Environmental_Governance in Petroleum Producing Countries

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Environmental Governance in

Petroleum Producing Countries -

Findings From a Comprehensive

Survey

September 2009

THE WORLD BANK


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Environmental Governance in Petroleum Producing Countries:

Findings From A Comprehensive Survey

Prepared by:

Integrated Environments (2006) Ltd.Calgary, Canada

DAppolonia SpA.Genoa, Italy

Prepared for:

World Bank Group

Norwegian Agency for Development Cooperation (NORAD)

September 2009

Disclaimer:

The information presented in this document has been compiled and interpreted exclusively for the purposes of the

World Bank and the Norwegian Agency for Development Cooperation (NORAD) by Integrated Environments (2006)

Ltd. (IEL) and DAppolonia SpA. (DAppolonia) in accordance with conditions specified by contract. IEL and

DAppolonia have exercised reasonable care, skill and due diligence to assess the data and information reviewed

during the preparation of this report, but makes no specific warranties or guarantees regarding the completeness

and accuracy of this information. The contents of this report are based on, and limited by, the circumstances and

conditions stated herein, the results of surveys and interviews, and upon publicly accessible information available at

the time of its completion. The professional opinions, recommendations and guidance expressed in report are

based on the information reviewed and expertise of the consultant team.


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Table of Contents

1 EXECUTIVE SUMMARY ...............................................................................................................7

2 BACKGROUND ......................................................................................................................... 11

PETROLEUM GOVERNANCE INITIATIVE (PGI) ................................................................................................... 11

WORLD OIL DEMAND AND ENVIRONMENTAL GOVERNANCE .............................................................................. 12

3 PREPARING THE PGI SURVEY .................................................................................................... 15

DEVELOPMENT OF THE SURVEY QUESTIONNAIRE .............................................................................................. 15

ESTABLISHMENT OF A BENCHMARK TEMPLATE ................................................................................................. 15

SELECTION OF SURVEY COUNTRIES ................................................................................................................. 18

SELECTION OF KEY THEMES ........................................................................................................................... 19

SURVEY ADMINISTRATION ............................................................................................................................ 20

SURVEY LIMITATIONS ................................................................................................................................... 21

4 SURVEY RESULTSCAUSAL RELATIONSHIPS ............................................................................. 23

OIL PRODUCTION VERSUS PETROLEUM GOVERNANCE ....................................................................................... 23

GROSS NATIONAL INCOME ........................................................................................................................... 24

HUMAN DEVELOPMENT INDEX ...................................................................................................................... 26

5 SURVEY RESULTS BY THEME ..................................................................................................... 27

IMPROVING THE LEGAL,CONTRACTUAL AND REGULATORY FRAMEWORK.............................................................. 27

STRENGTHENING INSTITUTIONS AND THEIR GOVERNANCE CAPACITY ................................................................... 28

EXPANDING PUBLIC CONSULTATION AND DISCLOSURE ...................................................................................... 30

ELIMINATING BARRIERS TO INFORMATION....................................................................................................... 31

OPTIMIZE THE ENVIRONMENTAL IMPACT ASSESSMENT PROCESS......................................................................... 32EIA Approval Process, Screening and Scoping .................................................................................... 33

EIA Content and Approach ................................................................................................................. 33

Project Siting ...................................................................................................................................... 35

Ensuring Effective EIA Monitoring and Follow-up of Agreed Environmental Management Plans .... 35

IMPROVING REGULATORY ENFORCEMENT ....................................................................................................... 36

INCORPORATING BEST ENVIRONMENTAL PRACTICE AND TECHNOLOGIES .............................................................. 38

UNDERSTANDING FUTURE LIABILITY AND RECLAMATION COSTS.......................................................................... 38

6 KEY FINDINGS .......................................................................................................................... 41

SURVEY DELIVERY ........................................................................................................................................ 41

LEGAL,REGULATORY AND CONTRACTUAL FRAMEWORK..................................................................................... 42

INSTITUTIONAL STRENGTHENING OF GOOD GOVERNANCE ................................................................................. 43ENVIRONMENTAL ASSESSMENT PROCESS ........................................................................................................ 43

PUBLIC INVOLVEMENT,DISCLOSURE AND ACCESS TO INFORMATION.................................................................... 44

PRIVATE SECTOR INVOLVEMENT IN BEST ENVIRONMENTAL PRACTICE .................................................................. 46

DECOMMISSIONING,ABANDONMENT AND LIABILITY......................................................................................... 46

7 RECOMMENDATIONS ............................................................................................................... 47


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8 REFERENCES ............................................................................................................................ 51

List of Tables

Table 3-1: Selection of Survey Countries ..................................................................................... 18

Table 3-2: Criteria for Selection of Benchmark Countries ........................................................... 17

List of Figures

Figure 2-1: World Oil Production 2007-2030 ................................................................................ 13

Figure 4-1: Oil production against PGI survey score ..................................................................... 24

Figure 4-2: Gross National Income against PGI survey score ....................................................... 25

Figure 4-3: Human development index (HDI) against PGI survey score ....................................... 26

Figure 5-1: PGI Scores - Legal, Regulatory and Contractual Framework ...................................... 28

Figure 5-2: PGI Scores for Institutional Capacity .......................................................................... 29

Figure 5-3: PGI Scores - Public Consultation and Disclosure ........................................................ 30

Figure 5-4: PGI ScoresEnvironmental Information Systems ..................................................... 32

Figure 5-5: PGI ScoresEIA Approval, Screening and Scoping .................................................... 34

Figure 5-6: PGI ScoresEIA Content and Approach .................................................................... 35

Figure 5-7: PGI ScoresEnsuring EIA Monitoring and Follow-Up ............................................... 36

Figure 5-8: PGI ScoresEnforcement, Best Practice Standards and Risk Management ............. 37

Figure 5-9: PGI ScoresDecommissioning and Abandonment ................................................... 40

List of Appendices

Appendix 1: Survey Questionnaire ............................................................................................... 55

Appendix 2: Survey Results ........................................................................................................... 84


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Abbreviations

ARPEL Regional Association of Oil and Natural GasCompanies in Latin America and the Caribbean

BP British Petroleum

CAPP Canadian Association of Petroleum Producers

CASRO Council of American Survey Research Organizations

EIA Environmental impact assessment

EITI Extractive industries transparency initiative

EMS Environmental management system

EU European Union

GDP Gross domestic product

GNI Gross national income

HDI Human development index

IAIA International Association for Impact Assessment

IEA International Energy Agency

IFC International Finance Corporation

IPIECA International Petroleum Industry Environmental

Conservation Association

IEL Integrated Environments (2006) Ltd.

Mb/d Million barrels per day

NORAD Norwegian Agency for Development Cooperation

OECD Organization for Economic Cooperation and

DevelopmentPGI Petroleum governance initiative

PPP Purchasing power parity

UN United Nations

WBG World Bank Group


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Acknowledgements

The authors of this publication are consultants Miles Scott-Brown of Integrated Environments

(2006) Ltd., Calgary, Canada, and Marcello Iocca of DAppolonia SpA, Rome, Italy. Eleodoro

Mayorga Alba, Principal Petroleum Economist from the Oil Gas and Mining Policy Unit (COPCO)

of the World Bank was the Task Team Leader.

We wish to thank the many participants that contributed towards this project in the 32 target

and benchmark countries surveyed. The group contribution in each country was both essential

and integral in completing the summary version of each survey, representing a snapshot of

country governance.

