New report shows companies should provide greater accountability
London/Berlin 28 April 2008 – A majority of leading oil and gas companies are far from transparent when it comes to the payments they make to resource-rich countries, leaving the door open to corruption and hampering efforts to fight poverty, according to a report published today by Transparency International (TI).
“The tragic paradox, that many resource-rich countries remain poor, stems from a lack of data on oil and gas revenues and how they are managed. Companies must do more to increase transparency,” said Huguette Labelle, Chair of TI.
Revenue transparency report findings
The 2008 Report on Revenue Transparency of Oil and Gas Companies evaluates 42 leading international and national oil and gas companies operating in 21 countries, based on the transparency of their reporting, particularly on payments made to governments for resource extraction rights.
The report, based on data made publicly available by companies, categorises companies into high, middle and low performers. Only a third of companies evaluated in the report are considered high performers. (See attached table for full results)
Oil and gas transparency fights poverty
Today, sixty percent of the world’s poorest people live in resource-rich countries. Most constitutions grant citizens ultimate ownership of their country’s natural resources. Yet much of the data on what companies pay for the right to exploit these resources and how this money is spent by host governments remains unpublished and beyond public scrutiny.
When companies and governments are fully transparent, citizens, journalists, civil society, researchers and investigators can track revenue flows, holding public officials to account and discouraging corruption. With oil prices at record highs and industry revenues in OPEC countries alone expected to reach nearly US $1 trillion in 2008, the question of transparency has never been more critical.
“Oil and gas wealth, if properly managed, should support better services and infrastructure. It should lead to a better quality of life for all citizens. It is the duty of civil society to work with companies and governments to unlock this potential,” said Labelle.
A call to companies
Companies need to act quickly to introduce proactive reporting, rather than wait for legislation. In identifying high-performers, TI’s report shows that revenue reporting on a country-by-country basis, which is identified as best practice, is possible. As the companies with best results show, transparency and profitability are not mutually exclusive. To the contrary, greater transparency can enhance confidence in the financial markets and with stakeholders. “Revenue transparency is a win-win equation,” said Cobus de Swardt, Managing Director of TI. “The benefits to all, especially the world’s poorest, can be enormous.”
Companies: just one piece of the puzzle“We hope that this report helps motivate companies to improve their revenue transparency and that they understand that civil society stands ready as a constructive partner in this process,” added de Swardt. “And when we update the report data we look forward to seeing not only improved scores, but greater company engagement in our work. This is an issue that can only be tackled collaboratively.”
Analysing company performance is just one piece of the puzzle. Although the private sector must increase revenue transparency, governments of host countries are ultimately accountable for the management of their resources. They must therefore lead the drive for a more equitable exploitation of oil and gas wealth, by enacting, promoting and enforcing regulation. Future reports by Transparency International will look at the role of resource-rich country governments as well as those governments home to major extractive companies.
Companies should proactively report revenues paid to governments on a country-by-country basis;
Governments, stock exchanges and regulatory agencies should urgently consider mandatory reporting for companies operating in-country and abroad;
Governments from oil and gas producing countries should introduce legislation mandating revenue transparency by all companies operating in their territories;
Regulatory agencies and companies should agree to publish information in a uniform and accessible format, one that facilitates both comprehension and comparability.
The 2008 Report on Revenue Transparency of Oil and Gas Companies makes four key recommendations: