
measures include:




Participation in the Extractive Industries Transparency Initiative,
Government to publish the text of petroleum agreements, governing exploration and
exploitation companies (subject to avoiding disclosure of information that would damage a
party’s legitimate business interests)
Transparent expenditure of petroleum revenue
Observance of gender equity.
Health, Safety, Environment and Social Impact: This policy accepts that the petroleum sector can
have serious negative impacts on the health and safety of the country’s citizens and communities
and on long term social and environmental sustainability. It requires that:

Environmental and Social Impact Assessment and Environmental Management Plans shall be
submitted by petroleum companies and evaluated by the Environment Protection Agency.
74



These ESIAs and EMP are to be comprehensive and include oil spill contingency plans and an
Emergency Preparedness Response Plan (EPRP).
Holders of petroleum licences will be strictly liable for any pollution damage,
All sub-regional, regional and international conventions and treaties on petroleum,
maritime, fishing and other related sectors to be honoured,
On completion the environment is to be brought back to its original state as far as possible,
with financial assurances being provided by companies.
Population Distribution and Local Socio-Economic Development: The policy attempts to minimise
the impacts of petroleum activities that could lead to demographic shifts within the country with
pressures on limited infrastructure and social services. Experience elsewhere shows that oil and gas
producing regions attract labour and threaten other sources of productivity so the policy seeks to
decentralise petroleum activities.
Licensing and Exploration: The policy sets a maximum size of 2000 sq km. for individual licence
blocks and calls for a transparent competitive bidding process in order to simulate competition,
attract well qualified partners and achieve the best returns for the country. Other conditions on the
granting of licences have been fully incorporated in the current Act. A specific clause refers to the
need for joint solutions to be worked out between the Government and neighbouring states should
an exploitable reservoir extend across both jurisdictions.
Work Programmes and Operations: All of the policy provisions on work programmes and operations
have been enacted in current legislation.
Local Content, Economic Development and Technology Transfer: The policy places clear
responsibilities on industry to contribute to the building up of national competence in the petroleum
sector, including investment in training, purchase of local goods and services and promotion of local
businesses.
Expectation Management: This aspect of the Petroleum Policy is not referred to specifically in the
Act although a number of clauses relate to publication of reports and information. The policy
highlights the need for the Government to provide the public with accurate and timely information
about activities in the sector to address false expectations and pre-empt dissemination of false and
/or unfounded information, while also engaging with all stakeholders.
Transportation of Oil and Gas: Transportation is recognised as an environmentally sensitive activity
and special licences are required for laying and operating pipelines lying outside of petroleum
production areas.
Institutional Oversight and State Participation: The policy clearly identifies the Office of the
President as the body responsible for formulating policies, regulations and procedures governing the
petroleum industry. It anticipates the establishment of the Petroleum Directorate as the principal
regulatory body through restructuring and strengthening of the former Petroleum Resources Unit
and proposes the establishment of a National Oil Company.
8.4.2 The Petroleum (Exploration and Production) Act, 2011
A new Petroleum Act was introduced in 2011 and careful analysis of its contents shows that the
majority of the petroleum policy objectives have been enshrined in law. The following discussion
covers the main features of the Act and does not seek to be comprehensive. As a summary, this
description has no legal status and the reader should refer to relevant sections of the Act for a fuller
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understanding. This Act is very comprehensive (93 pages) and progressive in terms of current
international best practice..
Ownership and control: of petroleum resources is governed by the Petroleum (Exploration and
Production) Act, 2011 and is vested in the Republic of Sierra Leone. (Part II). It is the State’s
(Government’s) responsibility to ensure that hydrocarbons are explored and exploited in the most
efficient, effective and timely manner. (S2. (3)).
Administration (Part III): All activities fall under the Minister who, at the present time, is the
President in person. The President may appoint a Minister but has chosen to assume personal
charge of this vitally important new industry.
The Petroleum Directorate (PD): The President (Minister) is assisted by a body called the Petroleum
Directorate whose role is to monitor petroleum operations in Sierra Leone (S5.) The PD is directed
under the Act to carry out twenty specific functions, including managing and vetting reconnaissance,
exploration and appraisal work plans, reviewing budgets, participating in tender processes and
negotiations on licensing, measuring production, ensuring regulations are upheld, ensuring optimal
levels of recovery of petroleum, promoting well-planned operations and use of facilities,
contributing to national budgetary planning, establishing and maintaining a central database,
publishing updates on the status of operations, enforcing standards, reviewing tariffs, facilitating
access, ensuring fair competition and practice, providing information to the National Revenue
Authority, assessing the tail end and decommissioning of petroleum operations, and preparing an
annual report on the status of activities
In discharging its responsibilities the Petroleum Directorate is charged with consulting and
cooperating, to the greatest extent possible, with other ministries, departments and agencies of
Government. The PD is led by a Director General who is responsible, amongst other things, for
preparing the annual report for the approval of the Minister, who lays it before Parliament.
The Sierra Leone National Petroleum Company: is a body incorporated under the Companies Act,
2009 to manage commercial aspects of petroleum production on behalf of the State. This company
may acquire interests in licences and production and manage its affairs on sound financial principles,
including borrowing funds and generating operating income. It is required to report annually on its
activities, operations and finances to the Minister, who is required to lay it before Parliament within
one month with his comments. This report is to be published in its entirety in the Gazette.
Acquisition of Petroleum Rights (Part IV): Three types of petroleum rights are specified under the
Act. These are:
a)
Reconnaissance Permits,
b)
Petroleum Licence, and,
c)
Permits for pipeline construction and operation linking fields subject to more than
one licence.
Holders of Petroleum Rights have to pre-qualify and demonstrate that they have the necessary
technical, financial, operational, industrial or other expertise to meet the Act’s requirements.
Reconnaissance Permit (Part V): Permits for reconnaissance work are not exclusive and more than
one operator may carry out surveys in the same area providing that each permit holder ensures that
their activities are not detrimental to each other. Approval of work programmes is required from
the PD and penalties may be levied in the case of default. Permits are subject to a non-returnable
fee and a guarantee to the value of the work, which is refunded after completion of reconnaissance.
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Petroleum Licences (Part VI): These licences are acquired by prequalified companies on the basis of
competitive tender. Results of tender processes are to be published in the Gazette. Strict conditions
apply in terms of the status and standing of prequalifying companies.
Under S34, calls for tenders set out the co-ordinates of the block or blocks, duration of the licence,
requirements for minimum work programmes and expenditure, terms of the licence, criteria for the
award of tenders, and date and address for submission.
A fee is payable on the successful award of a licence.
Tender applications are required, under S37, to identify all parties holding more than 5% of the
relevant shares, the intended location for exploration, licence period, assessment of the impact of
the operations on the environment, a plan to prevent pollution, manage wastes and safeguard
natural resources, technical capacity of the operator, financial resources, training and employment
of Sierra Leonean citizens, and insurance cover.
Licences may be granted to more than one operator and only become binding after ratification by
Parliament. License conditions must be published in their entirety in the Gazette.
Petroleum licences grant an exclusive right of operation for a maximum period of 30 years. They are
divided into two parts: an exploration period lasting a maximum of 7 years (which consists of an
initial 4 year phase followed by two extensions of 2 years each) and the production phase. Each
extension of the initial exploration period is subject to review and conditions – including a
requirement to relinquish 50% of the initial licence area 3 years after the date on which the licence
was granted and a further 25% after expiration of 5 years. The entire licence area must be
surrendered after 7 years if no discovery has been made.
Where a discovery is made, the licence holder is required to relinquish the area not covered by the
discovery at the end of the exploration period. The Minister must be notified of any discovery in
advance of third parties and within 7 days. If the discovery merits appraisal the licensee must
submit a detailed appraisal work programme and accompanying budget within 60 days. The
appraisal plan must include:
a) the estimated size of the hydrocarbon reserves,
b) the area designated as the appraisal area,
c) a period not exceeding 2 years in which the appraisal will be carried out
Within 120 days of completing an appraisal the licensee must submit a detailed report to the
Minister covering a) all technical and economic data relevant to the assessment of commerciality, b)
preliminary estimates of crude oil and natural gas reserves, fluid characteristics and a statement on
whether in the opinion of the licensee the discovery is commercial, is not commercial or could
eventually be of commercial interest.
Development and Production (Part VI): A licensee who satisfies all the requirements of earlier parts
of the Act and has shown evidence of a commercial deposit may enter into the production phase for
the remainder of the licence period. This is subject to the Minister’s approval of a detailed plan for
development and operation of the petroleum field. The content of the development plan is
specified in detail (See Annex 1) and the findings of the engineering studies must be accompanied by
a social and environmental impact assessment approved under the relevant legislation (see section
on the Environment Protection Act).
The development plan may be modified on instruction from the Minister and may require additional
capacities, additional resources or third party access and, once in operation, the plan may be revised
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at the Minister’s direction if socio-economic considerations warrant it. Initial approval of the
development Plan by the Minister is subject to satisfaction of stringent conditions set out in S. 57.
Substantial powers are granted to the Minister under the Act to amend or halt development
programmes where this is necessary for safe, appropriate or efficient production or in the public
interest (S58) and where significant public interests so require, the Minister, after consultation with
the licensee, postpone the development of a field.
Prudent Operations (S.60): This section sets out precise requirements that a licensee shall use “best
international techniques and practices and sound economic principles and in a manner that will:
(a) ensure maximum recovery of petroleum in each individual or several combined
petroleum accumulations;
(b) minimise pollution and the effect of petroleum operation on land adjoining or adjacent
to the production area;
(c) safeguard natural resources, particularly fishery resources; and
(d) ensure that wastage of petroleum or reservoir energy is avoided.
Joint Development(S.61): In cases where a petroleum reservoir extends beyond the boundaries of a
petroleum licence area and the Minister establishes, on the advice of the PD and consultation with
licensees, that joint development and operation would be more efficient and advantageous, the
Minister may direct that this should happen.
Where a reservoir extends into unlicensed blocks, the Minister shall grant a petroleum licence to the
National Company for the previously unlicensed area, who will then participate in a joint
development programme.
Cross Border Petroleum Operations (S.62): Where a reservoir extends into the territory, or
continental shelf of another state, the State shall seek to reach agreement with that state for the
most efficient coordination of petroleum operations and the apportionment of the petroleum
reserves.
Ministerial directions (S.63-69): These sections of the Act provide authority to the Minister to make
directions on the rate of production of petroleum, its measurement, inspection and sampling, and
supplies to cover national requirements.