Other World Bank staff involved in the development and review of this project includes

Mohammed Bekhechi, Harvey Himberg, Marcelo Acerbi, Hocine Chalal, and Michael Levitsky.

The contribution of consultants who assisted the core team is also greatly appreciated including

Fernando Rodriguez, Michael McWalter, Joseph Akpokodje, Peishen Wang, Maged Mahmoud

Hamed, Yahya Albadwi and Marcia Oliveira.

The consultant team also wishes to thank the contribution, time and effort of World Bank staff

in Angola, Argentina, Gabon, Cameroon, Colombia, Congo-Br, Mauritania and Peru for

organizing survey logistical arrangements.

Finally, the authors wish to thank the Oil for Development program of NORAD who provided

funding for the projec


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1 Executive SummaryThe Petroleum Governance Initiative (PGI) is a joint effort of the Government of Norway and

the World Bank Group to provide assistance to oil producing nations to allow for effective

environmental and social management of oil and gas development. As part of the

Environmental Pillar, or theme, this report summarizes the results of a survey of national

governments as to how they manage the environmental and social impacts of oil and gas

projects.

The focus of the project is to measure environmental and social performance of national

governments against a benchmark standard, derived from five countries, representing a

compendium of best management practices for minimizing the impacts of oil and gas activity.

The outcome of the project is to identify areas where the World Bank can provide assistance to

improve environmental governance and management systems, particularly in those developingcountries undergoing rapid oil and gas industry development, where resource revenues form a

major portion of GDP.

Five pilot countries were selected to pre-test and further refine the questionnaire - Angola,

Colombia, Gabon, Azerbaijan and Mauritania. In addition, a total of 29 countries were initially

approached, of which 27 countries participated in the survey, across four regions - Latin

America and Caribbean, Sub- Saharan Africa, Middle East and North Africa and Asia & Pacific.

The survey was completed using on-line survey software and survey questionnaires were

translated into French, Spanish, Russian and Portuguese. Five pilot countries were selected to

pre-test and further refine the questionnaire - Angola, Colombia, Gabon, Azerbaijan and

Mauritania.

The survey assessed governance of the oil and gas industry for the following ten general

themes:

Improving the Legal, Contractual and Regulatory Framework

Strengthening Institutions and their Governance Capacity

Expanding Public Consultation and Disclosure

Improving Environmental Impact Assessment (EIA) Beyond the Approval Stage

Ensuring Effective Monitoring and Follow-up of Agreed to Environmental

Management PlansImproving Regulatory Enforcement

Eliminating Barriers to Information

Incorporating Best Environmental Practice and Technologies

Understanding Future Liability and Reclamation Costs

Managing Greenhouse Gas Emissions


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Surveys were sent to government, industry and civil society representatives. A single version of

the survey was consolidated for each country, representing a compendium of the opinions of

the survey respondents, and the professional opinion of the consultant team. Statistically, the

results may not be entirely valid for an individual country, but taken as a whole, they represent

a valid research effort to identify the most serious gaps of the environmental governancesystem in oil producing developing nations.

Key findings of the survey are as follows:

1. Environmental protection is considered to be a key component of good governance. Ascountries become richer in terms of economic growth, concern for environmental

protection becomes more evident.

2. The results of the survey show that in the majority of countries surveyed, a sufficientlyappropriate, but largely theoretical, environmental policy and legal framework is in

place for managing impacts of the oil and gas industry. Most governments of emerging

oil producers have a dedicated institution for managing the environmental and social

impacts of the oil and gas sector. In most cases, the principles of their regulatory system

are those already adopted in more developed countries, largely transposed into national

legislation. Oil and gas operators, in particular those large oil companies with an

established environmental policy, prefer to operate in countries where a modern

regulatory system is implemented.

3. There is a large variability across all survey countries as to how the environmentalimpact assessment (EIA) process for oil and gas activities is implemented. Overall, most

countries have some form of EIA process that has been incorporated within theirregulatory framework. However, much of the emphasis of the EIA process appears

directed towards the approval of oil and gas projects, rather than to a life cycle

approach for minimizing environmental and social impacts. Particularly lacking are a

systematic involvement of the public and local stakeholders, access to baseline

environmental and social information in the project affected area, and the analysis of

project alternatives and cumulative regional impacts beyond the project level.

4. Monitoring and project follow-up are considered part of the EIA regulatory frameworkenforced in the majority of surveyed countries. Nevertheless, actual enforcement

practices are inadequate, monitoring is insufficient and reported data is not disclosed.Most countries show an insufficient, sometime totally absent control and enforcement

mechanisms during the post-EIA approval phase.

5. While governments may consult about oil and gas activities, they disclose little to thepublic and affected stakeholders. Governments generally choose to inform stakeholders

rather than involve them in decisions regarding oil and gas development. The impact of


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the public consultation process on the ability to affect decisions regarding oil and gas

projects is unclear.

6. Similarly, there are significant barriers to the disclosure of information about oil and gasprojects and the natural and social environments in which they occur. In a globalinformation age, efforts are needed to improve access to information. Most

governments lack a policy about how information about oil and gas projects is to be

disclosed or disseminated to the public and affected stakeholders. They also lack a clear

commitment to responding to project stakeholders in a timely and effective manner and

to establish and implement a centralized information system for dissemination of

information concerning oil and gas development.

7. Governments generally lack a mechanism to require oil and gas companies to adhere tothe regulatory framework for managing environmental and social impact. An ongoing

dialogue with industry and local stakeholders could help governments incorporating

changes and introducing best environmental practice into national environmental

regulations.

8. Finally, governments should pay more consideration to decommissioning andabandonment of oil and gas facilities and their associated liability costs. Indeed, more

attention is paid to granting approval to proceed with oil and gas projects today, rather

than considering what are the long terms impacts and costs of these projects at some

time in future.

Recommendations to the Bank arising from the PGI survey include the following:

1. Undertake a gap analysis in specific countries as a further refinement of the survey. Countrydiagnostics could be undertaken as part of project preparation.

2. Undertake a gap analysis at a regional level in order to identify the most appropriatemechanism for institutional strengthening of environmental governance, enabling

development of a common coherent and consistent environmental and social regulatory

system, while at the same time optimizing resource development.

3. Improve country capacity in EIA monitoring and follow-up through training, workshops, andcase studieson the job training is preferred to make use of real world experience and tomaximize the benefit of capacity building.

4. Promote the development of outsourcing of monitoring and EIA review capacities.5. Improve the consultation and outreach process to develop and build trust between

industry, governments and local communitieslook at creative mechanisms such as shared


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regional development plans or impact benefit agreements to ensure that producing regions

benefit economically from oil and gas and that social conditions are improved and not

impaired.

6. Support the development of regional information systems for disseminating environmentaland social information relating to proposed oil and gas development.7. Support an approach for management of environmental liabilities arising from oil and gas

development, such as an overarching regulatory and accounting framework, assistance in

the determination of liability costs and their assignment, understanding of

decommissioning, closure and abandonment procedures.

8. Delivery of training programs for key themes identified as part of the PGI survey.


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2 BackgroundPetroleum Governance Initiative (PGI)

The Petroleum Governance Initiative (PGI) is a bilateral collaboration of the Government of

Norway and the World Bank Group (WBG) aimed at achieving structured cooperation on

petroleum sector governance issues. In particular, it is designed to provide support to

petroleum producing countries in the implementation of appropriate petroleum governance

frameworks, including resource and revenue management, linkages to the effective

management of environmental, social and community issues arising from oil and gas

development, and fostering mechanisms for community development and benefits in oil

producing regions.

