Democracy is pushing Tunisia's energy wealth into the spotlight, but old interests prefer to work in the shadows.
- By Fadil AlirizaFadil Aliriza is a Visiting Senior Fellow for the Legatum Institute’s Transitions Forum. He has been working as a journalist and analyst focusing on Tunisia and Libya after the 2011 uprisings. Follow him on Twitter @FadilAliriza.
In the early days after the uprising that pushed out Tunisia’s ruling regime in January 2011, reform-minded Tunisians in all sectors saw the popular demands for dignity, freedom, and employment as a green light to reshape their country. In the energy sector, a group of midlevel state employees for the national oil company called foul on corruption at the top and demanded investigations, transparency, and accountability. They saw profits from Tunisia’s oil and gas resources being given to foreign companies on terms unfavorable to the state, with some of the remaining profits not even reaching state coffers. Together with civil society groups, concerned citizens, a few newly elected legislators, and journalists, they eventually succeeded in getting a partial win early this year when the country’s former parliament, the National Constituent Assembly, passed a new constitution that included Article 13, a clause guaranteeing parliamentary oversight of all contracts involving state-owned natural resources.
While a lack of transparency makes it difficult to guess the extent of Tunisia’s oil and gas wealth, official figures show that Tunisia buys over 60 percent of its natural gas from British Gas, which extracts that gas from Tunisia’s own reservoirs. Tunisia’s natural gas reserves of roughly 2.5 trillion cubic feet (tcf) meet over half of its domestic demand, and its nearly 23 tcf of recoverable shale gas reserves could eventually turn Tunisia into an energy exporter. Tunisia does not have the technical capacity to explore and extract its own reserves, so it signs contracts with foreign oil companies and enters into partnerships with them. In the past, those contracts were managed on the Tunisian side by two state organs under the Ministry of Industry: the General Energy Directorship (DGE) and the national oil company, ETAP. Now, under Article 13, the parliament and its energy committee have the power to review these contracts.
But when the National Constituent Assembly’s energy committee started using its oversight power this year to review contracts signed between the state and foreign oil companies, other state institutions reacted fiercely. Bureaucrats from the Ministry of Industry, which has traditionally had near-exclusive jurisdiction over energy contracts, pushed back on legal grounds to make sure that the energy committee would not have a say over any more contract extensions. Even the executive branch pushed back against the committee; at a budget presentation this summer, Prime Minister Mehdi Jomaa warned assembly members to stop impeding the work of foreign oil companies. Jomaa’s argument was that the committee’s intervention was hurting Tunisia’s economic development — but his critics say that Jomaa’s many years working at a sister company of the international oil company Total make him too cozy with the sector. Even his current industry minister, Kamel Bennaceur, is a former longtime executive at the world’s largest oilfield services company, Schlumberger.
International companies, too, pushed back against the energy committee by pressuring elected assembly members not to include language about the national protection of resources in legislation, some members allege. Security forces added to the pressure on the energy committee when they first informed the head of the energy committee, Chafik Zerguine, that there were death threats against him and then subsequently denied the story.
Zerguine considers the oversight of these contracts a vital part of building up a truly democratic state. “If they are just going to sign contracts alone on behalf of the Tunisian people, contracts that neither the representatives nor the people know about, then that is the highest possible form of carelessness, playing with the destiny of the Tunisian people,” he says. “I even see this as a coup against the revolution. The revolution came at first for development, for employment, for the rights of the future generations.”
After the committee rejected the extensions for three contracts in June, the government stopped presenting contracts to them, a move facilitated by a ruling from the Administrative Tribunal, a judicial body that is nominally independent from the Justice Ministry and tasked with intervening in regulation disputes. The essence of the legal argument was that while the constitution now says the assembly has the right to review contracts, none of the more specific laws and regulations governing the sector have yet been changed to reflect this. Thus, they say, the energy committee won’t get to use their new power until other laws are changed. The assembly tried to make these legislative changes, but was blocked by the presidency of the assembly at the time (whose top advisor happened to be the vice president of British Gas in Tunisia).
