Will Star Shine for South Sudan?
For immediate release: 27Oct 2014
Will Star Shine for South Sudan?
Scrutinising South Sudan’s first post-independence oil deal
South Sudan’s first post-independence oil deal is high-risk and in urgent need of further scrutiny, according to a new Global Witness report released today. The seven month investigation into the deal between the South Sudanese government and the Spanish-owned oil company Star Petroleum for two of the country’s last remaining oil blocks, uncovered that:
- the company is closely connected to a businessman convicted of a million euro fraud;
- no information about who owns Star Petroleum is available to the public. Instead the company’s shareholders are all other companies registered in tax havens or unknown jurisdictions;
- the company isn’t producing oil anywhere else in the world;
- the deal is being negotiated behind closed doors, and through a loophole in the law, which means that Star has faced no competition from other companies in its negotiations for the concession.
“The block E concession covers 45,000 square km in four states – that’s a lot of ordinary people’s farms and grazing land,” said Emma Vickers, Global Witness’ South Sudan campaigner. “The government has to prove that this deal will help, not harm, those farmers and cattle herders by being open about who the company is, what kind of a contract they’re giving it, and what kind of rewards citizens can expect. From our research, it’s not clear that doing a deal with this company will benefit ordinary people. Without showing people that it will, the government risks fuelling mistrust among a vulnerable population who have often associated oil with conflict.”
The deal is being done at a time of crisis in South Sudan. The ongoing conflict has sparked a humanitarian calamity and left 1.7 million people displaced. South Sudan’s oil dependent economy is in trouble: oil production has been halved by the instability and international oil prices have fallen in recent months, depleting government income.
The government has repeatedly stated that it will use oil money to bring development to its people and to broaden the economy away from oil but, this year, a third will be spent on army salaries. Not only is the company an unknown, and the country is in turmoil, but the benefits of developing South Sudan’s oil industry both to the economy and to ordinary people, have yet to be proven.
“One of the fundamental problems with this deal is that the public know very little about it,” Vickers added. “Politicians have promised their citizens transparency and yet they’re negotiating behind closed doors. It’s time for them to lift the lid on who Star is and why they are negotiating with the company.”
South Sudanese law makers have already gone a long way to making sure this type of information is available to the public by putting strong transparency provisions in their oil laws. Global Witness’ research has discovered that the Ministry of Petroleum has activated those provisions and asked Star for documentation. Star Petroleum reports that it has provided a list of who the company’s owners are, evidence of its technical expertise, and an assessment of the possible environment impact of oil exploration. This is a positive step. The government must now take the next step and allow parliamentarians to review the deal and the documentation before it is signed. Star should also make this information publically available and easily accessible. When the contract is agreed, this must be made public too.
Global Witness put its concerns about the company and the deal to Star Petroleum. In its response, the company stated that it is “doing its business in compliance with local and European laws and all business ethical standards with full[y] transparency”.
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Contact: Emma Vickers, South Sudan Campaigner +44 (0)7715 076 548 or +44 (0) 207 492 5838 or Sarah Morrison, Senior Communications Advisor +44 (0)207 492 5840.
Notes to editors:
- Global Witness’ report ‘Will Star Shine for South Sudan?’ is available here: http://bit.ly/1tAdbY3.
- Before publication, Global Witness sent questions to Star Petroleum on 18 September 2014 (http://bit.ly/1twO9um). Star responded to Global Witness on 22 September 2014 in an email the text of which is available here: http://bit.ly/1tYC9CK. Global Witness sent Star Petroleum further clarification questions on 2 Oct 2014 (http://bit.ly/1twOlK1). Star Petroleum responded in a letter on 3 October 2014 available here: http://bit.ly/1FPRxnW.
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