Petroleum is a key economic sector in many developing countries. However, given weakinstitutional structures and lack of local competence to manage petroleum resources, it is often

a challenge for many of these countries to avoid the resource curse how to translate

petroleum resources and revenues into improved living conditions and sustainable economic

growth, while fostering environmental protection and minimizing the social impacts of a

resource boom economy. This topic is the subject of considerable debate (Brunnschweiler,

2008; Gary & Karl, 2003; Karl, 1997; ODI, 2006; Overseas & Institute, 2006; Pegg, 2006; Sachs &

Warner, 1999, 1999 revised, 2001).

The PGI covers three general themes, or pillars, that addresses issues of transparency and

economic responsibility, environmental sustainability and responsible community

development. These three PGI pillars are as follows:

Pillar 1 - Petroleum sector governance and petroleum revenue management;

Pillar 2 - Environment; and

Pillar 3 - Community development.

Pillar 2 of the PGI (Environment) involves four main activities:

Assessment of environmental governance and management systems in oil producing

countries (this report);

A strategic environmental and social assessment of oil and gas activity in Mauritania,

highlighting West Africa coastal and marine zones and the application of environmental

regulations to petroleum sector operations;


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Workshops and a toolkit on decommissioning and abandonment of oil and gas

operations; and

Specific in-country assistance in environmental management on a case-by-case basis.

World Oil Demand and Environmental Governance

According to the reference scenario of the International Energy Agency (IEA) World Energy

Outlook 2008 (IEA, 2008; International, Energy, & Agency, 2008), world oil demandbefore the

current economic downturn - was expected to increase from 84 mb/d in 2007 to 106 mb/d in

2030. Most of that increase in production was predicted to come from non-OECD countries,

rising from 44% in 2007 to 51% in 2030. Production of conventional oil (crude oil, natural gas

liquids and enhanced oil recovery) was expected to drop off at that time (see Figure 2-1).1

By

2030, fossil fuels are still predicted to account for 80% of the worlds primary energy mix, with

oil remaining the dominant fuel.

The bulk of the net increase in oil production is expected to come from natural gas liquids and

from non-conventional oil sources, including Canadian oilsands. Some 64 mb/d of additional oil

supply, the equivalent of six times current daily production from Saudi Arabia, will be needed to

cover energy demand increase and current production decline (IEA, 2008).

Even if this projection does not materialize, oil and gas producers will be forced to explore and

develop oil and gas fields in more remote, frontier and often more fragile environments,

including the Amazon basin, sub-Saharan Africa, the circumpolar Arctic and offshore deepwater

areas.

Not only will these exploration and production activities be costly, they could have significant

environmental and social impacts, if not managed properly. It is essential that governments of

oil producing nations enhance their capacity to protect their natural environment and ensure

that sustainable benefits of oil and gas development accrue for their citizens, today and into the

future.

1World Energy Outlook 2008, Executive Summary. OECD IEA.


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Figure 2-1: World Oil Production 2007-2030


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3 Preparing the PGI SurveyThe focus of the PGI survey is to measure environmental and social performance of national

governments against a benchmark standard, representing a compendium of best management

practices for minimizing the impacts of oil and gas activity. Detecting gaps, and more

importantly, facilitating the rapid implementation of corrective measures, are an important

challenge of the World Bank Group in its safeguard efforts to preserve natural habitats and the

culture of indigenous peoples.

Development of the Survey Questionnaire

In order to survey countries in a cost effective manner, and in order to reach a broad audience

of respondents representing diverse opinions from governments, industry and civil society, a

web-based survey tool was developed. The web-based survey tool was developed in English,although companion surveys were developed in Spanish, Russian, Portuguese and French,

allowing participants access to the survey in five languages.2

The survey featured a multiple choice response for a series of questions centering around 10

key themes, that are considered to be representative of good environmental governance

(a copy of the survey is provided in Appendix 1). The responses to each question

were structured in relation to compliance with a benchmark template representing an ideal

governance response derived from five benchmark countries. The response to each question

was then assigned a score relative to the template as follows:

0Did not comply with the benchmark template

1 - Partially complies with the benchmark template

2Fully complies with, or exceeds, the benchmark template

Establishment of a Benchmark Template

A benchmark template was developed from five countriesCanada, Norway, Italy, Malaysia

and Brazil. The template was considered to represent a compendium of best practices

undertaken by governments in managing the impacts of the oil and gas industry. These

benchmark countries were selected for the following reasons:

Canadarepresentative of best practices for continental production of oil and gas and

would incorporate US on-shore practices (Bailey & Engelhardt, 1983);

2The web-based survey tool selected was Survey Monkey - seewww.surveymonkey.com.The survey is also

presented in Appendix 1.
http://www.surveymonkey.com/http://www.surveymonkey.com/


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Norwayrepresentative of best practices for offshore production of oil and gas and

would incorporate UK off-shore practices (Kinn, 1999; Lind, 1983);

Italyincorporation of EU standards;

Malaysialarge oil and gas producer in South Asia; and

Brazillarge oil and gas producer in South America.

Criteria for the selection of benchmark countries are shown in Table 3-1. Benchmark responses

for each question were derived by three means:

By direct survey means (Brazil and Norway);

By opinion of knowledgeable experts (Italy and Canada); and

By literature review and Internet survey (Malaysia).

It should be noted that the benchmark template represents a best practice ideal for survey

comparison purposes only. An optimal environmental governance framework for a given oiland gas producing country should be designed, adopted and implemented taking into

consideration each countrys specific environmental constraints, proposed oil and gas projects,

the regulatory and legal framework and institutional capacity.

Five pilot countries were selected to pre-test the questionnaire, and to further refine the survey

approach. The pilot countries were Angola, Colombia, Gabon, Azerbaijan and Mauritania. In

each pilot country, contacts were made with various representatives of government, industry

and civil society, in order to solicit support in completing the questionnaire. The questions were

discussed with potential respondents as to their clarity and suitability in assessing petroleum

governance. In some cases, where further clarification was required, the questionnaire was

modified and this version was used for all subsequent surveys.


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Table 3-1: Criteria for Selection of Benchmark Countries

Country

Environmental

Governance

(State of

Development)

Petroleum

Production

(Greater than 1

MMbbl/d)

Oil Production

(Onshore vs.

Offshore)

Continent/Geographic

Representation

Accessible

Information Selected

E

Canada High Onshore and

offshoreNorth America

Highly accessibleIEL

team has extensive in-

country experience

USA High

Onshore and

offshore North America Accessible

No

Duplicate with Canada

Norway High Offshore Europe Accessible

Italy High No0.11Onshore and

Offshore

European

Community

Highly accessibleIEL

team has extensive in-

country experience

UK High Offshore Europe AccessibleNo -

Duplicate with Norway

on-

E

Malaysia Moderate No0.8 ? Asia Somewhat accessible

Kuwait Less Onshore Asia Somewhat accessible

No

Suggested survey country

South Africa Moderate No0.23 Offshore Africa Somewhat accessible

More information needed

Algeria Less Onshore and

OffshoreAfrica Less Accessible

No


Brazil Moderate Onshore and

OffshoreSouth America Somewhat accessible

More information needed

Mexico Low to Moderate Onshore and

OffshoreCentral America Moderately accessible

No



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Selection of Survey Countries

A total of 29 countries, currently either receiving World Bank assistance, or eligible for

assistance, were initially selected for the survey. Of these 29 countries, results for 27 countrieswere compiled (see Table 3-2). No survey responses were obtained for Mozambique and

Kuwait. Four regions were selected, based on a division of regions in use by the World Bank as

follows:3

Latin America and CaribbeanArgentina, Colombia, Ecuador, Mxico, Per, Trinidad

and Tobago and Venezuela.