Use of Natural Gas (S.70): This important section gives rights to the licensee to use natural gas for
re-injection in a reservoir to maintain or increase pressure, and for power generation.
Restrictions on Gas Flaring (S.71): prohibits flaring of gas unless specifically authorised by the
Minister during production testing operations, on grounds of safety or when reinjection is not
compatible with good reservoir practice and there is no other means of utilising the gas. In
emergencies gas may be flared without prior notification.
Access to land and compensation (S.73-78): These sections cover access to land and the basis on
which compensation becomes payable for disturbance or damage to third party assets.
Pipeline Permits (S76): sets out the basis on which the Minister may grant permits for constructing
and operating pipelines.
Decommissioning (Part VIII): Sections 77 to 83 determine the basis on which licensees are required
to submit a decommissioning plan before petroleum operations on a facility are permanently
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terminated for ministerial approval, the establishment of a decommissioning fund and guarantees,
safeguards for handling liabilities for damages, the option of state intervention in event of the failure
of a licensee to discharge his responsibilities and the potential for the State to acquire the assets if it
so desires.
State Participation (Part IX): The State may elect to participate as a licensee under the auspices of
the National Company, subject to an initial carried interest of at least 10% which may be increased
within a specified time period following a commercial discovery. Petroleum licences may include a
provision that the State is given right of first refusal to acquire an interest at the same price as
agreed with a potential purchaser.
Employment and Local Content (Part X): This part contains important provisions to ensure that
adequately qualified citizens of Sierra Leone have opportunities for employment, and that training
programmes are established in all aspects of petroleum operations. In addition, licensees and
contractors are required to give preference to services, consumables and other goods produced in
Sierra Leone or provided by Sierra Leonean companies and suppliers. Each licensee is required to
prepare an annual report of its achievements in this regard which is to be published in the Gazette.
Section 89 sets up a Training, Research and Development Fund, managed by the Minister to be
financed through a fee provided in the petroleum licence.
Environment, Health and Safety (Part XI): The Act provides the framework for establishing
integrated health, safety and environmental quality management systems and standards. The
Government is obliged to take such reasonable steps as may be necessary to honour its international
obligations relating to the environment, health and safety.
Licensees are required to prepare and execute preventative plans to guarantee the protection,
conservation and restoration of the environment affected by petroleum operations and to adopt
and implement specific contingency plans to deal with emergencies. All petroleum right holders
must obtain a licence under the Environment Protection Agency Act, 2008 before commencing any
operations, based on prior approval of an Environmental Impact Assessment. Prior consultations are
required with representatives of local communities or citizens at risk of suffering social,
environmental or economic disruption as a result of petroleum operations.
Responsibility for dealing with emergencies or pollution incidents lies with the licensee and all costs
associated with remedial action are to be met by the operator. Legal action may be taken against
any failure to observe the Act’s requirements. The holder of a petroleum right is required to
maintain at the work site the means of dealing adequately with fire, oil spills, blow-outs and any
other accidents or emergency situation. Safety zones are to be established around every facility
carrying out petroleum operation. The Minister may, after consultation with the Environment
Protection Agency issue directives to implement the above measures.
Financial Provisions (Part XII): Holders ofpetroleum rightsare required to pay royalties, area fees,
personal income and corporate tax, custom duties and a special petroleum tax “the Petroleum
Resources Rent Tax”. All payments to the State under the Act are to be disclosed in accordance with
the Sierra Leone Extractive Industries Transparency Initiative. The Act requires pricing of petroleum
on fair market values and enables the State to receive its royalty payments in kind in crude oil or gas.
Area fees are payable per square kilometre of licence area in accordance with the amounts
prescribed in regulations.
Remaining Parts (X111- XVII): The remaining parts of the Act are also important but they are not as
relevant to the main focus of the SEA as the parts that have been reviewed above. They cover
arbitration, transfer, revocation and suspension of petroleum rights, general provisions, offences
and miscellaneous items.
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8.4.3 Environment Protection Agency Act, 2008
This Act clearly identifies the EPA as the lead agency for managing the environment of Sierra Leone.
Its preamble specifically refers to offshore and onshore facilities and the EPA’s responsibilities in
respect of the waters of Sierra lone, including territorial waters and waters in the exclusive economic
zone.
The EPAs remit includes advising the President on the formulation of policies on all aspects of the
environment, coordinating the activities of bodies concerned with technical or practical aspects of
the environment, determining the control and prevention of discharge of waste, collaborating with
foreign and international bodies, issuing environmental permits and pollution abatement notices,
prescribing standards and guidelines, ensuring compliance with environmental impact assessment
procedures, controlling pollution, promoting studies and research , initiating education programmes,
promoting effective planning , developing a comprehensive data base, and other key functions.
Environmental Impact Assessment (Part IV) is the substantive part of the Act and defines the
requirements for all activities listed in Schedules to be subject to a Licence issued by the Board.
The First Schedule specifically refers to the requirement for EIA for extractive industries (i.e. mining,
quarrying, extraction of sand, gravel, salt peat and oil and gas) Requirements for satisfying an EIA
for Oil and Gas projects are set out in the Third Schedule.
8.4
Implementing Policies, Laws and Regulations in Sierra Leone
An important question that must be raised in any Strategic Environmental Assessment is the extent
to which industry, government ministries, departments and agencies (MDAs) and civil society are
equipped to put policies, laws and regulations into effect. This issue is being addressed in discussion
with individual officers and representatives of MDAs, with the SEA Steering Committee and with
stakeholders in general.
The following observations are made in relation to the role of industry, government, civil society and
the public at large. They represent no more than a brief snapshot of issues and concerns, and there
are undoubtedly exceptions to these broad generalisations, but, nonetheless, the issues need to be
stated in order to inform genuine debate and discussion about the role of governance and
institutional accountability in relation to this important new industry.
8.4.1 The Petroleum Industry
At the present time, the petroleum industry is represented in Sierra Leone by a small number of
individuals based in (5-10) offices representing the major international and local companies who
have acquired petroleum rights. Staffing of these offices is restricted to one or two expatriate
experts who are temporarily resident, supported by a similar number of Sierra Leonean employees.
The role of these offices is to provide a local presence in accordance with the Petroleum Act, to
engage with government MDAs and to support planned survey, exploration and appraisal operations
off-shore. The main technical and commercial expertise on oil and gas development resides in
company headquarters and regional offices outside Sierra Leone, including Ghana. These
arrangements work well for the purpose of satisfying procedural requirements of the various acts
and regulations but the question needs to be asked about the preparedness of the industry,
collectively, to manage potential hazards and risks from off-shore operations.
Survey and drilling vessels operating in Sierra Leonean waters are hired for short periods from
international contractors, all of whom are regulated by international codes and practices.
Representatives of petroleum right holders who have been engaged in discussion insist that current
survey operations are being carried out to the highest standards and there are no reasons for
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assuming that this is not the case. On the other hand, it must also be noted that there is no way of
corroborating such statements in the absence of any significant independent inspection and
monitoring by government.
Over the last five years, the main reconnaissance activity in Sierra Leonean waters has involved
seismic survey and there have been only three recent drilling operations. Consequently the risk of
any adverse environmental or social impacts has been very small. Nevertheless experience in other
countries has clearly shown that seismic activity can have damaging effects on the movement of fish
populations, whales and dolphins. Without independent survey and monitoring it is impossible to
say whether or not historic survey work in Sierra Leonean waters has had any effects. What is clear,
however, is that the rate of reconnaissance survey will escalate rapidly in the coming months with
increasing international interest in Sierra Leone’s potential oil and gas reserves.
The lead petroleum exploration companies in Sierra Leone are highly experienced and reputable
operators, and they are understood to have put in place contingency plans for dealing with any
emergencies, in accordance with the Petroleum Act and Environment Protection Agency Act. At the
same time it should be noted that these plans have not been tested in joint operations with the
State disaster management services.
As the number of drilling operations increases in the coming months, the risk of minor incidents,
including leakage of oil from well heads, spillage of reagents and the discharge of contaminated
water will also increase. In the absence of any real survey capacity within government, the onus of
ensuring high standards of housekeeping will rest largely with the industry. Given the ‘frontier’
nature of most off-shore activities with ships operating in waters, which are often two or three days
sailing time from their shore bases, there are grounds for concern that comprehensive surveillance
and monitoring may not take place.
These comments are not intended to be provocative but carry an important message that, unlike
established oil producing areas (for example the North Sea and offshoreUnited States) where
Governments have fully developed regulatory, monitoring and enforcement capabilities, the
industry in West Africa is operating almost entirely on its own. In the unlikely, but not inconceivable,
event of a significant accident involving an off-shore well or pipeline, local experts operating on the
drilling rig or supply vessels would have to contain its effects using booms, dispersants and other
equipment that are stored either on ship or on shore. For a major event, specialist teams would
need to be flown to Sierra Leone from wherever they are based and mobilisation would take 24-48
hours.
8.4.2 Government MDAs
Sierra Leone has been investing heavily in the creation of new and more efficient forms of
governance over the last ten years, with the assistance of international partners including the World
Bank, DFID and the EU. As a result, there is now a new Petroleum Directorate and a rapidly evolving
Environment Protection Agency. Similar progress has been made in relation to onshore
development of mineral resources. Great strides have been made in setting up these new
institutions but it is widely acknowledged that the MDAs charged with regulating the Petroleum
Industry do not have the resources or the capacity collectively to meet all of their obligations.
The Petroleum Directorate has a small staff of highly skilled geologists, financial and legal experts
but it does not have expertise in every field of activity for which it has a monitoring role under the
Act. Of course, as specified by the Act, it is not expected to deal with every issue itself and the
Petroleum Directorate works closely in conjunction with other arms of government, but these MDAs
also face practical limitations in terms of their capacity to assist.
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The Environment Protection Agency is a good example of a body which is rapidly strengthening its
internal capacity to monitor the environmental impact of all economic sectors. It readily
acknowledges,however that it does not yet have the necessary expertise to monitor and test
complex industrial operations and processes of the type undertaken on a deep sea drilling rig, nor
does it have the resources to carry out routine marine surveillance to check for potential oil spills
(from any source including marine shipping as well as the emergent oil and gas industry).
