Yesterday we brought you part one of our exclusive interview with William Pollen of Invest In Africa, and George Cazenove of Tullow Oil about the recently announced sponsorship of Sunderland. You can read part one by CLICKING HERE.
One of the things which has attracted so much media attention to the deal is the involvement of Tullow Oil in the deal, who have in some quarters received a fair bit of criticism about their company, with little opportunity for any comeback.
So today we speak further with George Cazenove, Head of Media Relations and Company Spokesperson for Tullow Oil, and a man very well placed to provide answers to some of the criticisms and speculation about Tullow Oil, who were up until this sponsorship deal, not really in the minds of large parts of the Sunderland fanbase...
We can all agree and it seems very clear that Tullow Oil and Invest In Africa are separate entities, but there is a strong connection between the two, and there's been some criticism of Tullow Oil and a few incidents, so I'd like to ask about those if possible?
George Cazenove (GC): Yes, sure that's absolutely fine.
There's been a few things written about work in Uganda and Congo where it was suggested the good of Tullow Oil was placed above that of local people and businesses, which if you take a step back and look at it goes very much against what Invest In Africa are about...
GC: Well that's putting it mildly. The guys who put together these comments about Tullow are anti-oil and anti oil in Africa, and they don't believe that oil companies whether that's Tullow or major multi-nationals, or smaller oil companies should be operating in Africa. That's fine, that's their perspective, there's a perfectly coherent, intellectual argument to support that. There's an equally coherent argument on our side that drilling for oil in Africa and doing business in Africa, which we've done successfully for 26 years is a good thing.
But there are definite challenges for oil companies to be understood and be seen as doing their best for local communities and also to do their best for their shareholders at the same time. And the reason that challenge is so hard at times is the oil industry's own fault. The perceptions and cynicism about oil in Africa are well-founded; part of my daily work is to try and change perceptions not through spin but through concrete examples of our work.
In specific answer to your question, in Uganda for example we have been accused of profiting at the expense of Ugandan people, but we haven't produced any oil in Uganda yet. We've spent billions of dollars trying to find oil, which we now have done successfully after many years of failed exploration by other companies, that's the first thing.
Secondly, we've created a huge amount of jobs and investment into the country, and spending with Ugandan companies. In 2011 we spent $73.1m with local Ugandan companies mostly within our supply chain. Certainly we've spent huge amounts of money on Corporate Social Responsibility (CSR) projects like hospitals and schools, but I'm always slightly reluctant to promote that because our main and most important impact in countries is through employment, spending with local companies and the creation of skills.
Importantly, the contracts that we sign with Governments these days are often supported and inspected by large bodies like the World Bank. Also the Governments involved don't sign these contracts in isolation. They have their own specialists, from their countries but also from countries that have long histories of oil and gas production helping them.
In some countries they [contracts] are confidential, the Government requests that they remain confidential for perfectly respectable reasons of commercial confidentiality, and in other countries they aren't confidential. In Ghana they are not confidential, and we publish all payments to Government on our website, and the contracts themselves are detailed on the Ministry Of Energy's website in Ghana. I don't think anyone could suggest that the agreements between Tullow Oil and the Government In Ghana are anything but equitable and transparent.
In time it's our hope that all the countries we operate in will publish the agreements, and that includes Uganda. We actively press Governments in these countries to publish their contracts. That's because transparency in and of itself is a very good thing but also it will show that there are no secret clauses and no unbelievable deals for oil companies. We spend huge amounts of money in countries and we - and our shareholders - require a perfectly normal investment rate of return on the money we've spent. We're hard-headed about this, we are a business that's looking to make profit, but it doesn't serve companies to make or be seen to make enormous profits on the back of African countries, it would do us no good at all and would be wrong. The profits we make on any oil production reflect the huge amount of investment we've made and the risks we've taken over the lifetime of a project. To put this into perspective, we started work in Uganda in 2006 and it's unlikely we will receive any revenue from oil operations until 2017 and we won't be profitable in Uganda until years after that.
I also wanted to ask about the reports in Ghana about the exclusion zone around the oil rigs affecting local fishermen were true, and also why the Ghanaian Navy are involved...
GC: Now let's just be clear about this, in Ghana, Tullow is a household name, we brought oil to Ghana in 2010.