Sub- Saharan AfricaAngola, Cameroon, Congo-Br, Gabon, Mauritania, Nigeria and Sao

Tome and Principe.

Middle East and North AfricaAlgeria, Egypt, Syria and Yemen.4

Asia & PacificAfghanistan, Azerbaijan, Cambodia, China, Indonesia, Kazakhstan, PapuaNew Guinea, Philippines and Thailand.

The selection of survey countries was made in accordance with the following factors:

Country is a petroleum producer, or a potential petroleum producer;

Country receives World Bank assistance, or is eligible for Bank assistance;

In-country contacts available within NORAD and the Bank; and,

Feasibility of survey completion.

Table 3-2: Selection of Survey Countries

Latin

America and

Caribbean

Middle East

and North

Africa

Sub Saharan

Africa

Asia/Pacific

Argentina Algeria Angola Afghanistan

Colombia Egypt Cameroon Azerbaijan

Ecuador Syria Congo Cambodia

Mexico Yemen Gabon China

3The Eastern Europe and Central Asia region were combined with the Asia & Pacific region, as only one representative,Azerbaijan, was included4No other OPEC countries were selected as they do not receive World Bank assistance


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Latin

America and

Caribbean

Middle East

and North

Africa

Sub Saharan

Africa

Asia/Pacific

Per Mauritania Indonesia

Trinidad &

Tobago

Nigeria Kazakhstan

Venezuela Sao Tome and

Principe

PNG

Philippines

Thailand

Selection of Key Themes

The survey was constructed around 10 themes that are considered to represent essential

elements of good governance for managing the environmental and social impacts of oil and gas

development. The themes were derived from consideration of best governance practices and

best environmental and social practices applicable to the oil and gas industry.

In the context of this report, we define best environmental practice for the oil and gas industry

to be the application of the most appropriate combination of management measures for

minimizing the impacts of oil and gas development. The ten best practice themes in this report

were derived from the following sources:

Codes of environmental practice for the oil and gas industry (Canadian Association of

Petroleum Producers (CAPP), 1999; E&P Forum, 1991, 2002; IPIECA, nd; UNEP, 2002);

Other governance studies for the petroleum industry or other sectors (Chatham House,

2007; Environmental Agency, 2004; OECD, 2002; World Bank, 2004);

Sector evaluations (Fraser Institute, 2008; World Bank, 2005, 2009);

Lessons learned from the Extractive Industry Review and the recent review of IFC

safeguards; and

Professional experience and opinion of the project team in relation to oil and gas

development in a variety of countries.

The ten governance themes are as follows:


Strengthening Institutions and their Governance Capacity


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Improving Environmental Impact Assessment (EIA) Beyond the Approval Stage

Ensuring Effective Monitoring and Follow-up of Agreed Environmental Management

Plans

Improving Regulatory EnforcementEliminating Barriers to Information



Managing Greenhouse Gas Emissions

A further description of these themes is provided in Section 4.

Survey Administration

The procedure for administration of the survey questionnaire was as follows:

Contact was made with the local World Bank office in each country and invitation

letters, if required, were made to local government institutions;

Individuals from government, industry and civil society and their appropriate affiliation

or institution were contacted to set up interviews;

The survey was discussed with potential respondents, and if in agreement, a timeline for

completion made;

Background information pertaining to the legal and regulatory framework and local

operating environment was collected;

Respondents were provided the opportunity to complete the on-line survey or a Word

version in one of five languages;

In the case of the on-line survey, respondents were sent a survey link to their specific

email address. This provides access to only one individual and helps maintain

confidentiality and anonymity of the survey;

Respondents completed the on-line survey at their leisure and once complete thesurvey returned automatically to the project team;

In the case of the non on-line versions of the survey, these results were entered into

Survey Monkey;


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The project team and consultants also completed their own version of the on-line

survey;

Follow-up emails were sent to those respondents who did not complete the survey on a

timely basis;

The survey results were tabulated using the Survey Monkey software, all responses

were considered anonymous and compiled for each question;

A single version of the survey was then compiled for each country using the results from

individual respondents and those of the project team;

A score was assigned for each question relative to the benchmark result; and

Scores were tallied and then analyzed in Excel relative to each of the 10 survey themes.

Survey Limitations

The survey to assess environmental governance and management systems in petroleum

producing countries was intended to provide a broad overview of how governments manage

the impacts of the oil and gas industry. Limitations to the survey approach and results are as

follows:

Not all governments chose to participate in the survey. Some were concerned that the

survey may be interpreted as representative of official government position, or policy,

and as a result, did not participate.

The survey was administered to government, industry and civil society in an attempt to

garner a wide range of opinion in relation to environmental governance. However, for

the questions that do not specifically refer to factual issues, this divergence of views and

positions also resulted in a difference in opinions as to the meaning and effectiveness of

governance.

Discrepancies in perception (sensitivity) about some themes may have occurred as

different categories of interviewees (government officials, private sector and NGOs)

completed the questionnaire. Normally, governments tended to give evidence of a well-

structured and functional national legislative framework and the correspondingregulatory system, while private sector representatives and NGOs generally responded

to questions on the basis of their perception of the actual situation. In general,

responses from government officials cover all themes, the institutional and legal aspects

in particular, while other respondents focused more on the effectiveness of the

regulatory system. In order to deal with these discrepancies, a single response was

collated for each country that represented the teams professional opinion of the actual


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governance situation based on expert knowledge and survey results from respondents

in each country.

The survey was relatively long, involving 80 questions. This was a hindrance to those

who did not have much time in which to respond. However, it was felt that the surveycould not be reduced further and adequately cover the breadth of responses required

for the ten survey themes selected. Many respondents demonstrated initial interest and

enthusiasm in completing the survey. Final responses however were fewer.

Surveys responses for each question and theme were compared to the benchmark

response. Results from the survey were not intended to measure environmental

performance between countries.

The survey should in no way be considered a statistical representation of the data for a

specific country, but rather represents a mosaic of opinions. Its main value appears atthe regional and global level in understanding gaps in the environmental management

system of producing countries and identifying areas for much needed improvement.

Although there were two questions on greenhouse gas emissions and climate change,

they were not considered in the final review because the data was not extensive enough

to make any pertinent conclusions. The question concerned participation in the WB

Global Gas Flaring Reduction Initiative and greenhouse gas emission reporting.


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4 Survey ResultsCausal RelationshipsIn order to first examine the results of the PGI survey, consideration was given to exploring

possible causal relationships between the PGI country score and independent variables that

have some relationship or relevance to petroleum governance. The major assumptions

explored were as follows:

Oil and Gas Production: As the oil and gas production experience and resource

revenues are key elements to sustainable oil and gas management, countries that are

major oil producers should also tend to have higher PGI country scores.

