Investigating accountability and governance practices in joint development zones: a case study of Nigeria and Sao Tome & Principe’s Joint Development Zone.

Abstract

This study critically assesses the appropriateness of the governance system used to control all aspects of oil exploration and production within the Nigeria São Tomé and Príncipe Joint Development Zone (NSTP-JDZ). The motivation for carrying out the research emerged from a review of the literature on oil and gas joint venture operations which straddle more than one country’s borders. In the case of the NSTP-JDZ, several reports had criticised its governance practices but had failed to provide a rigorous analysis to substantiate their claims. The study therefore contributes to the literature relating to the governance of oil and gas joint development zones. A mixed method approach was used in the empirical research and the results were analysed against a globally acknowledged good governance theoretical framework. The results confirmed that there are major flaws in the NSTP-JDZ governance system, although there are also positive aspects of the practices. Four areas of concern were identified: Firstly, inadequate personnel skills were impairing management of the zone to such an extent that it could not be guaranteed that resources will be safeguarded for the benefits of future generation. Secondly, control of resources was severely impaired by an uncertainty about who had the authority to implement actions and, of more concern, by political and other conflicting interventions in the management decisions of the NSTP-JDA. Thirdly, the findings indicated the need for improvement in the audit procedures and communication culture between local communities and NSTP-JDZ operators. Lastly, there was a body of opinion that employment practices within the zone were unfair. In addition to identifying the above deficiencies in the governance system, the study has identified and analysed differences in views on governance issues between key stakeholders in the zone. These differences are important as they may well pinpoint why the governance system is deficient and, more importantly, reveal how the governance system can be improved. The vested interests of stakeholders are known to shape stakeholder views and, when there are stakeholders from different countries representing their nation’s interests, these differences can be acute; the findings may be extrapolated to other joint development zones although the various characteristics of the parties involved in each zone will affect the degree to which it is applicable. Finally, the study may have significant economic consequences for both Nigeria and the São Tomé and Príncipe - bearing in mind the importance of oil resources to both countries.

Petroleum Technology Development Fund