The Navy has shown that it is ready to act in defence of the State’s interests when incidents occur,
like the pirate attack on a Chinese fishing vessel in 2008, or the seizure of six vessels fishing illegally
in March 2012. Unfortunately, however, experience off the East African coast has shown that
international piracy can be a threat to off-shore oil and gas operations and the Sierra Leonean navy
does not have the vessels, fuel reserves or manpower necessary to carry out regular deep water
patrols 50 kilometres out to sea over 500 kms of coastline to ensure the safety of the offshore oil
and gas industry, or to assist the EPA, Ministry of Fisheries and others to monitor the marine
environment.
The Disaster Management Department is currently putting in place a new disaster management
policy and is refining its national disaster management plan to include issues relating to offshore oil
and gas development.
8.5
International Best Practice
Sierra Leone can learn a great deal about the requirements for governance and institutional
strengthening by studying current international best practice. The Deepwater Horizon disaster in
the Gulf of Mexico in 2010 has caused oil and gas regulators around the world to look very closely at
their own systems and procedures to ensure that their environmental, health and safety practices
are as comprehensive as possible.
8.5.1 UK Experience
In 2010, in response to the Deepwater Horizon incident, the UK Government commissioned an
expert panel chaired by Professor Maitland, to provide an independent review of the regulatory
regime for oil and gas in the UK. Three independent experts and three officers from the regulatory
authorities[Department of Energy and Climate Change (DECC), the Health and Safety Executive (HSE)
and the Maritime and Coastguard Agency (MCA)] formed the panel. Their 200 page report sets out
detailed recommendations for upgrading the UK regulatory system and notes that the number of
independent environmental inspectors of offshore operations will be increased from 7 to 19.
Specific recommendations are listed under the following headings:
1. Assured implementation of safety and environmental management systems. Regardless of how
sophisticated and robust the systems for control and management of risk, their success requires the
provision of positive assurance that they are properly implemented and remain effective.
2. Improvements in the learning culture and processes for spreading best practice. Where incidents
are potentially high in impact but occur very infrequently, it is particularly important to extract and
promulgate, quickly and comprehensively, valuable learning to prevent a recurrence with more
severe consequences.
3. A more integrated regulatory system. Given the intrinsic link between the safety of those
employed on offshore installations, the protection of the physical environment in which they
operate, and the management systems in place to control these risks, closer collaboration between
relevant regulators is likely to contribute to a strengthened and more efficient regime.
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4. A clearer command and control structure in the event of a spill. Efforts to mitigate the impacts of
a serious oil spill incident are heavily dependent on a strategic and co-ordinated approach, with
absolute clarity over roles, responsibilities and expectations.
5. Robust arrangements to ensure operators’ level of liability and ability to pay in the event of a
spill. The licensees are fully responsible for meeting the costs arising from the impact of any
incidents and so both the scope of their financial responsibilities and their ability to meet them
should be clearly and unambiguously defined.
6. Intensified R&D to develop improved avoidance, capping, containment, clean-up and impact
monitoring of major offshore oil spill incidents. Innovation has clearly been key to the industry’s
ability to exploit hydrocarbon resources in a range of increasingly challenging environments, and it
ought to be applied with similar vigour to develop tools and strategies to assure safety and protect
those environments.
8.5.2 The European Union
In the wake of high profile disasters across the globe, the EU is taking steps to put in place a panEuropean regulation that will provide a regulatory framework and contingency measures for
all member states engaged in offshore oil and gas exploration. Such steps clearly have major
implications for oil and gas operators across Europe in both developed and less developed markets,
particularly given the scope of what has been outlined in the draft document.In addition, the EU
Commission has advocated the creation of a European Union Offshore Oil and Gas Authorities Group
which will serve primarily as a forum for the exchange of experiences and expertise between
national authorities and the Commission, including:
(a) identifying priorities for preparation of guidance documents, standards and best practices in
the oil and gas sector;
(b) preparing, or initiating and overseeing the preparation of, guidelines on the industry best
practices;
(c) in the interest of sharing experience, facilitating rapid information exchange between the
Commission and national authorities, regarding e.g. the occurrence and causes of and responses to
major incidents, and events which could have led to major accidents as well as, operational
intelligence concerning drilling installations that intend to move between Member States;
(d) promoting and facilitating consensus between the Commission and national authorities
regarding the best regulatory practice;
(e) promoting exchanges and secondment of staff between national authorities to increase their
knowledge and experience;
(f) exchanging information regarding the application of national and Union legislationand policies
relevant to offshore oil and gas activities, including measures to prevent intentional unlawful acts
against those activities, and assisting the Commission in monitoring the implementation of relevant
legislation.
8.5 3 The United States of America
In response to the Deepwater Horizon explosion and resulting oil spill in the Gulf of Mexico, the
Obama Administration launched the most aggressive and comprehensive reforms to offshore oil and
gas regulation and oversight in U.S. history. The reforms, which strengthen requirements for
everything from well design and workplace safety to corporate accountability, are helping ensure
that the United States can safely and responsibly expand development of its energy resources.
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The administration established a new Bureau of Ocean Energy Management, Regulation and
Enforcement (BOEMRE) in June 2010. A key decision by the BOEMRE has been to usemultiple-person
inspection teams, instead of individual inspectors, for offshore oil and gas inspections. This internal
process improvement will improve oversight and help ensure that offshore operations proceed
safely and responsibly. The new process will allow teams to inspect multiple operations
simultaneously and thoroughly, and enhance the quality of inspections on larger facilities.
In addition to on-the-job training, BOEMRE recently established the National Offshore Training
Center and has developed the agency’s first formal training curriculum, which has been piloted with
new BOEMRE inspectors. http://www.boemre.gov/jobs.
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PART 4
ADVICE TO DECISION MAKERS
Chapter 9
Findings and Conclusions
Chapter 10
Recommendations
Chapter 11
Monitoring and Evaluation
86
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9.
FINDINGS AND CONCLUSIONS
9.1
Status of the Industry
In Sierra Leone, exploration for oil and gas in the deep waters of the continental shelf has reached a
critical phase. Recent discoveries point to the existence of a number of potential reservoirs
containing light crude oil. Based on experience in neighbouring countries, any commercial reservoir
is also likely to include gas deposits. The level of international interest has increased and there is
strong competition for the latest round of bids on open exploration blocks. However, despite the
increased level of exploration activity, there is no way of predicting whether or not substantial
commercial finds will be made in the next five years.
At a global level, the focus on sustainable development, re-emphasised by Rio + 20, calls for greater
use of renewable energy sources, including wind, solar and wave power and the development of biofuels. Sierra Leone is well positioned to play its own role in development of renewable energy
sources, including sugar for ethanol production and palm oil. Nevertheless, as one of the poorest
countries in the world, it would be quite unrealistic to expect Serra Leone to turn its back on the
exploitation of oil and gas if this is found in commercial quantities and to forego the opportunity of
developing its economy. At the same time, the fact that oil and gas represent fossil fuels with a
finite life increases the imperative for Sierra Leone to manage these resources wisely and ensure
that lasting value is extracted by transforming natural capital into future social, environmental and
economic assets.
9.2
Developing an offshore oil and gas industry
Government policy (The Petroleum Policy)states that Sierra Leone should develop any offshore oil
and gas resources in the interests of the nation, provided that this can be done in ways which
protect the environment and safeguard human welfare. The findings of this strategic
environmental assessment confirm that, with proper planning and management, these objectives
of government policy can be met, although a great deal of work is needed to establish the
appropriate technical, economic and governance framework. Development of any major new
industry and economic sector inevitably carries a degree of risk, but the SEA steering group is
confident that these risks are manageable providing the lessons learnt and described in this chapter,
and the recommendations set out in chapter 10 are acted on and adopted. The most important
action to address any shortcomings has already been taken by the decision of the government to
give serious consideration to the conclusions of this strategic assessment.
9.3
Creating the right environment for business
The need for clarity about operating rules and procedures is a very important issue which has been
cited by both the proponents for development (the industry and government development agencies)
and those with reservations (conservation bodies and civil society).
There is a fear, on the part of those who wish to give maximum stimulus to oil and gas investors,
that bureaucratic controls and excessive regulation could actively discourage prospecting and
exploration with potential developers turning their attention to other countries with less stringent
controls. Conversely, others maintain that, if Sierra Leone has weak laws and an inability to enforce
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essential measures for environmental protection and social welfare, it will only succeed in attracting
those companies lacking a sense of corporate responsibility and poor performance records.
Experience suggests that it is not the existence of comprehensive regulations and monitoring
procedures which deters investors, but lack of clarity and confusion over how such regulations are
to be applied, the existence of corrupt practices, and excessive delay in the processes of licence
application and approval.
The SEA concludes that the more Sierra Leone does to clarify and quantify its procedures for
governing the oil and gas sector, the stronger the support will be for development of its oil and gas
potential from inward investors.
9.4
Protecting the Environment
One of Sierra Leone’s greatest natural assets is its natural environment including exceptional
beaches and large expanses of mangrove. These resources, in turn, support fishing communities
and an under-developed tourism industry. Unfortunately, however, the coastal environment is
exposed to progressive degradation from human activity and pollution. In global terms the most
serious threats to the marine environment arise from terrestrial sources of industrial and domestic
waste, agricultural fertilizer and pesticides and the discharge of radio-active and other hazardous
waste, coupled with changes in gaseous and chemical composition caused by air and water
emissions. The oil and gas industry has been shown to account for only 13% of total marine
pollution. It is also a fact that oil and gas are naturally occurring elements and unevenly distributed
within the earth’s mantle. Hydrocarbons are continuously released on land and at sea through faults
and porous rocks. Significant quantities of oil are discharged naturally through the sea bed, before
being degraded and absorbed by natural processes in sea water
A key finding of this SEA is that while individual small leaks of oil, (typically less than a barrel - 42
gallons in a single incident in a month) may have minimal impact on the environment the
cumulative effects of repeated small scale spills are likely to cause subtle changes in water quality
and a deterioration in bio-diversity.. However,the most serious threats to the marine and coastal
environment stem from substantial spills and catastrophic accidents on the scale of the
Deepwater Horizon.It is the hazards presented by these exceptional events which need to be
addressed in emergency response plans.