Gross National Income. It would be expected that countries that have higher national

incomes as a result of oil revenue would be able to expend more funds on

environmental protection and human development.

Human Development Index: As the level of human development is a major asset, those

countries with a higher human development index should also tend to have higher PGI

country scores.

Oil Production versus Petroleum Governance

In order to determine the relationship between oil production and PGI scores, oil production

data in thousands of barrels per day was taken from BP Statistical Review of Oil Production

5

foryear 2007. For those countries not included in the BP individual country data, such as

Afghanistan, Cambodia, Mauritania, Papua New Guinea and Philippines, oil production data

was taken from Index Mundi 20056.

One would expect that countries with a higher rate of oil production and therefore higher

resource revenues would have a higher governance score, as more resources could be made

available. However as shown in Figure 4-1, this does not appear to be the case.

5 See athttp://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622 Visited December 20 2008.6 See athttp://www.indexmundi.com/energy.aspx?country=ph&product=oil&graph=production Visited December 20,

2008.
http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622http://www.indexmundi.com/energy.aspx?country=ph&product=oil&graph=productionhttp://www.indexmundi.com/energy.aspx?country=ph&product=oil&graph=productionhttp://www.indexmundi.com/energy.aspx?country=ph&product=oil&graph=productionhttp://www.indexmundi.com/energy.aspx?country=ph&product=oil&graph=productionhttp://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622


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Figure 4-1: Oil production against PGI survey score

The analysis shows an unexpected almost no causal relation (R2=0.13) between oil production

and PGI score.

In fact, those countries that have a high rate of oil production, such as China, Mexico,

Venezuela, Algeria and Angola show relatively low PGI scores. These countries could be

potential recipients of assistance to help improve their petroleum governance scores.

Gross National Income

The next analysis considers the relationship between PGI scores and GNI per capita based on

purchasing power parity (PPP) based on the World Bank, World Development Indicators

Database7. The results of this analysis are shown in Figure 4-2.

7Data for each country can be found at:http://ddp-

ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP

=N&HF=N/CPProfile.asp Visited December 22, 2008.
http://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asphttp://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&WSP=N&HF=N/CPProfile.asp


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Figure 4-2: Gross National Income against PGI survey score

There is a weak polynomial regression relationship between GNI and PGI scores (R2=0.42). Thisindicates that countries with higher GNI may have more financial resources available to spend

on improving environmental and social performance of the oil and gas industry. As countries

experience greater prosperity and economic progress, their citizens, and governments, pay

more attention to the noneconomic aspects of living conditions, including concern for

environmental protection and human health (Gangadharan & Valenzuela, 2001; Grossman &

Krueger, 1995).

The relationship also indicates opportunities for improvement in petroleum governance in

those countries below and to the right of the polynomial regression line (higher GNI) including

Argentina, Gabon, Venezuela, Kazakhstan and Trinidad and Tobago.


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Human Development Index

Another analysis was to consider PGI scores against the Human Development Index (HDI) from

the UN Human Development Report.8

The HDI measures the average achievements in a

country in three basic dimensions of human development: a long and healthy life, access toknowledge and a decent standard of living. It is calculated for 179 countries and territories for

which data is available. Results for this analysis are shown in Figure 4-3.

Figure 4-3: Human development index (HDI) against PGI survey score

The data shows a low causal relationship between these two variables (R2=0.27). It indicates

that those aspects of a high level of human development such as longevity and decent standard

of living are not necessarily related to high scores of petroleum governance.

However the relationship does indicate opportunities for improvement in for those countrieswith a high human development index and low PGI score below the regression line including

Mexico, Argentina, Venezuela, Trinidad and Tobago, Kazakhstan and Ecuador.

8UN, Human Development Report, athttp://hdr.undp.org/en/statistics/- 2006 data
http://hdr.undp.org/en/statistics/http://hdr.undp.org/en/statistics/http://hdr.undp.org/en/statistics/http://hdr.undp.org/en/statistics/


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5 Survey Results by ThemeThis section of the report presents the result of the petroleum governance survey by each of

the 10 governance themes. The entire survey data set is shown in Appendix 2.


The Legal, Contractual and Regulatory Framework of the PGI survey addresses a broad range of

issues including the following:

Constitutional rights and obligations;

Environmental policy and regulations for managing the impacts of oil and gas

development;

International obligations and agreements;Host country and production sharing agreements;

Parks, protected areas and other restrictions on oil and gas development; and

Mechanisms for resolving environmental disputes.

While this theme is broad ranging in its extent, it scored 59% against the benchmark indicating

that, for the most part, survey countries have a well-developed legal and regulatory framework

for managing the oil and gas industry. Environmental considerations are included in the

constitutional rights and obligations of many countries and this question scored the highest at

76% against the benchmark. Similarly many countries also had restrictions on developing oil

and gas in parks and protected areas; this question scored 67% against the benchmark. Nearly aquarter of surveyed countries (23%) still lack a specific environmental law and a full set of

environmental regulations addressing environmental issues arising from the O&G development.

A summary of PGI scores for the Legal Regulatory and Contractual Framework is provided in

Figure 5-1.

Most countries have a well-developed policy and legal framework for managing the

environmental impacts of oil and gas development. This theme scored 59% against the

benchmark. While countries may have an entrenched regulatory and legal framework for

managing oil and gas impacts, this does not necessarily mean that these legal provisions are

entrenched in host country or production sharing agreements. This question had two parts:inclusion of environmental considerations into host country agreements scored 96% against the

benchmark, while inclusion into production sharing agreements scored higher at 58% for an

overall score (both questions) of 77% against the benchmark.


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Figure 5-1: PGI Scores - Legal, Regulatory and Contractual Framework

There was a mixed response in regards to incorporation of international obligations and

agreements for environmental protection. Overall, this theme scored 55% against the

benchmark. However when examined in detail, the responses of survey countries were as

follows:

Most countries incorporate international agreements, provisions and obligations for

environmental and social considerations into their legal systemscore of 69%;

Nearly half consider trans-boundary impactsscore of 46%; and

Half stipulate that oil and gas operators adhere to environmental regulations and

provisions from their country of originscore of 50%.9

In regard to resolution of environmental disputes, the countries surveyed scored 62% overall

for the three questions asked. Most notably is that many countries provide the public access to

the courts and legal system in resolving environmental disputes; the score for this question was

78% against the benchmark value.

Strengthening Institutions and Their Governance Capacity

An important theme in the governance survey is the capacity of government institutions to

manage the impacts of the oil and gas industry, considering available human, financial andtechnical (e.g. equipment) resources. Although the overall response to the questions in this

theme scored 60% against the benchmark, there are apparent differences between institutional

structure (score of 74%) and institutional effectiveness (score of 51%).

9The benchmark countries scored very low in this regard as they have stringent regulations in place, whereas in some of thesurvey countries they scored higher particularly in cases where the national environmental and legal framework may be lacking.


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A summary of PGI results, considering institutional capacity as two general themes (institutional

structure and institutional effectiveness), is shown in Figure 5-2. The results show that most

survey countries have a well-developed institutional structure to manage the impacts of the oil

and gas industry, but lack the institutional capacity to effectively management these impacts.

Figure 5-2: PGI Scores for Institutional Capacity

Most governments indicated that they have a dedicated institution for managing the impacts of

the oil and gas industry (score of 64% against the benchmark). Governments also indicated that

this institution has a written mandate and objectives and a clear set of strategies for managing

impacts of the oil and gas industry (score of 84%).