Twenty-one other contracts were due for review this year, but none of them were presented to Zerguine’s committee. He says the real reason for this was because the Ministry of Industry knows his committee would reject many of them as illegal. Their illegality, as Zerguine explains, stems from a wide variety of regulation breaches, such as extending past legally mandated time limits. According to the old way of doing business, these regulatory breaches were often overlooked. One can speculate as to why they were overlooked, but nothing can be proven given the lack of transparency in the sector.
According to Zerguine, the government and the Ministry of Industry are likely stalling for time. “They are awaiting another assembly. They will not present it to the current committee because they think that the future committee will be more lenient,” Zerguine explains. He suspects that both of these bodies are too close to industry interests to take the risk now. Zerguine stood for parliamentary elections in November and lost his seat.
One month after his committee rejected the first three contract extensions, the Interior Ministry relayed death threats to Zerguine. First, two district police chiefs called Zerguine to tell him there were threats against his life. Then, the number two at the Ministry of Interior, Tunisia’s national security chief, also called him to relay the threats. The ministry told Zerguine they would need to start monitoring his travel and his communications. Zerguine agreed to check in with the police regularly about his travel and lodging arrangements for a few days — but after receiving no further details about the nature of the death threats against him, Zerguine became suspicious about the motives of security forces. He decided to go public with the threats, but the ministry denied the story completely. They ministry later backtracked on their denial when Zerguine said he had plenty of proof of his correspondence with police. Multiple phone calls to Interior Ministry spokesperson Mohamed Ali Laroui to verify Zerguine’s version of events were not answered or returned.
“It is because the oil lobby perhaps has hands in the Ministry of Interior,” Zerguine says. “I don’t think that the Ministry of Interior could so easily inform me of a threat and then deny it. That was unprofessional, immoral.”
Zerguine’s committee rejected five contract extensions in total, all for various reasons. One 15-year contract had reached its legal time limit, and the committee decided that the contract, which gives the company the right to look for hydrocarbons on a particular plot of land, must be presented for open bidding again. Another contract was rejected because the foreign company had tried to fulfill its contractual obligation to contribute to local industrial infrastructure by building a pipeline that benefitted only itself.
This is precisely why activists prefer parliamentary oversight over executive deal-making — they believe it will help root out corruption.
“Which is better: for these contracts to be made between two parties, or for the people’s representatives to have a look at these contracts?” Zerguine asks. “This is the wealth of Tunisia, it is not the wealth of the men of ETAP or the wealth of the Minister of Industry.”
A spokesperson for ETAP and a spokesperson for the Ministry of Industry both separately condemned Article 13 as a “catastrophe,” noting wryly that according to the current wording, even fishermen would need approval from the energy committee given that fish could be considered a natural resource. Ridha Bouzouada, the head of the DGE, says that they will heed the Administrative Tribunal’s ruling and continue to apply old, sector-specific regulations until they are amended to reflect the constitution. But these regulations, which are written in nearly impenetrable technical and legal language, at times contradict one another. Adding to the confusion is that some current contracts were signed under a regulation from ’85, while others were signed under a regulation from ’99.
Bouzouada offers another defense for applying old regulations: He says previous contracts not in line with Article 13 might be torn up, which would provoke litigation from foreign companies. However, it’s hard to find anyone arguing for that sort of retroactive application of Article 13, and most activists say that was never the intention of the article.
Despite this, people who have worked in or with the industry are sticking to this alarmist line. Bechir Tekaya — who was in charge of petroleum agreements at ETAP for decades and now works as a consultant for foreign oil companies — echoes Bouzouada’s point. He says that some of the current legal challenges to the old model are a “discredit to the prime ministry, to the administration,” which had previously assured foreign companies of their ability to work in Tunisia.
Opening the door to parliamentary oversight of contracts is actually fairly radical compared to contract regulations in other Arab nations. While officials in Libya promised to publish contracts after their revolution in 2011, “that didn’t last long,” says Matthew M. Reed, vice president of Foreign Reports, Inc., a consulting firm focused on oil and politics in the Middle East. He offers Kuwait as one example of a country where the parliament has some power to investigate, but even it doesn’t have direct power over the contracts in the way Article 13 appears to stipulate.
“The industry usually demands some degree of secrecy when deals are being negotiated,” he says. “Any disputes over legal authority will make Tunisia less inviting. The fact is Tunisia needs foreign companies more than they need it.”