Individual exploration companies have fully developed emergency response plans in line with
international standards which are well documented in EIAs. The severity of any accidental spillage of
oil would be determined by the quantities and rate of release, combined with the effects of ocean
currents and wind action. Highest level of risk would arise if oil slicks are blown towards the
shoreline, rather than being dispersed in open sea. Under these circumstances oil could be washed
ashore within less than 2 days of the incident occurring. The risk assessment studies for the existing
offshore boreholes show that most of the coastline of Sierra Leone and parts of Liberia could be
exposed to oil spills (although only a relatively small length of coast would be affected by any
specific incident). Small scale and even moderate oil spills could be combatted by use of booms and
dispersants held on rigs, FPSOs or at shore bases, but in a major event, international resources
would need to be called on (from bases including Southampton and Aberdeen in the UK). The SEA
notes that in parts of the world where marine exploitation of hydrocarbons is well established,
sophisticated regional response mechanisms exist - including joint activity by oil industry federations
and collaboration between the emergency services of neighbouring countries. The first steps
towards regional Corporation had been developed by the Interim Guinea Commission and Ecowas,
but these are inadequate to deal with a major incident. It is imperative that a regional response
mechanism is developed and that close collaboration between individual operating companies is
required as part of the regulatory framework.
89
Deep water oil and gas extraction is still in an early phase of development and, as land and shallow
water resources are depleted,marine resourceswill become increasingly important. As a result the
deep water marine environment will come under increasing pressure as technology is tested in
increasingly severe conditions. There are parts of the world where extensive off shore oil and gas
activity has taken place for decades, including California, the Gulf of Mexico, Indonesia, the
Caribbean and the North Sea. Literally thousands of oil wells have been drilled in these locations
and many very sensitive marine environments have been preserved in these areas despite the high
levels of activity. But at the same time, there has been a decline in water quality which adversely
affects fish stocks, coastal ecology and the use of beaches for tourism.
Following a review of international practice (see chapter 4) it is clear that the majority of countries
who are seeking to develop new oil and gas sectors are experiencing exactly the same range of
issues. It is also apparent that the highest level of regulation and insistence on high-quality
performance is exercised in the host countries of major oil and gas producers (e.g. North America,
Europe and Asia – see chapter 4). A good example is the adoption by the US EPA for the State of
Louisiana of infrared remote sensing to detect gaseous leaks from oil pipelines and storage tanks.
9.5
Social Issues
The biggest challenge with planning for a potential hydrocarbons development programme is
handling unrealistic levels of expectation amongst local communities who have very limited
knowledge and understanding of the processes involved – but also managing the public debate
amongst other more informed companies and organisations who may choose to present a distorted
view of the facts for individual or political gain. On the one hand it is vitally important that
information is shared openly and transparently in terms of the likely outcomes, on the other it is
important to ensure that clear and impartial advice is offered on the interpretation of such facts.
This is one of the key roles that the SEA process can perform.
9.6
Institutions and Governance
Experience around the world as shown the importance of distinguishing between three key activities
in developing hydrocarbons. These are:



physically developing the resource,
controlling and regulating activities, and,
transparent and accountable decision-making
Physically developing the resource:The most effective way of developing deep water oil and gas
resources is to utilise the best international expertise available.This means giving responsibility for
technical decisions to tried and tested operators with the finance, staff resources, technical knowhow and equipment to do the job.
Controlling and regulating activities: Even in countries with the highest level of monitoring and
surveillance capacity, lapses and shortcomings occur within the hydrocarbons industry, which need
to be constantly checked and corrected. It is important that the functions of regulation and
monitoring are kept quite separate from operation and management of the oil and gas fields. This
requires the establishment of independent, strong and well-resourced regulatory environmental
and health and safety agencies.In this respect, the activities of the National Oil Company, to be
established under the Petroleum Act, should concentrate entirely on the commercial objectives of
producing hydrocarbons for the benefits of the State, leaving regulation to other authorities
including the Petroleum Directorate and EPA.
90
Transparent and Accountable Decision-Making: It is a common human failing that many otherwise
responsible leaders and managers succumb to bribery and corruption when presented with
opportunities to make money without adequate safeguards. These risks are compounded when
responsibility for operations and management is combined with responsibility for financial and
administrative control. A fundamental principle in developing the hydrocarbons industry should be
that all key decisions on policy development are taken by government and referred to Parliament;
and all executive decisions taken by, or in the name of, the President or a minister should be
reported in official communications, which are publicly available and circulated to the media.
9.6.1 Applying these principles
9.6.1.1 Physically developing the resource
A common feature in countries with a largely undeveloped oil and gas sector is for the principal
functions defined in the petroleum policies and act to be allocated to a single ministry or
department. At the same time, regulatory and advisory functions on environment, health, safety,
fiscal policy, taxation and other revenue collecting activities are likely to be widely dispersed under
different authorities. This can lead to jockeying for position and rent seeking within different
ministries and also lack of coordination and confusion over who needs to take the lead in specific
circumstances.
As the hydrocarbons sector develops, the next step for many states has been to establish its own
National Oil Company in order to participate directly in the development and financial benefits of oil
and gas resources. There are both advantages and disadvantages to this approach. Advantages in
establishing a national oil company include:



development of appropriate knowledge and skills within government,
direct control over the use of a proportion of hydrocarbons allocated under the law to the
state,
creation of strong partnerships between the state and its private sector collaborators.
The dis-benefits can arise if formation of a National Oil and Gas Companyresults in the creation of a
powerful autonomous body which is no longer answerable to Parliament and holds all the powers
necessary to determine key decisions, as applies in countries like Uganda and Liberia.
Many examples exist of very successful state-owned oil companies, including the Malaysian
government’s PETRONAS, which competes internationally with the largest private sector companies,
and also oversees the development of Malaysia's offshore industry. However, the case studies cited
in chapter 5 also include examples of many failed state-owned companies which have been used
simply as vehicles for financing military regimes and corrupt state governments. It is for this reason,
that there is currently so much debate in Uganda over the role of its potential national oil company.
The SEA Steering Committee is unanimous in its view that the functions of a national oil company,
in the commercial activities of exploration and production of oil and gas, should be clearly
distinguished from the role of government in:
 determining the legal framework, in conjunction with parliament,
 drafting and overseeing regulations, and,
 evaluating and monitoring performance in the industry.
For this reason, if a Sierra Leone National Oil and Gas Company is to be established, its remit should
be strictly limited to operational functions, leaving administration and control in the hands of
91
existing agencies like the Petroleum Directorate, the Environment Protection Agency and other
similar bodies.
9.6.1.2 Controlling and monitoring development
The need for clarity about operating rules and procedures is a very important issue which has been
cited by both the proponents for development (the industry and government development agencies)
and those with reservations (conservation bodies and civil society).
9.6.1.3 Transparent and Accountable Decision-Making
When surveys are conducted concerning public opinion and the attitudes of civil society towards the
development of oil and gas the question which is of greatest concern is "What happens to oil
revenues". In countries with autocratic rule and lack of transparency the answer is invariably that
the proceeds go directly to political and business leaders and are shared within the elite with no
obvious benefit to any other part of the state.
Sierra Leone is in the fortunate position of having a very clear Petroleum Policy and Petroleum Act.
At the present time, the President has retained crucial powers for overseeing the nascent industry
and ensuring that systems are not abused. However, the legislation makes provision for creation of
both a petroleum ministry and the establishment of a national oil company. It is therefore very
important that these developments take place in full knowledge of both the strengths and
weaknesses of different management systems. Experience in Liberia is salutary in observing the
current debate over the role of its President, Parliament and NACOL.
From the standpoint of this SEA, a key conclusion is that the legislative, regulatory and
administrative processes of government will need to evolve on a continuous basis over the next 5
to 10 years. This process would benefit greatly from a continuing role for the SEA in continuing to
monitor, in an independent and transparent manner, the way in which each stage in the
development takes place.
9.7
Financial accountability
Fortunately, Sierra Leone has already committed itself to managing its natural resources in an open
and transparent manner. In the ground-breaking national conference on transformation held in
February 2012, there was wide support for the concept of establishing a national fund to ensure that
current exploitation of renewable resources like timber and finite natural resources, including
minerals and oil and gas will not only enhance existing GDP, but will also benefit future generations.
The SEA strongly supports the concept of a “future generations fund”, modelled on the Norwegian
and New Zealand examples. It should be noted that existence of sovereign wealth funds does not, in
itself, guarantee that the proceeds and benefits will flow to all sectors of the nation. It will therefore
be important to develop specific proposals for Sierra Leone which avoid pitfalls already identified
in other parts of the world (see Appendix 5).
In addition to payment of a proportion of oil revenue into a “future generations fund”, it is vitally
important that all other revenue flows are clearly identified and accounted for. In Sierra Leone
there is currently a debate about the aim of ensuring that all government revenue is directed to the
consolidated fund. The advantages lie in ensuring that all money flows are properly accounted for by
the Ministry of Finance and also providing a degree of consistency in the way in which all ministries,
departments and agencies operate. The potential dis-benefits include the fact that central control
can lead to excessive bureaucracy, the absence of prompt payment against annual budgets, and loss
92
of independence of key agencies which have been deliberately established to fulfil a monitoring role.
Perhaps, the biggest failing in channelling resources through the consolidated fund, is the loss of
transparency in terms of expenditure. It is simply too easy for government to direct proceeds to uses
which have not been identified in advance by parliament.
In discussions around this key issue, the SEA steering group, which has benefited from direct
involvement of the Ministry of Finance, has formed the opinion that whatever route is chosen for
payment of oil revenues, the critical need is for money flows to be declared and accounted for by
both the oil and gas industry and the government itself and for accounts to be maintained which
allow all proceeds to be tracked. Further, under the extractive industries transparency initiative,
movement of all funds should be published annually.
9.8
Engaging Civil Society
Even in countries with the highest level of monitoring and surveillance capacity, lapses and
shortcomings occur within the hydrocarbons industry, which need to be constantly checked and
corrected. Civil Society and Non-Governmental organisations can be highly effective in helping
authorities to monitor industrial activity and in safeguarding community interests. However, it is
important that these bodies receive proper training and capacity-building to ensure that their
campaigns are based on objective and realistic assessments of the situation, rather than emotive
responses.
9.9
Managing Expectations
A recent EIA study (Talisman, 2012), shows that there are widespread misunderstandingsamongst
coastal communities about the nature of oil and gas development in the marine environment in
Sierra Leone. Many people believe that extraction is already taking place without disclosure, and
there is growing expectation that jobs will be provided for the many thousands of adults and young
people who are currently without work. If these expectations are allowed to continue unchecked it is
likely to lead to deep resentment, and potentially to violence and civil unrest when, in the fullness of
time it becomes apparent that fewer than 5000 people will benefit directly from jobs in the industry.
In order to manage expectations it is essential that the findings and recommendations of this SEA
are widely publicised in the media, and circulated to all coastal communities. It is also important
that regular bulletins are produced, ideally modelled on the approach initiated by Action Aid in
Uganda.