When it came to the ability to express this mandate and whether the institution has adequatecapacity to fulfil its strategies, most governments indicated a number of limitations to doing so.

A total of 89% of countries surveyed did not comply or only partially complied with the

benchmark, expressing limitations in budget, personnel, training, equipment and retention of

institutional knowledge.

Limitations in institutional knowledge are related to the capacity of the institution to retain

personnel in key positions. Many countries (64%) indicated that they have a moderate or high

rate of turnover within their institution. This is directly related to whether the institution can

pay competitive salaries compared to other government departments or the private sector. A

total of 88% of countries surveyed did not comply, or only partially complied, with thebenchmark, recognizing that they do not pay competitive salaries, which is one factor in the

high turnover rate of personnel.


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The survey questions regarding the theme of public consultation and disclosure had two

components; the first dealt with the process of public consultation and involvement while the

second dealt with consultation specifically relating to indigenous peoples. Most governmentssurveyed have some form of public consultation in place with an overall score of 67% against

the benchmark.

A summary of PGI scores considering public disclosure is shown in Figure 5-3. As the figure

indicates, most countries have a process for public consultation and involvement. However,

transparency and information disclosure lag behind consultation efforts, while survey countries

lack effective consultation procedures for indigenous peoples. There are also gaps in

disseminating baseline environmental and social information pertaining to the project and its

effects.

Figure 5-3: PGI Scores - Public Consultation and Disclosure

From the survey results, it appears that the overall intent of consultation is to inform

stakeholders and the public about the project, rather than to use information gained from

consultation for consideration in decisions regarding the project approval and implementation

process (score of 62% against the benchmark). Only 35% of countries surveyed indicated thatpublic consultation has the ability to affect the project approval process. This indicates a low

level of public confidence in their ability to affect government decisions regarding oil and gas

development.

Most governments (54% of those countries surveyed) indicated that public consultation begins

early on in the project cycle (score of 77% against the benchmark) and 54% of countries


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surveyed indicated that the timing and location of consultation should be both convenient and

accessible to stakeholders (score of 73% against the benchmark).

Governments however do not usually reimburse costs incurred by stakeholders acting as

interveners in the consultation process. Only three countries out of all countries surveyedindicated that such costs are provided.

Similarly the results of public consultation are not published and made publicly available. Only

32% of countries surveyed indicated that this is the case (score of 62% against the benchmark).

In regard to indigenous peoples, less than one half (31%) of countries surveyed indicated that

they have ratified the International Labor Convention (ILO) 169 regarding the rights of

indigenous peoples and consultation.

Very few countries (15%) indicated that they have a law and associated regulations that

addresses the rights and obligations for indigenous peoples specifically establishes a

consultation process (score of 50% against the benchmark).

Eliminating Barriers to Information

This theme examines how governments make information available to stakeholders and the

public about proposed oil and gas projects and disclose their predicted impacts on natural and

human environments (Figure 5-4).

Overall, the survey results indicate that there are significant barriers to governments in

disseminating information about oil and gas activities and also the processes in place tomanage environmental and social impacts of petroleum development. The overall average

score of questions in this theme tallied 22% against the benchmark. There are significant

differences as to whether governments have a dedicated environmental information system,

compared to how information about oil and gas projects is disseminated to the public.

Most governments surveyed do not have a dedicated or centralized environmental and social

information system in place to assist in management of oil and gas impacts (score of 31%

against the benchmark). Only 11% of governments surveyed indicated that they have a

dedicated information system to retrieve baseline and other types of environmental and social

information associated with the oil and gas industry. For the most part, this system is not

available to the public and stakeholders (only 8% of countries indicated so), and there are

insufficient resources in place to ensure its effective function.


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Figure 5-4: PGI ScoresEnvironmental Information Systems

Governments indicated that they lack a clear information disclosure policy as to how

information about oil and gas activities and their management is communicated to the public

and stakeholders (score of 48% against benchmark). Similarly, most governments do not have a

commitment to respond to all information requests in a timely manneronly 21% of countries

fully complied with this benchmark standard.

Governments did a better job in communicating information about oil and gas projects to the

public early on during the project cycle (score of 66% against the benchmark). A total of 32% of

countries surveyed fully complied with the benchmark to disclose information about pending

oil and gas activities at the earliest date possible.

Governments also try to make sure that any information disclosed about oil and gas

development is accessible in some way to different languages, culture and indigenous people

(score of 66% against the benchmark).

Optimize the Environmental Impact Assessment Process

The environmental impact assessment theme focuses on the implementation of an effective

environmental impact assessment process, regulating new oil and gas projects, including

mitigation and the minimization of environmental and social impacts. The overall theme scored

an encouraging value of 67% against the benchmark. The following sub-themes were

considered:

EIA approval process, screening and scoping (score of 72% against the benchmark)

what mechanisms are in place for reviewing projects, assessing their environmental and

social impacts and arriving at a decision in the public interest ?


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EIA content and approach (score of 64% against the benchmark)what processes and

procedures are used in the environmental assessment process?

What considerations are taken into account when siting oil and gas projects? (score of

67% against benchmark).

What procedures are in place for evaluating and managing the environmental and social

risks associated with oil and gas development? (score of 65% against the benchmark).

Generally the survey results shows that many countries are well versed in the EIA process as it

pertains to the approval of oil and gas projects. EIA content and approach are well developed

and the siting of oil and gas projects usually includes consideration of environmental and social

concerns. However, monitoring and follow-up post project approval is generally weak

throughout many countries surveyed (see below).

EIA Approval Process, Screening and Scoping

Survey results show that most countries have set up an adequate EIA process for the review

and initial regulatory approval of oil and gas projects (overall score of 72% against the

benchmark, see Figure 5-5). It is important to note that although many countries may not have

enforced a specific environmental law addressing environmental issues arising from oil and gas

development, some form of impact assessment is routinely undertaken throughout all phases

of exploration and production activities.

The screening process for all oil and gas projects is mandatory in 67% of surveyed countries.

Some form of scoping is also conducted in all surveyed countries; in 56% of these countries, the

public is normally involved.

Specific Terms of Reference for oil and gas projects are set by governments and include some

form of public review (score of 61% against the benchmark). Adherence to specific timelines in

the review of oil and gas projects is undertaken to a somewhat greater extent (score of 67%

against the benchmark).

EIA Content and Approach

This subtheme (overall score of 64% against benchmark countries) explores the degree of

completeness of the EIA process and the quality of the Environmental Impact Assessment (EIA),

or Environmental Impact Statement (EIS), utilised for that purpose (see Figure 5-6).

Although most countries have established an environmental assessment review process, it is

not always completed in a comprehensive and exhaustive manner, according to internationally

accepted best EIA practice standards. Analysis of alternatives (score of 61% against benchmark)

is in fact often incomplete (48%), or totally missing (15%). Only 37% of surveyed countries take

into account the option zero (no development alternative).


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A total of 63% of surveyed countries do not fully incorporate an analysis of cumulative

effects, or an integration of social and biophysical impacts in the EIA process. Cumulative

effects are not considered at all in 15% of countries surveyed.

In most cases (score of 86% against the benchmark), environmental impact studies include all

environmental information necessary to carry out a proper impact assessment, while social and

cultural aspects are often under represented.