Activists insist that Article 13 really only calls for strict accountability and transparency, something that shouldn’t scare off oil companies if handled professionally. An early version of the article was even more radical, calling for all contracts “to be rendered public,” but this version died in the assembly’s consensus committee.
The move against the first version was a blow to transparency, says Mohamed Dhia Hammami, a 22-year-old who combines the roles of investigative journalist, activist, and legislative assistant. Hammami counts the current minister of industry and former oil industry executive Kamel Bennaceur among those “totally against transparency.” (Despite three weeks of repeated requests, the Ministry of Industry spokesperson said that the minister was too busy to grant an interview.) And, according to some measures, Tunisia could certainly use more transparency. The Natural Resource Governance Index ranked it just 28th of 52 countries studied, giving it the lowest possible rating in both contract transparency and in environmental and social impact evaluations.
And post-uprising era reports have, too, shown that there is a need for transparency. A 2012 report produced by Tunisia’s Audit Court, an independent investigative body, found that Tunisia’s state institutions, which are charged with overseeing foreign concessions, failed to carry out this task. Private companies profit off of this neglect. British Gas, for example, exploits two large natural gas fields, Miskar and Hasdrubal, and sells the gas from these fields back to the Tunisian state. The national oil company ETAP has the right to a share of production, but the Audit Court found that ETAP had ceded this right in the case of the Miskar field “on the grounds of its low returns,” despite “knowing that the actual results of this concession in terms of produced volumes prove that it was the most important gas discovery to be made in Tunisia.”
It is not clear what the government of Tunisia has to gain from this sort of arrangement. Why would Tunisia give up its legal rights to resources that it later buys back from a foreign company? The Audit Court investigation brought these types of paradoxes to light — but further answers will require greater transparency and oversight. The auditors also found other instances where British Gas “did not comply with ETAP directives.” (British Gas did not publicize any official response to the report at the time and neglected to respond to numerous requests for an interview.) One of the three contracts that Zerguine’s energy committee rejected in July was with British Gas Tunisia.
In evidence of another instance, Hammami showed this reporter a document provided by two sources (acting separately) from the Audit Court investigation, which reveals a multibillion-dollar discrepancy in the amount of taxes paid by foreign oil companies to the state in 2009 and the income attributed to oil and gas taxes in that year’s public budget. Hammami says that the documents were censored from the report, though their authenticity could not be verified.
In yet another case, Hammami says, the Audit Court asked ETAP why it had never conducted an audit on one foreign company, Perenco, in the 15 years that the company had done business in Tunisia. ETAP allegedly replied that they didn’t do an audit because Perenco asked to not to be investigated.
“The defense is worse than the crime,” says Hammami.
At a roundtable discussion on the energy sector at UTICA, Tunisia’s version of a Chamber of Commerce, in April, the current Minister of Industry Bennaceur, however, said that the Audit Court’s report was full of “disinformation.” On another occasion, he said that “99 percent of the corruption that we’re talking about is fiction.” Numerous others within the Ministry of Industry have said that the Audit Court did not seek their official response to the allegations. However the Audit Court notes that they had numerous meetings with top officials from within the state’s oil and gas administrations and included their official responses in the final version of the report.
Despite the fast approaching presidential run-off, the controversy over Tunisia’s energy resources seems to fall short of the headlines. According to a state-employee and whistleblower, the Audit Court’s initial decision to investigate was the result of his and his colleagues’ outspoken calls for an investigation. However, the activist (speaking on condition of anonymity) said that this initial push has largely died out due to pressure and threats from higher-level state employees to lower-level ones like him.
“Nothing was done to change personnel or the institution” after the investigation, the whistleblower said. And the current government, he continues, is the friendliest to petrol interests that Tunisia has ever had, given the prominent oil-industry experience of Jomaa and Bennaceur. The whistleblower attributes the lack of interest in energy sector reform to the fact that “people are focused on other things like politics, terrorism, [and] ISIS.”
“Because the media is focusing on political issues, it’s a good opportunity now for companies to get good deals with the government,” he says, pessimistically.
Given Tunisia’s relatively small size, weak economy, and desperation for investors, the reality may be that Tunisia has little power to renegotiate how it deals with foreign oil companies. But for Tunisia to truly live up to its reputation as a “start-up democracy,” it will need not only investors, but accountability and transparency too.
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