The Devil’s Excrement

by Michael Patrick O'Leary

This article appeared in Lakbima News on November 14 2010. Unfortunately, they attributed authorship to Dr Juan Pablo Pérez Alfonzo, rather than Padraig Colman.

Oil will bring us ruin. It’s the devil’s excrement. We are drowning in the devil’s excrement.

Dr. Juan Pablo Pérez Alfonzo, principal architect of OPEC.

The people of Louisiana have been drowning in the stuff but Sri Lanka nevertheless wants to have a swim. Once again, Sri Lanka has hopes of becoming oil-rich. Perhaps we will one day be able to import maids rather than sending our Sri Lankan women to Saudi Arabia. Petroleum Resources Development Minister, Susil Premajayantha, recently announced that that plans are underway to drill the first oil well in the Mannar basin during the first quarter of next year. He also said that the government hoped to conclude the ongoing oil exploration activity off Kirinda and elsewhere in the country’s territorial waters.

This has a familiar ring. Is it too late to warn that oil is a curse rather than a blessing to most countries that find it on their premises?

Sri Lanka imports nearly 30 million barrels of the black stuff every year at a cost of some US$ 2.2 billion. The CEB uses it to generate electricity. Add to this the cost of subsidies, the knock-on effect of transport costs on prices and one can see why the Government would like to have its own oil.

Previous minister, AHM Fowzie, said Sri Lanka could produce oil by 2010 but we are still waiting. The government demarcated eight exploration blocks of 3,500 to 4,000 square kilometres in the Mannar basin, two of which were earmarked for India and China. Fowzie hobnobbed with some unsavoury characters in Baku. The Azerbaijani ambassador to Sri Lanka told his country’s news media that Azerbaijan could help Sri Lanka develop an oil-producing industry. In Azerbaijan, the oil-rich clans retain power through politically motivated arrests and torture. At least two people died in pre-trial custody in 2006. Media freedom deteriorated, with violence against and arrests of journalists, as well as defamation cases brought by the government.

As long ago as 2004, a Transparency International report estimated that billions of dollars were lost to bribery in public purchasing, citing the oil sector in many nations as a particular problem. As the Corruption Perceptions Index 2004 showed, oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all had extremely low scores. Public contracting in the oil sector is plagued by revenues vanishing into the pockets of Western oil executives, middlemen and local officials.

Even if oil exploration in Sri Lanka proves to be successful, it is unlikely that many Sri Lankans will benefit. Venezuela is to some extent an exception in that government policy is to try to use the wealth to improve the lot of the people as a whole. Hugo Chávez used oil revenue to regenerate agriculture and help Venezuelans feed themselves. The illiteracy rate used to be 90% but now adult literacy is complete; there are new schools across the country, a free health service operates in shantytowns; housewives get a wage. The transport infrastructure is improving even in remote places. The government is spending nearly $900 million to promote manufacturing, agriculture and tourism. Venezuela has, over the past 25 years, earned $300 billion from petroleum sales, yet more than half of the population lived in poverty, a quarter of the population of working age were unemployed and over 200,000 children survived by begging. Caracas is one of the three most violent cities in the world.

When Mr Fowzie was junketing in Azerbaijan, the Director General of Petroleum Resources in Sri Lanka, Dr Neil R de Silva, said oil companies would be expected to take steps to ensure employment for Sri Lankans. He also said that the Sri Lankan maritime services are not prepared and there were no Sri Lankans qualified to work in the industry. I wonder where the local Sri Lankan expertise has been discovered in the intervening period.

The number of local people employed after the construction phase of the Chad-Cameroon pipeline was negligible in Cameroon and around 350 in Chad. In Ecuador 50,000 new jobs a month were promised; there have been only 9,000 new jobs so far, mostly unskilled and temporary.

Professor Michael Ross of the University of California in Los Angeles produced a chart mapping oil sales against literacy and malnutrition rates. In it, every five per cent rise in oil exports was matched by a three-month fall in life expectancy and a one-point rise in childhood malnutrition. Sri Lanka currently enjoys good WHO indicators in terms of infant mortality but malnutrition figures are causing concern.

Dutch disease is the concept that if a country’s economy is heavily dependent on oil production its currency becomes too strong, making other sectors such as manufacturing, unprofitable and difficult to develop. In Nigeria 70% of the workforce worked in agriculture. Oil has stifled diversity and agricultural production has not kept up with the increase in population. In 1962, agriculture contributed 78.2% of the nation’s revenue; in 1977 it contributed 1.1%. The contribution of crude oil rose from 13.3% to 98.9% over the same period.

Governments squander oil revenues to buy support. Profits go to the elites and existing power imbalances are worsened. The elites have no desire to share the benefits of oil with the poor.

Does Sri Lanka want to be a nation where foreigners call the shots – a polluted nation, plagued by poverty and inequality; where corruption, dynastic elites and nepotism compromise good governance and erode human rights?


Does Sri Lanka deserve the blessing of oil?