Figure 5-5: PGI ScoresEIA Approval, Screening and Scoping

Impact assessment of regional effects is not considered in half of the countries surveyed,

indicating that impact assessment efforts largely consider only project level impacts. Lacking a

proper data collection and processing centre makes it difficult to identify and measure

cumulative impacts.

Qualitative and also quantitative characterizations of project impacts are fully performed in

46% of the surveyed countries, while qualitative analysis alone is performed in another 46% of

survey countries. In the remaining 8% of survey countries, the environmental impact study does

not include any characterization of the importance of each potential environmental impact.

Planning of impact specific mitigation measures is considered within the EIA process for 96% of

survey countries (though in half of them the process does not include public review). In the

remaining 4% of survey countries, no mitigation measures at the project level are taken into

account.


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In 52% of cases, environmental baseline information are available at the project level but not

necessarily at the regional level, while in 12% of the countries, environmental baseline

information is considered proprietary to the proponent and not made available to the public.

Figure 5-6: PGI ScoresEIA Content and Approach

Project Siting

For the siting and location of new oil and gas projects, 76% of survey countries take into

account provisions and limitations stipulated by relevant land use policies and planning. Some

form of public consultation and review of where oil and gas facilities are sited takes place in

88% of countries surveyed. Governments in only 28% of those countries surveyed completeappropriate consultation (see Figure 5-6).

Ensuring Effective EIA Monitoring and Follow-up of Agreed Environmental Management Plans

This theme examines the capacity and capability of governments in the follow-up of EIA

approval conditions and requirements, and how proponents are complying with those

conditions (see Figure 5-7).

The EIA monitoring and follow-up theme only scored 50% against the benchmark, despite the

consideration that 88% of surveyed countries require the mandatory preparation and

enforcement of a monitoring and environmental management plan. The reasons for this low

score are due to the relative lack of third party independent monitoring and making monitoringresults available to the public.


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Figure 5-7: PGI ScoresEnsuring EIA Monitoring and Follow-Up

Both governments and/or proponents regularly undertake monitoring and project follow-up in

46% of surveyed countries.

In 77 % of surveyed countries there is no third party independent monitoring and follow-up of

mitigation effectiveness or compliance assessment. In 31% of cases some form of corrective

action, or adaptive management, is undertaken in order to mitigate unexpected environmental

effects.

Only 4% of the surveyed countries make monitoring results fully available to the public, eitherthrough a centralized database, or other means.

Improving Regulatory Enforcement

The regulatory enforcement and compliance theme examines how governments are enforcing

environmental laws or regulations applicable to the oil and gas industry and also specific

conditions as stipulated by project approval requirements. Figure 5-8 shows PGI scores for the

following themes: regulatory enforcement and compliance, best environmental practice, risk

avoidance and management.


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This theme addresses how governments are incorporating best industry practices to minimize

the environmental and social impacts arising from the oil and gas industry, particularly in those

instances where best practice standards exceed existing regulatory requirements. Best practicein this case would be based on industry association standards (e.g. API, IPIECA, OGP/E&P Forum

etc.), or publically available corporate environmental operating standards.

The incorporation of best environmental practice by the oil and gas industry is one way of

creating a standardized level of best practice, even if the regulatory environment may be

lacking. Overall, the survey indicated that governments generally do not consider, or have

implemented, the necessary processes to incorporate best environmental practicethe

average of the questions in this theme scored 60% against the benchmark value.

About one half of the governments surveyed indicated that they have some form of policy towork with oil and gas proponents and promote the use of Best Available Techniques (BAT) or

Best Environmental Practices (BEP) for environmental and social management of oil and gas

development (score of 60% against the benchmark).

Just over one half of countries surveyed indicated that they have a requirement to comply with

international best environmental practices for oil and gas activities within their national

jurisdiction (score of 73% against the benchmark).

Governments however indicated that they do not have a mechanism or procedures for

incorporating or updating changes in best environmental practices within their national laws

and regulations applicable to the activities of the oil and gas industry (score of 41% against thebenchmark). Only 17% of countries fully complied with the benchmark that encourages

dialogue between industry and government in this regard.


Incorporating future liability and reclamation costs associated with current oil and gas activities

is a concern to the oil and gas industry. However many governments around the world are

more concerned with the immediate financial gains associated with the promotion of oil and

gas development, compared to possible future implications of liability costs. This is an obvious

concern to communities living adjacent to oil and gas development and there are numerousexamples of the negative financial and health burdens of extractive industry development

(World Bank, 2005).

The survey found that little attention is being paid by governments to assessing future liability

and reclamation costs. Overall, all countries surveyed had a score of 55% against the

benchmark as to how they are managing future liability and reclamation costs (see Figure 5-9).


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Governments lack an established process for managing the decommissioning and abandonment

of oil and gas projects; overall the score for this question was 46% against the benchmark. A

total of 81% of countries surveyed did not comply or only partially complied with the

benchmark.

Governments also generally lack a commitment to ensure that oil and gas facilities are

decommissioned and remediated in a timely manner. This was one of the lowest of all

responses made for this questiona score of 28% against the benchmark. A total of 96% of all

countries surveyed either did not comply or partially complied with the benchmark in response

to this question.

There are a lack of guidelines specifying the residual limits for contamination in soil and water.

This obviously is a concern to local communities and poses an issue for both short and long

term human and ecological health. Overall this question scored 37% against the benchmark and

57% of countries surveyed did not comply, indicating that they have no guidelines in placing for

residual contamination originating from the oil and gas industry.

There are no procedures in place for assigning costs for orphan wellsthose abandoned oil and

gas facilities that have no ownership but yet have ongoing liability concerns and associated

costs. This was one of the lowest responses in the survey, scoring 14% against the benchmark.

Governments in these countries do not have any capacity and procedures in place for managing

orphaned wells, or assessing the responsibility for environmental liability that has no apparent

ownership.

There are small differences in approaches to decommissioning and abandonment between

offshore and onshore. Governments stated that decommissioning and abandonmentrequirements apply to both offshore and onshore facilities, both scoring 87% and 82%

respectively against the benchmark.

Governments generally do not or determine a value for costs associated with restoration of

environmental damage arising from the oil and gas industry. This question scored 48% against

the benchmark and a total of 76% of survey responses for this question did not comply with the

benchmark.

While EIAs do include reference to decommissioning and abandonment plans, there are little or

no requirements of government to approve these plans. This question scored 56% against thebenchmark with 72% of survey responses not complying or only partially complying with the

benchmark, whereby governments are required to approve decommissioning and

abandonment plans.


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Figure 5-9: PGI ScoresDecommissioning and Abandonment


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6 Key FindingsThis section describes key findings of the PGI survey considering the following:

Survey delivery;

Legal, regulatory and contractual framework;

Institutional strengthening of good governance;

EIA process;

Public consultation, disclosure and access to information;

Private sector involvement in best environmental practice; and

Liability.

Survey Delivery

The PGI survey was administered to 27/29 countries over a period of about 9 months. Primary

concerns about the survey and its delivery were indicated as follows:

The survey was relatively long;

The response from governments and local stakeholders was mixed, and the survey

relied on the ability of the consultant team to extract and summarize survey results;

Results from the survey were not intended to measure environmental performance

between each country; and

The survey should in no way be considered to be a statistical representation for an

individual country, but rather represents the opinion of survey respondents and the

project team as to how national governments compare to an ideal benchmark

governance condition.