9.10 Forward Planning
The government has taken significant steps, including the preparation of this strategic assessment in
preparing the ground for hydrocarbon development. Nevertheless, it must be concluded that,as
things stand present Sierra Leone is not equipped with the necessary resources and expertise to
manage the rapid change which would follow a major commercial oil discovery. This requires
urgent action by government, by the oil and gas industryby all organisations with an interest in the
marine environment, and by Sierra Leone's international partners.
9.11 Management of the industry
Sierra Leone has a clear Petroleum Policy and a strong Petroleum Act. It also has an all-embracing
Environment Protection Act. However, both sets of legislation lack detailed regulations to ensure
clear guidance and delivery and this needs to be addressed as a matter of urgency.
93
Good relations have been established between the relevant arms of government and the major
international companies who are engaged in exploration. There is a willingness to cooperate and
to work together to achieve the country’s economic, environmental and social goals. But, in
practice, government is severely hampered by limited resources in terms of personnel and
equipment to manage a major new industry as this starts to materialise.
9.12 Co-ordination within Industry
At present there is no local forum or association for providing an ‘industry’ view on key issues
relating to Hydrocarbons development. This has particular relevance for long term planning and for
disaster response activities and means that individual company decisions are taken in isolation
without co-ordination from either the industry or government. Despite this conclusion, the
preliminary discussions held with industry representatives as part of the SCA process have been
extremely useful in clarifying some of the key issues that need to be worked on jointly by the
government and the hydrocarbons industry.
If Sierra Leone is going to achieve maximum benefit from the development of its oil and gas
resources it is vitally important that early decisions are taken on the creation of one or more
landing sites that can be developed as shore bases to support offshore operations. Industry
representatives have pointed out that there is no incentive for exploration companies to make this
type of investment before a commercial discovery is confirmed. This is because most of the
investment spent in the preliminary stages of survey, reconnaissance, and exploratory and appraisal
drilling goes directly to international contractors. These are the companies who supply survey
vessels, drilling rigs and all other support services from established ports and shipyards around the
world.
It is only at the point where a commercial discovery has been made that the licence holder will begin
serious planning to locate a permanent supply base for supporting offshore operations. There are
obvious advantages in choosing a base in close proximity to the oil or gas field. But if a suitable site
does not already exist the company will need to weigh the relative costs and time required to
develop a green-field site as opposed to continue to use an existing port.
The SEA steering group is firmly of the opinion that Sierra Leone should seek to ensure that any
offshore operations are managed from a port, or supply base within the country. It is therefore
concluded that, if the industry is not motivated to locate a suitable location at this time, the
government should initiate a full feasibility study, with the assistance of international partners.
The feasibility study into potential supply bases should examine the following options:




re-allocation of an existing area of Queen Elizabeth II wharf specifically for the use of the
hydrocarbons industry,
the potential for extending for creating a new wharf adjacent to the deep water (+10 m)
section of the Sierra Leone River Estuary,
development of a wharf /supply base in the deep water section of the Sherbro estuary, or,
any other appropriate coastal location.
An initial draft of the terms of reference for this feasibility study is set out in Appendix 6.
94
95
96
10 RECOMMENDATIONS
The following recommendations have been carefully considered and are formally proposed by the
SEA Steering Committee, in the light of comments received from stakeholders and the public during
regional consultative meetings in August, 2012.
Short term Actions
Acting on the SEA Findings and Recommendations
1.
The SEA findings and recommendations should be submitted to the President, in his capacity
as Minister under the Petroleum Act, with the request that the report, findings,
recommendations and views of the Minister should be tabled before Parliament for formal
discussion.
Consultations
2.
The SEA report should be published and formally circulated by government for a period of
public consultation which should be two months in duration. The consultation process
should be clearly set out in newspaper advertisements in both English and local languages
and the general public should be invited to comment in public fora to be announced in
regional centres.
Administration
3.
A Hydrocarbons National Advisory Board (HNAB) or standing committee should be
established by government to give advice on implementing the recommendations of this
SEA. The Hydrocarbons National Advisory Board (HNAB) should be appointed by the
President and comprise of not more than 10 individuals, who have national standing in the
fields of oil and gas development, law, economics and finance, natural resource
development, environmental protection, civil society and the media.
4.
The SEA Steering Committee should be maintained as a technical Committee on Oil and Gas
Development with responsibility for briefing HNAB and ensuring that action is taken by the
relevant authorities on all SEA recommendations that are approved by Government.
5.
Regional presence on the SEA Steering Committee should be strengthened by the inclusion
of balanced regional representation.
6.
The HNAB and SEA Steering Committee should meet four times a year to receive reports
from the relevant ministries and agencies and to review the latest developments in the
hydrocarbons sector.Membership of the HNAB and the SEA Steering Committee should not
be mutually exclusive, and there would be advantage in having one or two individuals who
would serve on both bodies for continuity.
7.
The HNAB and SEA Steering Committee should work closely with those authorities
responsible for disaster management to ensure that the latest principles and approaches to
oil and gas hazards and risks are taken into account in national planning for disaster risk
management.
97
Medium term Actions
International Action
8.
ECOWAS and the Abidjan Convention should be informed of the SEA findings and invited to
coordinate a regional response on the need for extending and continuing the SEA
programme in the territories of all Member States within the Gulf of Guinea.
Future Role of the SEA
9.
The SEA process should be continued with a review every two years in order to monitor, in
an independent and transparent manner, the way in which each stage ofdevelopment takes
place, and to assist with adjusting to future changes in circumstance. A major component of
the SEA Review will be to advise on the adequacy of risk reduction procedures.
Development of a National Oil and Gas Plan
10.
All Petroleum exploration and production Licence Holders who report that a discovery
merits appraisal in accordance with S. 50 of the Petroleum (Exploration and Production) Act
2011 should be requested to enter into discussion with the Petroleum Directorate, the
National Advisory Board and representatives of the Standing Committee over the possible
implications for development, should the discovery be confirmed to be commercial.
11.
The information provided in 9 above should be used by Government, in conjunction with
information from other sources, to prepare a National Oil and Gas Plan in order to guide
future development in all affected economic sectors.
Feasibility study for a permanent hydrocarbons supply and support base
12.
The government should initiate, at the earliest opportunity, a full feasibility study for the
development of a hydrocarbons supply and support base.
Data and Information Gathering
13.
A full scale environmental sensitivity mapping exercise should be funded from government
funds and undertaken for the entire coast of Sierra Leone.
14.
The Petroleum Directorate should provide technical assistance as part of any contract
entered into with companies who engage in exploration or production drilling.
Responding to Emergencies
98
15.
Immediate steps should be taken by the Government, supported by the Petroleum Industry
and by International Partners, to strengthen collaboration and coordination between the
industry and State regulators, to develop disaster risk reduction strategies and plans and to
strengthen the State’s capacity to respond to an off-shore oil and gas emergency.
16.
The Government should set aside money in a special fund to cover clean-up operations in
the event of an oil spill during operation which is not adequately dealt with by the industry.
The necessary legal provisions should be made for all such costs to be recoverable from any
operator who is responsible for a spill of this nature.
17.
Coastal emergency centres should be established in Sulima, Bonthe and Freetown and
should be provided with essential equipment to monitor and assist with any marine
emergency resulting from off-shore oil and gas operations. Training for the navy and
offshore capability of the navy should be strengthened. Minimal requirements for each
centre should include:


A marine support vessel, capable of operating in all weather and for periods of a
week or more, at distancesup to 80 nautical miles from shore, with full navigation
aids, auxiliary engines and fuel supplies, to be operated by the Navy.
Training for representatives of local communities, to equip them with the skills to
manage oil spill clean-up operations.
Environmental Safeguards
18.
Urgent action is required to improve data gathering and information on environmental
conditions within the coastal and off-shore marine areas falling within Sierra Leone’s
jurisdiction. The Petroleum Directorate and Environment Protection Agency should draw up
a list of environmental research requirements to be supported by all holders of
reconnaissance and exploration licences.
19.
The Environment Protection Agency should carry out research, on the basis of international
good practice, and develop and publish a set of environmental standards for the
Hydrocarbons sector in relation to emissions to water, air and land.
Social Welfare Measures
20.
The proposed coastal centres for coordinating emergency responses amongst local
communities should receive full training in oil spill clean-up activities and should be
equipped with the necessary support services and facilities.
21.
New regulations should be prepared by the Environment Protection Agency to cover the
preparation of Environmental and Social Impact Assessments in the Hydrocarbons sector.
22.
Companies operating in off-shore waters should be encouraged to set up specific assistance
funds for coastal communities lying closest to their operations, in the same way that
companies provide resources for affected communities in the vicinity of land-based mining
operations.
Education, Training and Technical Skills
23.
The capacity of key government institutions, including the Petroleum Directorate and
Environment Protection Agency, to respond to their roles in management, monitoring and
99
research, should be strengthened through provision of appropriate training and financial
support.
24.
The Universities, technical colleges and vocationaltraining centres of Sierra Leone should be
assisted with funding from both government and the hydrocarbons industry, to allow for the
development of appropriate courses and building the capacity of Sierra Leonean workers in
the Oil and Gas industry. Practical skills and academic performance should be strengthened
at all levels from training in driving, welding, drilling and other rig operations through to
Masters, PhD and post- doctoral studies.
25.
The Government should encourage credible companies with the necessary expertise and
technical knowledge in planning, environmental and social issues in the hydrocarbons sector
to establish their presence and operate in Sierra Leone.
Longer-term Actions
Financial resource management
26.
The government should instruct the Ministry of Finance to explore ways of establishing a
self-contained account (either within, or separate from, the Consolidated Fund) into which
all revenue from the hydrocarbons industry can be paid. All transactions, in terms of
payments or subsequent distribution of funds from this account, should be recorded and
published annually as part of Sierra Leone's Extractive Industries Transparency Initiative
(EITI).
27.
A "Future Generations Fund" should be established by government following international
principles for sovereign wealth funds, into which a fixed proportion of oil and gas revenues
(say 10%) will be paid throughout the lifetime of any commercial oil and gas fields developed
in Sierra Leone.
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11 MONITORING AND EVALUATION
Introduction
Reference has been made in various sections of this report to issues that will need to be carefully
monitored in the years ahead. Some of these are identified in the recommendations listed in the
previous chapter but the purpose of this final chapter is to draw together the overall conclusions in a
table which identifies tasks, roles and responsibilities for monitoring. This is with a statement on the
need for subsequent evaluation of the findings and actions that may be required.