The floating production, storage and offloading vessel (FPSO) is 100km offshore from the coast of Ghana - and there's a 500 meter exclusion zone around the FPSO itself. It's an international requirement to have an exclusion zone around an FPSO in order to keep the fishermen and other boats out of harms way. If you think about the Gulf of Guinea and how big that is, an FPSO is a few football pitches long, and has a 500 meter exclusion zone around it, so there's still a lot of area around the FPSO to go fishing. Nevertheless, there is an impact from the FPSO and we do not seek to deny that, and we have worked hard with the Ghanaian Fisheries Agency, fishermen and fishing communities to mitigate that impact. This has included both direct and indirect assistance ranging from compensation procedures, to assistance with locating alternative fishing grounds. We have also briefed fishing communities on health and safety around the FPSO.
I can't speak for the Ghanaian Navy, but the Ghanaian Navy patrol the exclusion zone themselves and they have often rescued fishermen who've found themselves in trouble as they've floated towards it. Oil is a major asset in Ghana so it's hardly surprising they are keen to protect it efficiently.
I think our impact in Ghana is best summed up by the fact that in the 2011 Budget, the Ghanaian Finance Minister estimated that revenue from oil operations in 2012 would bring the Ghanaian Exchequer, $750 million. That is money that Ghana would not have without Tullow's discovery and development of Ghana's offshore oil.
What I'd say Simon, is that we work in Africa and it can be a difficult place to do business, and there are campaign groups out there who don't want companies like Tullow working in Africa, but in my opinion they're sometimes doing more harm than they are good. They feel very passionately and I respect their passion, but often the claims made about businesses working in Africa don't stand up to scrutiny and end up re-inforcing the negative views that many businesses that don't invest in Africa have of the continent.
Businesses like Tullow should be and need to be held to account and the oil industry has legacy issues in Africa that mean it deserves to be scrutinised carefully. Campaigning groups and NGOs are a key part of being held to account along with host Governments, our own Governments who regulate us and shareholders and other stakeholders. However, there needs to be a balance between scrutiny and making unsubstantiated claims that end up re-inforcing negative stereotypes and preventing investment.
These sort of points are exactly why we want to speak with you really, it's easy to put these sort of anti this and that claims out there...
GC: Words are pretty cheap, and actually if you look at, and I'd encourage anyone if they have the time to look the Invest In Africa website (click here) and also look at the Tullow website (click here). Now clearly it's our website so it's hardly going to include a huge amount of criticism on it, but there is plenty of good, solid, audited data on it about the work that we've done. If any of your readers have questions about our work, I am always ready to answer their questions.
Something that was mentioned on that as well was the social responsibility. It's reported that there was a very large investment in that in Ghana. Is that investment a cost that is recovered elsewhere?
GC: That's a good question and no, absolutely not, and that is a complete myth.
When you recover costs from oil exploration you have to agree the recoverable costs with the Government. So if for example we build a hospital in Ghana, if we then try to claim that money back from our costs the Government would rightly say "hang on, you built this to help the local community and to gain your licence to operate, you can't go claiming that back", so social responsibility costs are definitely not recoverable and that is another total myth.
So what about the quote from the Tullow Oil Ghanaian representative, Gayheart Mensah, about social responsibility costs being recoverable?
GC: Gayheart is a fine and excellent colleague of mine, and I think he was quoted completely out of context both in the source article and again in a second article. What he might have been referring to are certain minor costs that could - and I stress the word 'could' - be argued to come under CSR (Corporate Social Responsibility) which are recoverable, such as some training fees and other fees that the Government insist that are incurred under the agreements can be classified as an operational cost. That is not the same as major social infrastructure and social investment projects we've undertaken in these countries which were implemented by Tullow out of choice and cannot in any way be classified as operational costs, so I'd definitely rebut that.
If you looked up the original quote from Gayheart, you'd certainly see that some people used it totally out of context. But let's be clear - if it had been an accurate quote and he had said that CSR costs were an operational cost and were recoverable, he would have been wrong. They are not recoverable.
Being quoted like this is one of the perils of being a company spokesman but you get used to it.
Many thanks to George who had to leave the call following this segment for providing some fantastic insight into Tullow Oil, and for being very open and honest in responding to some of the criticisms of Tullow Oil. We're not done just yet mind! Tomorrow we bring you another chat with William Pollen, where we talk more about the deal with Sunderland, and look to what the future holds for all parties in the deal.