Nonetheless, there has been a high degree of interest from participants in regard to the results

of the survey. While some may have considered the survey to be too long, it was also viewed

to be comprehensive and provided a high level of information regarding environmental

management and governance of the oil and gas industry. The online survey process allowed


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participants to enter and leave the survey at will. However, the survey could have been

shortened, particularly those questions concerning the legal and regulatory framework that

consisted of about 25% of the survey total.

While cooperation of the World Bank was provided throughout the Survey, particularly fromlocal Bank offices, a more formal effort to engage key government representatives could have

resulted in higher participation of respondents, but this would also be offset by additional time

requirements for survey completion.

The online version of the survey (Survey Monkey) was administered to the email addresses of

specific respondents and featured an automatic return to the consultant team at the conclusion

of the survey (respondents selected a complete survey button at the end). The survey featured

a multiple choice response in regards to no, partial, or full compliance with the benchmark

template. The online version was easy to administer, provided great flexibility to participants in

relation to time to complete, was cost effective to administer (limited or no travel) and also

provided a mechanism for rapid compilation and easy analysis of survey results. The only

negative feedback to the online survey was that no other language version was provided.

Future surveys should consider reuse of the online survey software. Follow-up to the survey is

required to ensure that those respondents who expressed interest in completing the survey

actually did so.

It is also recommended that the survey results be provided to governments of each country for

discussion and further refinement. This could be beneficial in the context of preparation of

relevant future Bank interventions.

Legal, Regulatory and Contractual Framework

Survey responses show a wide range of variability regarding the legal and regulatory framework

due to two main factors: On one side, there are obligations resulting from the international

context of laws, regulations, treaties and agreements governing oil and gas exploration and

production activities. In particular, ratified international treaties and agreements endorsed by

local governments impose compliance to national legislative and regulatory requirements,

while also incorporating international standards set for the governance of the oil and gas

development activities. A sufficiently appropriate, but largely theoretical, environmental policy

for the oil and gas industry exists in the majority of countries surveyed. In most cases, the

regulatory system principles already adopted in more developed countries are largely

transposed into the national legislation of emerging oil producers. In turn, oil and gas

operators, in particular those large oil companies with an established and stringent

environmental policy, prefer to operate in countries where a modern regulatory system is

implemented.


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On the other side, some countries surveyed do not have a sufficiently organized administrative

structure to allow for the enforcement of an efficient regulatory system. Other countries do

not have the organizational capability or the human and financial resources available to set up

an effective and organized management system for oil and gas activities. Some countries may

incorporate into domestic legislative system a general environmental law setting policy toaddress environmental issues arising from oil and gas activities, only as a means of attracting

foreign investors and operators, while neglecting additional obligations concerned (i.e. EIA

process, public involvement, environmental monitoring, data disclosure, etc.). Survey results

show that in 89% of countries surveyed, the responsible institutions for environmental

management have little (74%) or insufficient (15%) resources (budget, staff, training,

technology, information system, etc) to effectively implement their strategies and fulfil their

regulatory mandate.

The results of the above considerations show that in many cases, the regulatory system in place

is somewhat of an empty box. The governance structure and frameworks exist, but the

implementation of governance into an efficient and effective environmental management

system for oil and gas activities is not fully in place. Therefore, efforts are necessary to

strengthen either the administrative and technical capabilities of local governments in order to

improve environmental governance of the oil and gas industry.

Institutional Strengthening of Good Governance

Most governments surveyed have a dedicated institution for managing the environmental and

social impacts of the oil and gas industry. This is either a dedicated Ministry of the Environment,

or a similar institution embedded within another Ministry - e.g. Ministry of Energy and Mines.

The survey responses indicate that institutional strengthening and capacity building is needed

in all countries, particularly in regard to training.

Other institutional needs such as increased salaries and benefits, employee turnover, retention

of institutional memory etc. are more appropriately dealt with at a country level and could form

part of a diagnostic and action plan initiative (see Section 6).

Environmental Assessment Process

The survey results indicate that there is a large variability across all survey countries as to how

the EIA process for oil and gas activities is implemented. Overall, most countries have some

form of EIA process that has been incorporated within each countries regulatory framework.

However, much of the emphasis of the EIA process appears directed towards

the regulatory approval of oil and gas projects, rather than to a life cycle approach for

minimizing environmental and social impacts across the entire project life. In some countries,


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the full extent of the EIA process, as dictated by best EIA practice, has yet to be implemented,

and these countries scored poorly against their benchmark counterparts.

Particularly lacking are the following: systematic and sufficient involvement of the public and

local stakeholders in the EIA process, access to baseline environmental and social informationin the project affected area, complete analysis of project alternatives, and consideration of

cumulative effects and regional impacts beyond the project level.

The majority of countries surveyed incorporate analysis of environmental risk and risk

management, however effective efforts in regulatory enforcement of EIA commitments, and

follow-up and monitoring efforts, as part of verification and oversight, are lacking.

The survey indicates that environmental monitoring and project follow-up are considered part

of the EIA regulatory framework enforced in the majority of surveyed countries. Nevertheless,

in many cases actual enforcement practices are inadequate, environmental monitoring is

insufficient and monitoring data are not disclosed, or made widely available to the public and

affected stakeholders. Moreover, most countries show an insufficient, sometime totally absent

control and enforcement mechanisms during the post-EIA approval phase.

While many countries indicate that regulatory enforcement mechanisms and risk management

procedures for oil and gas activities are incorporated into the regulatory framework, actual on-

the-ground enforcement of EIA approval conditions and regulatory limits is not taking place in a

systematic and effective manner.

Public Involvement, Disclosure and Access to Information

Results of the survey indicate that while governments may consult about oil and gas activities,

they often disclose little to the public and affected stakeholders. Consultation still has a long

way to go in the countries surveyed; governments generally choose to inform stakeholders

rather than involve them in decisions regarding oil and gas development.

The impact of the public consultation process on the ability to affect decisions regarding oil and

gas projects is not clear. This obviously has a significant effect on the confidence of locally

affected stakeholders and communities that their specific concerns about oil and gas projects

can be effectively heard and considered.

There is good attention to recognizing the need to consult early on in the oil and gas

development phase and governments recognize the importance of doing so.

However, there is little consideration given by governments to providing costs for participation

in the consultation process, or that industry can also participate in providing reimbursement of


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stakeholder costs. Most governments give consideration to holding consultation activities in the

directly affected project area as a means of maximizing local involvement.

However, in many cases the consultation with local communities focuses more on the amount

to be negotiated as compensation rather than establishing communication links formanagement of environmental impacts throughout the entire project cycle.

Survey results show that little attention is paid to involving indigenous peoples in consultation

regarding oil and gas projects. Less than one half of the countries surveyed have ratified the

international convention ILO 169 regarding indigenous peoples, and ensuring their voice is

heard as to how resource projects are developed. As a result, few governments have specific

laws and regulations as to how involvement of indigenous peoples in the review and approval

of oil and gas projects would actually take place. This is of concern, in that many oil and gas

projects in developing nations actually take place in frontier areas within the traditional lands of

many indigenous peoples. This also has relevance for the recently signed UN Declaration on the

Rights of Indigenous Peoples that was adopted by 144 states in September 2007.10

One of the largest areas for improvement pertains to improving the dissemination of

information about the consultation process. Survey results indicate that little information is

communicated back to pr

Environmental_Governance in Petroleum Producing Countries

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