Part 1 Monitoring
Tasks to be performed
1. The grant of exploration licences and any
conditions imposed by the Petroleum
Directorate should be made public.
2. The progress of exploration within
licenced blocks should be published at 6
months intervals
Section
Report
8.4.2
of
8.4.2
Purpose
Responsibility
In the interests of
transparency.
Petroleum
Directorate
To ensure that the public are
kept informed of current
activities in accordance with
the petroleum policy.
To facilitate forward planning
for the industry.
Petroleum
Directorate
To ensure that the country
maximises its opportunities for
adding value to petroleum
products
To build national awareness
SEA Steering
Group
3. Establishing a dialogue with industry on
development of a Support Base, and
forward planning on the 4 scenarios
4. Plans for redevelopment of the Kissy Oil
Terminal and for refining petroleum
products in Sierra Leone should be kept
under regular review
5. Ensure that parliamentarians are
informed on the issues arising from
international experience in oil and gas
development
4.6.1 & 4.6.2
6. Respond to shortcomings in pollution
management of inland and coastal waters
identified in a recent report (Johnson,
2011).
7. Adopt inland and coastal water
monitoring programme and techniques.
6.5
To reduce levels of coastal
pollution
Box 6.1
8. Introduce Marine Water Quality
Standards
6.7.1
Figure 6.2
To achieve a high standard of
information and reduce risks to
fisheries and coastal
communities
To protect marine nature
reserves and sensitive coastal
areas
9 Carry out annual review of the capacity of
Sierra Leone’s regulatory authorities to
monitor coastal and marine waters
6.12.1
4.6.2
Chapter 5,
Conclusions
To improve on the present
position in which none of the
authorities have appropriate
vessels equipped for deep
water service
101
SEA Steering
Group
Hydrocarbons
National
Advisory
Board / SEA
Steering
Group
EPA / IMBO/
Ministry of
Fisheries /
Universities
Maritime
authorities /
EPA / Industry
All
government
agencies led
by EPA
All
government
agencies led
by EPA and
the Navy
10. Develop a detailed monitoring
programme for offshore operations
including seismic survey, exploratory and
production drilling and transport of oil and
gas to floating storage and production
vessels or shore based facilities
11. Develop a National Oil Spill Emergency
Response Plan
6.12.2
To put in place a reliable
monitoring programme.
All
government
agencies led
by EPA
6.12.2
To ensure immediate and
appropriate levels of response
12. Introduce the latest standards and
guidelines and equip regulatory agencies
with necessary staff, technical know-how
and financial resources to monitor
development
13. Develop plans to recover and process
any gas found in association with oil
deposits
14. Maintain a high level of monitoring of
any offshore development by both
operators and regulatory agencies
6.12.2
To achieve a high standard of
performance throughout the
industry
EPA/
Petroleum
Directorate/
NDM
Department
EPA/
Petroleum
Directorate
6.12.2
To avoid the need for gas
flaring
Petroleum
Directorate
6.12.2
To protect the marine
environment
15. A key recommendation of the SEA is
that a joint standing committee should be
established for planning and monitoring the
activities of the oil and gas industry
16. Regular radio and television broadcasts
should be planned in order to keep people
in Sierra Leone, and the coastal areas in
particular, up to date with progress in the
oil and gas industry.
17. Government will make official
announcements about any commercial find
of oil or gas in Sierra Leonean territory.
Chapter 10
To ensure proper planning of
all national resources
associated with oil and gas
All
government
agencies led
by EPA
NHAB
Table 7.2
To ensure maximum
dissemination of the
information contained in the
SEA and in subsequent work
EPA
Table 7.2
To meet the requirements of
the Oil and Gas Policy and
Petroleum Act
18. All maritime activity associated with the
offshore oil and gas industry will be
monitored regularly in order to protect
marine fisheries.
19. The case for benefit sharing with local
coastal communities will continue to be
explored by the Hydrocarbons National
Advisory Board (HNAB) and SEA steering
committee
20. International best practice in
monitoring and evaluating the effects of
offshore oil and gas development will
continue to be studied in order to ensure
that Sierra Leone has up to date knowledge
of the key issues.
7.5.3
To safeguard Sierra Leone’s
rich fishing resources
Office of the
President /
Petroleum
Directorate
EPA / Ministry
of Fisheries
7.5.4
To ensure an equitable
approach to sharing the costs
and benefits of oil and gas
development
HNAB / SEA
Steering
Committee
8.5
To maintain Sierra Leone in the
forefront of knowledge about
oil and gas development
HNAB / SEA
Steering
Committee
Evaluation
102
Responsibility for the evaluation of these actions and for ensuring that the adopted
recommendations of the SEA are carried out will rest with the National Hydrocarbons Advisory
Committee.
103
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Petrodevelopment 2030, Socio-Economic Consequences of an extensive oil and gas
development in the Barents Sea: P.Arbo, Et Al, Norwegian College of Fishery Science,
University of Tromso, Statoil Hydro, 2007
237.
Socio-Economic Benefits of Adopting Production Sharing Agreements; Solomon K.
Kwawukkume Ghanaweb.com
116
238.
Socio-Economic Impact of Oil and Gas in Norway; E. Halland, Norway Petroleum Directorate,
Nova Scotia’s Energy Research Forum, 2006
239.
Socio-Economic Injustice and Cronyism: Warlordism and Taylorism in the Sierra Leone Civil
War, D.Ogunmola, Journal of Alternative Perspectives in the Social Sciences, Working Paper
No 3, November 2009
240.
The Potential Socio-Economic Implications of Licensing the SEA2 Area in the North Sea;
A.Kemp, L.Stephen, University of Aberdeen, August 2001
241.
The Potential Socio-Economic Implications of t=Licensing the SEA 4 Area (in the North Sea)
Mackay Consultants; UK Department of Trade and Industry, May, 2003
242.
Understanding the Effects of Offshore Oil and Gas on Queen Charlotte Basin Communities;
N.Dale, UNBC Community Collaborative Studies, No 5, Prince George, British Columbia, 2005
Trinidad & Tobago
243.
Economy of Trinidad and Tobago, Wikipedia, 2012
244.
Oil and Gas and the Environment in Trinidad and Tobago: Experience and Challenges;
C.Chandool, IAIA, Puebla, Mexico, 2011
245.
Oil and Gas Arithmetic in Trinidad and Tobago; R.Shah, April, 2012
Uganda
246.
Contracts Curse, Uganda’s Oil Agreements place profit before people; Civil Society Coalition
on Oil in Uganda, Febraury 2010
247.
Managing Oil Revenue in Uganda, A Policy Note: OREA Knowledge Series No 1, Kampala,
March 2009
248.
Oil Discovery in Uganda: Managing Expectations; L.Bategeka, J.Kiiza and S.Ssewanyana,
Makerere University, 2009
249.
Oil Extraction and the Potential for Domestic Instability in Uganda; J.Kathman and
M.Shannon, African Studies Quarterly, Volume 12, Issue 3 Summer 2011
250.
Public Participation and Oil Exploitation in Uganda; C.Schwarte, IIED, 138, December 2008
251.
The Power of Oil – Charting Uganda’s Transition to a Petro-State; P. de Kock, K. Sturman,
Research Report 10, SAIIA, March, 2012
252.
Uganda Activists sue Government over Oil Production Sharing Agreements; S. Akankwasa,
www.ibanet.org
253.
Uganda’s Oil Contracts leaked – a bad deal made worse; www. carbonweb.org
254.
Uganda’s petroleum legislation: Safeguarding the sector, Global Witness, 28 February 2012
Understanding the Oil and Gas Industry
255.
A Guide to Oil and Gas Resources; Archive greenpeace.org (undated)
256.
A Guide to Social Impact Assessment in the Oil and Gas Industry; IPIECA, 2004
117
257.
Improving Social and Environmental Performance – Good Practice Guidance for the Oil and
Gas Industry; IPIECA, 2011, www.ipieca.org
258.
Oil and Gas Production Handbook – An introduction to oil and gas production; H.Devold, ABB
ATPA Oil and Gas, 2006
118
119
APPENDIX 1 – THE PRESIDENT’S ADDRESS
KEYNOTE ADDRESS DELIVERED BY HIS EXCELLENCY THE PRESIDENT OF THE REPUBLIC OF SIERRA LEONE, DR. ERNEST BAI
KOROMA ON THE OCCASION OF THE LAUNCHING OF THE STRATEGIC ENVIRONMENTAL ASSESSMENT OF THE POTENTIAL
DEVELOPMENT OF THE OIL AND GAS SECTOR AT THE BRITISH COUNCIL HALL ON TUESDAY 13th MARCH, 2012
Mr. Chairman,
Honourable Vice President,
Ministers of Government,
Hon. Members of Parliament,
Mayor, Freetown City Council,
Paramount Chiefs,
YourExcellencies, Members of the Diplomatic and Consular Corps.
Heads of Government Department and Local Government
Distinguished Guests
Ladies and Gentlemen
It is my privilege to deliver this keynote address and launch the Strategic Environmental Assessment (SEA) scoping report
for the potential development of the Oil and Gas sector in Sierra Leone.
Mr Chairman, Distinguished Guests, Ladies and Gentlemen, our country is blessed with immense natural resources.
However, although the exploitation of these resources have significant potential economic benefits they also have
inevitable negative impacts on the biophysical environment and the lives of the people living around these areas. Evidence
of these negative impacts is clearly visible in the mining areas of this country. We have no choice but to meet these
challenges with well-designed policies and robust implementation of these policies.
Mr. Chairman, Distinguished Guest, Ladies and Gentlemen, our country is on the verge of becoming an oil-producing
nation. We very much aspire to utilize these oil and gas resources to create a prosperous nation. But we are also gathered
here today to register our determination to protect our coastal communities and rich marine resources from
environmental problems that could arise from our exploitation of these resources.
This is of particular importance, when we recollect that because of uncontrolled and unsustainable exploitation the nation
lost over 95% of its dense forest resources leaving only 5% to meet the needs of the entire populace. This tragedy could
have been avoided had a Strategic Environmental Assessment been undertaken.
Mr. Chairman, we have as our priority to build a better Sierra Leone, and to tackle the challenges of environmental
degradation which, if unchecked, threatens the natural foundations of our country. Let me assure you all that this
government will go the extra mile to ensure that mistakes of the past are not repeated. My Government is determined to
chart an economic path that is fair, inclusive, transparent and sustainable.
We are therefore pleased to inform you that we have commenced work on a Strategic Environmental Assessment (SEA) of
the Potential Oil and Gas Development in Sierra Leone. Our primary aim in undertaking the SEA is to ensure that oil and gas
finds here in Sierra Leone are exploited to secure the national interest and future economic prosperity, while supporting
the social welfare of directly affected communities and protecting our environment.
Mr Chairman, the SEA process in Sierra Leone would provide prospective developers, coastal communities and civil society
with a clear picture of the potential positive and negative consequences of commercial oil and gas deposits on the national
and local economy, livelihoods and well-being of coastal communities and marine environment of Sierra Leone. As such it
will provide a blue-print to guide decision-makers, investors, community leaders and civil society in responding to the
development choices that may need to be made if commercial quantities of oil and gas are found.
120
Mr Chairman, Ladies and Gentlemen, a national steering committee comprised of all stakeholders in the oil and gas sector,
the environment, natural resources management, fisheries and local communities has been constituted to move the entire
process forward. Technical assistance for the process is being provided by the World Wide Fund for Nature (WWF) West
Africa which has substantial experience in promoting SEA in natural resource development.
The process is co-chaired by the Environment Protection Agency, the Petroleum Resources Unit (PRU) and the Office of the
Chief of Staff to ensure the whole process is participatory, focused and above all accountable to the people of Sierra Leone.
Mr Chairman, Ladies and Gentlemen my presence at this launching ceremony underscores the importance this government
places on ensuring proper management, conservation and sustainable utilization of our natural resources, particularly the
Oil and Gas sector and I will therefore urge all to support the process.
It is now my honour to formally launch the Scoping Report of the Strategic Environmental Assessment for the Potential
Development of the Oil and Gas Sector in Sierra Leone.
I thank you all for listening.
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APPENDIX 2 CONDUCT OF THE SEA
Terms of Reference for anSEA of Potential Hydrocarbon Development in Sierra Leone
BACKGROUND
In the last decade, West Africa has emerged as an increasingly important producer of hydrocarbons
(oil and gas) from oil fields found in its coastal waters. Nigeria has been a major producer for more
than thirty years and has now been joined by Ghana following successful development in the Jubilee
Field. The same geological structure stretches along the West African coast to include parts of Cote
d’Ivore, Liberia and Sierra Leone. Preliminary exploration has identified potential resources off
Sierra Leone, although the strikes so far have not been shown to be commercially viable. However
the probability of finding exploitable oil and gas reserves has been significantly increased by these
discoveries.
International experience has shown that when any major new mineral resource is discovered and
exploited this can have major macro-economic benefits but it can also give rise to development
pressures which have both beneficial and adverse social consequences at regional and local level. In
addition, unless development is handled with great care serious adverse environmental impacts can
be caused for marine life, fisheries and coastal tourism development.
The traditional approach to planning for hydrocarbon development follows a sequence beginning
with exploration and then more systematic testing of the reserves, followed by construction of
infrastructure, including well collection centres, pipelines, oil and gas transport facilities and,
ultimately, transhipment or on-shore processing. Each of these stages in development is
accompanied by detailed environmental and social assessment based on EIAs of individual projects.
While assessment of the individual components is useful in identifying localised effects it fails to
present the bigger picture of what is likely to happen to the overall economy, which sectors of
society will gain and lose from the development and how the marine ecosystem will be affected
In recent years it has been recognised that forward planning for oil and gas development can be
greatly enhanced by undertaking Strategic Environmental Assessment (SEA) of the whole
development cycle from discovery and development through to eventual decommissioning when
the reserves have been fully exploited. SEA allows different policy options and physical programmes
to be examined so that the most beneficial economic, social and environmental strategy can be
adopted to ensure maximum sustainable growth in the national and local economies, stronger social
cohesion within coastal development areas and achievement of the highest practical levels of
environmental protection (a win-win-win outcome).
These draft terms of reference provide a framework for undertaking an SEA of prospective
Hydrocarbon development in Sierra Leone.
Sponsors of the SEA
The Environment Protection Agency and Petroleum Unit of Sierra Leone have agreed to join forces in
order to conduct a government-based SEA of Hydrocarbon potential. They are assisted by the World
Wide Fund for Nature (WWF) West Africa which has substantial experience in promoting SEA in
natural resource development. Funding for the SEA will be provided through direct staff
contributions from relevant government departments and experts within WWF, together with
facilitation and consultancy advice, financed by WWF.
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METHOD OF APPROACH
SEA can be regarded as a family of strategic assessment approaches, as defined by the OECD-DAC
manual “Applying Strategic Environmental Assessment”. The process ranges from assessments
focusing largely on bio-physical components of the environment through to fully integrated
economic, social and environment approaches with the emphasis on sustainable development
outcomes. It is the latter approach that will be favoured in this case.
The World Bank is a strong supporter of a form of SEA which concentrates on the institutional
barriers and opportunities to achieving natural resource development aims at policy and programme
level. This approach recognises that it is often governance issues and the lack of human capacity to
manage change that has the greatest impact on achievement of development goals.
The Hydrocarbons SEA in Sierra Leone will combine elements of the OECD-DAC and World Bank
methodologies. It will also be structured around recommendations from the best practice guide for
offshore oil and gas development in the West African Marine Ecoregion “Extractive Industries &
Sustainable Development”, 2010, published by WWF WAMER (West African Marine Ecosystem and
authored by S.Kloff, C. Wicks and P.Siegel. This highly relevant publication gives an overview of the
West African Marine Ecosystem, reflects on the governance and economic impediments towards
sustainable development and discusses how oil and gas development impacts on the environment.
Aims and Objectives of the SEA
The primary aim of this SEA will be to provide the Government of Sierra Leone, prospective
developers, coastal communities and civil society with a clear picture of the potential consequences
of commercial oil and gas deposits on the national and local economy, livelihoods and well-being of
coastal communities and environment of Sierra Leone. As such it will provide a blue-print to guide
decision-makers, investors, community leaders and civil society in responding to the development
choices that may need to be made if commercial quantities of oil and gas are found.
The SEA process will also constitute an important learning platform for all participants in helping to
understand the nature of strategic decisions in natural resource development.
Conduct of the SEA
Steering Group The SEA will be overseen by a steering group comprised of individuals from relevant
ministries departments and agencies in government, Paramount Chiefs, Research bodies, NGOs and
Civil Society. The steering group will have in the region of 15 members who will engage fully in the
process by helping to provide information and advice in their specialist areas and also contribute to
writing drafts of key sections of the SEA report. All organisations represented on the Steering Group
will be expected to ensure that the same individual represent them at each meeting, unless
unavoidably prevented by illness or other unavoidable constraint.
Advisory Group
A smaller group of 5-6 advisors will be established to include academic
professionals, commercial and business interests International Partner representatives and civil
society leaders. The advisory group will provide advice and comments on drafts of the SEA report.
WWF Advisors WWF will support the SEA both technically and financially through its Senegal office.
Consultant/ Facilitator An experienced consultant with skills in SEA, extractive industries and natural
resource development and the West African environment will be retained to guide the SEA process,
working closely in conjunction with the Steering Group and WWF advisors. The consultant will be
123
responsible for managing the day to day conduct of the SEA process, making extensive contributions
to the drafts and editing and overseeing final production of the SEA report.
Stakeholders As the SEA process unfolds key stakeholders will be identified amongst the critical
coastal communities, in industry, in civil society and in government. Appropriate representatives
will be contacted and invited to join one or more stakeholder groups to help identify, discuss and
debate issues as they emerge throughout the SEA.
Media There is a significant role for the media to play in following the progress of the SEA and
reporting on the issues raised – especially by stakeholders.
COMPONENTS OF THE SEA
This SEA will be undertaken in three main stages:
Setting the context –
-
Determining the programme of work
Defining the potential scope of hydrocarbon development
Describing project components
Understanding the issues
information gathering
Contacting stakeholders
Identifying key decision-makers
Analysing Issues –
-
-
Preparing a Situation Analysis (Baseline description)
Undertaking a review of stakeholders’ relative strengths and influence
Identifying those economic sectors and actors who are likely to win or lose from oil and gas
development
Reviewing relevant policies, plans and programmes that may affect or be affected by
hydrocarbon development,
Considering relevant governance issues, including management, organisation, investment
finance, taxation.
Reviewing alternative development scenarios (location of shore based facilities /
transportation options / processing options / value added and down-stream benefits etc.)
Examining potential environmental. Social and local economic impacts linked with all
elements of the marine oil and gas industry from drilling, rig operations, pipeline
construction and operation through to transhipment, ballast water disposal, on-shore
processing and refining.
Considering licensing, environmental, health and safety regulation
Investigating prototypes and parallels in West Africa (Ghana), the North Sea (Shetland) and
elsewhere.
Advising Decision-makers
-
-
Distilling the findings of the two previous sections to produce an easily read and concise
report outlining scenarios for the future if oil and gas are found in substantial quantities in
Sierra Leone’s coastal territory.
Highlighting the policy decisions and governance structures that need to be put in place to
manage development and change in response to hydrocarbon development .
124
SEA Report Structure
The SEA report will cover:
Context
-
Process Methodology
Potential Hydrocarbons development programme
Description of typical hydrocarbons components
Situation Analysis (Baseline for economy, social and environmental characteristics of
potentially affected areas)
Analysis
-
Stakeholder identification and stakeholder analysis
Institutional analysis and political economy
Analysis of development scenarios
Potential impacts of development scenarios
Policy responses to avoid, ameliorate and compensate for predicted adverse effects
Advice to Decision Makers
-
Recommendations
Policy Matrix and Action Plan
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APPENDIX 3 TRINIDAD & TOBAGO OIL DISASTER
CONTINGENCY PLANNING ARRANGEMENTS
BOX 1 EXAMPLE OF OIL DISASTER CONTINGENCY PLANNING - TRINIDAD AND TOBAGO
The islands of Trinidad and Tobago have had a national oil spill contingency plan in place since the
1970s. The first draft finalised in 1977 was updated in 2004 and the current draft is dated 2012.
The plan defines the Ministry of Energy and Energy Affairs as the lead agency for handling all oil spill
responses on land and sea, while the Trinidad and Tobago Coast Guard is the nominated response
agency.
Map of Oil and Gas Concessions
Definition of Spill Size
Responses to spill incidents are planned according to a pre-determined assessment of risk
126
The Incident Command Structure and Routine Training and Testing Exercises
A formal structure has been created by the Trinidad and Tobago Government to ensure proper
coordination of any significant incident
Testing the Emergency Response System
Routine Testing of the Emergency Response System is carried out each year
127
Safeguarding Fishing and Tourism Resources
Particular attention is paid to the key fishing areas around the islands with environmental sensitivity
mapping of areas requiring critical protection
128
The Emergency Response Process – Decision Making Tree
A clear sequence of actions and responses have been defined for the use of dispersants at sea.
129
130
APPENDIX 4 COASTAL CHIEFDOMS
KAMBIA
Samu
Mambolo
270376
56857
33825
PORT LOKO
Kaffu Bullom
Loko Massama
Koya
453746
89637
72348
63614
90682
225599
WESTERN (Urban)
East 1
West 2
West 3
772873
55168
91345
113294
259807
174249
63537
22996
WESTERN (Rural)
York Rural
Koya
86533
MOYAMBA
Bumpeh
Ribbi
Timdale
Kagboro
258506
32363
25163
8192
31150
96868
BONTHE
Bendu Cha
Nongoba Bullom
Sittia
Kwamebai Krim
Imperi
Dema
139687
4680
13617
13449
7715
17576
5301
PUJEHUN
Soro Gbema
Kpaka
Mano Sakrim
228392
31977
12827
7536
62338
Chiefdoms
Total 20 (Rural)
Total 3(Urban)
Grand Total
131
52340
614360
259807
874167
132
APPENDIX 5 DETAILS OF SOVEREIGN WEALTH FUNDS
IWG Home page-- International Working Group (IWG) of Sovereign ... www.iwg-swf.org/
Introduction
The International Working Group of Sovereign Wealth Funds (IWG), which met in Kuwait City April 5-6
2009, reached a consensus ("Kuwait Declaration") on the establishment of an International Forum of
Sovereign Wealth Funds. The Forum is a voluntary group of Sovereign Wealth Funds (SWFs) which will
meet, exchange views on issues of common interest, and facilitate an understanding of theSantiago
Principles and SWFs activities.
Generally Accepted Principles and Practices (GAPP)—Santiago Principles
1.
In furtherance of the "Objective and Purpose", the IWG members either have implemented or intend to
implement the following principles and practices, on a voluntary basis, each of which is subject to home country
laws, regulations, requirements and obligations. This paragraph is an integral part of the GAPP.
GAPP 1. Principle
The legal framework for the SWF should be sound and support its effective operation and the achievement of its
stated objective(s).
GAPP 1.1 Subprinciple The legal framework for the SWF should ensure the legal soundness of the SWF and
its transactions.
GAPP 1.2 Subprinciple The key features of the SWF's legal basis and structure, as well as the legal
relationship between the SWF and the other state bodies, should be publicly disclosed.
GAPP 2. Principle
The policy purpose of the SWF should be clearly defined and publicly disclosed.
GAPP 3. Principle
Where the SWF's activities have significant direct domestic macroeconomic implications, those activities should be
closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall
macroeconomic policies.
GAPP 4. Principle There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation
to the SWF's general approach to funding, withdrawal, and spending operations.
GAPP 4.1 Subprinciple The source of SWF funding should be publicly disclosed.
GAPP 4.2 Subprinciple The general approach to withdrawals from the SWF and spending on behalf of the
government should be publicly disclosed.
GAPP 5. Principle
The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise
required, for inclusion where appropriate in macroeconomic data sets.
GAPP 6. Principle
The governance framework for the SWF should be sound and establish a clear and effective division of roles and
responsibilities in order to facilitate accountability and operational independence in the management of the SWF to
pursue its objectives.
GAPP 7. Principle
The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with
clearly defined procedures, and exercise oversight over the SWF's operations.
GAPP 8. Principle
The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate
authority and competency to carry out its functions.
GAPP 9. Principle
The operational management of the SWF should implement the SWF’s strategies in an independent manner and in
accordance with clearly defined responsibilities.
GAPP 10. Principle
The accountability framework for the SWF's operations should be clearly defined in the relevant legislation, charter,
other constitutive documents, or management agreement.
GAPP 11. Principle
An annual report and accompanying financial statements on the SWF's operations and performance should be
133
prepared in a timely fashion and in accordance with recognized international or national accounting standards in a
consistent manner.
GAPP 12. Principle
The SWF's operations and financial statements should be audited annually in accordance with recognized
international or national auditing standards in a consistent manner.
GAPP 13. Principle
Professional and ethical standards should be clearly defined and made known to the members of the SWF's governing
body(ies), management, and staff.
GAPP 14. Principle
Dealing with third parties for the purpose of the SWF's operational management should be based on economic and
financial grounds, and follow clear rules and procedures.
GAPP 15. Principle
SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and
disclosure requirements of the countries in which they operate.
GAPP 16. Principle
The governance framework and objectives, as well as the manner in which the SWF's management is operationally
independent from the owner, should be publicly disclosed.
GAPP 17. Principle
Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and
financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient
countries.
GAPP 18. Principle
The SWF's investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment
strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
GAPP 18.1 Subprinciple The investment policy should guide the SWF's financial risk exposures and the
possible use of leverage.
GAPP 18.2 Subprinciple The investment policy should address the extent to which internal and/or external
investment managers are used, the range of their activities and authority, and the process by which they
are selected and their performance monitored.
GAPP 18.3 Subprinciple A description of the investment policy of the SWF should be publicly disclosed.
GAPP 19. Principle
The SWF's investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its
investment policy, and based on economic and financial grounds.
GAPP 19.1 Subprinciple If investment decisions are subject to other than economic and financial
considerations, these should be clearly set out in the investment policy and be publicly disclosed.
GAPP 19.2 Subprinciple The management of an SWF’s assets should be consistent with what is generally
accepted as sound asset management principles.
GAPP 20. Principle
The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader
government in competing with private entities.
GAPP 21. Principle
SWFs view shareholder ownership rights as a fundamental element of their equity investments' value. If an SWF
chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and
protects the financial value of its investments. The SWF should publicly disclose its general approach to voting
securities of listed entities, including the key factors guiding its exercise of ownership rights.
GAPP 22. Principle
The SWF should have a framework that identifies, assesses, and manages the risks of its operations.
GAPP 22.1 Subprinciple The risk management framework should include reliable information and timely
reporting systems, which should enable the adequate monitoring and management of relevant risks
within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business
continuity planning, and an independent audit function.
GAPP 22.2 Subprinciple The general approach to the SWF’s risk management framework should be
publicly disclosed.
GAPP 23. Principle
The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured
and reported to the owner according to clearly defined principles or standards.
GAPP 24. Principle
A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.
134
APPENDIX 6
TERMS OF REFERENCE FOR A FEASIBILITY STUDY
TO ESTABLISH A SHORE SUPPORT BASE
FOR THE OFFSHORE OIL AND GAS INDUSTRY IN SIERRA LEONE
Introduction
In the next five years there are good prospects that Sierra Leone will have a commercial find of oil
and/or gas in the offshore waters along the continental shelf.
Current activities in the commercial sector are concentrating on exploration and evaluation of
potential reservoirs using vessels and equipment provided from shore bases at established ports in
Cote d’Ivoire and Ghana (Abidjan, Takoradi and Tema) or from other international centres in Europe,
Asia and America. There is no current investigation of potential sites for development of support
facilities, although individual companies are making their own informed judgements based on the
existing situation.
If Sierra Leone is to position itself to take maximum advantage from the production of hydrocarbons
and the subsequent downstream industries that could be developed it is vital that it plans ahead to
establish appropriate sites for these activities. In doing so, it will be following the example of Ghana
and Uganda which are both developing oil refining capacity and Kenya which is building the largest
new deepwater port in Africa in the last 100 years.
The first priority is to establish where along the coastline of Sierra Leone one or more permanent
Supply and Support Bases might be constructed. There are many critical factors that affect this
decision, on technical, logistical, economic, social and environmental grounds and the purpose of
this feasibility study is to carry out a comprehensive investigation of these factors and to present
clear advice and recommendations to Government.
Specific Objectives
The Contractor will undertake the following functions and activities:






Discuss the project requirements with all key ministries (to be identified).
Discuss the aims and objectives of the project with individual oil and gas companies and the
Sierra Leone Oil and Gas Consultative Body
Draw on its own, and international experience, in defining parameters for a successful
Supply and Support Base.
Undertake an initial review of potential locations, based on currently available information
Carry out selective and comprehensive surveys in those areas (up to 4) identified as primary
targets from the initial review.
Undertaking scoping studies on technical, social, environmental and health and safety issues
for these areas, in accordance with a brief to be provided by the Environment Protection
Agency.
135



Produce outline designs and costs for sites (up to 3) which are confirmed as potentially
suitable locations.
Develop appropriate models for land acquisition, joint venture funding and management
assuming the involvement of more than one operating company.
Advise on the logistics and funding requirements for the development of these sites.
Timescale
The Feasibility Study is to be completed within six months of the date of commissioning.
Publication and Use of the Results
It is the Government’ intention to fund the feasibility study and to publish it as a basis for continuing
dialogue and negotiation with oil and gas companies. The Government will assist in promoting a
preferred site(s) but will require operating companies to enter into a joint venture for the financing
and subsequent operation and management of the facilities.
Pre Qualification Requirements
Companies responding to this brief and terms of reference are required to send in an Expression of
Interest within four weeks of the placing of this advertisement to the (Office of the Chief of Staff /
Petroleum Directorate / EPA ?) setting out their experience and capacity to undertake the work and
a brief statement of the approach that would be adopted and the level of resources in manpower
and financial commitment that would be required to complete the study.
The Government expects to receive outline proposals (EOIs) from international engineering and
environmental consultancies, commercial build and design contractors, individual oil and gas
companies and consortia of the above. An essential pre-qualification requirement will be the ability
to show that the potential contractor has direct experience of marine engineering and port
construction activities in the oil and gas sector and can establish the necessary working relationship
with the principal oil and gas operators in Sierra Leone to ensure that the results of the Feasibility
Study are accepted. A further requirement will be the ability to show evidence of comprehensive
environmental and social impact assessment work in the marine and coastal environmental and
examples of comparable ESIAs in the oil and gas sector.
Selection of Contractor
During the pre-qualification round, a more detailed brief will be prepared by Government and up to
four potential contractors will then be selected and invited to submit full technical and financial
tenders for undertaking the work.
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