Oil Majors Rapped Over Secrecy, Corruption

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Inter Press Service

Oil Majors Rapped Over Secrecy, Corruption

by
Abid Aslam

WASHINGTON - Leading oil firms impede efforts to stamp out poverty and corruption by shrouding their financial dealings in secrecy, says a global watchdog.0430 06 1

Transparency International, in a new report, says Western firms and those from developing countries are similarly opaque when it comes to disclosing their payments to governments in countries where poverty prevails despite an abundance of natural resources.

Sixty percent of the world's poorest people live in such countries, the group says. Most constitutions grant citizens ultimate ownership of their country's natural resources, it adds, but much data on what companies pay for the right to exploit these resources, and on how host governments spend this money, remains hidden from public scrutiny.

Development opportunities are being squandered in the process.

"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, the group's chairperson.

Global oil revenues amounted to some 866 billion dollars in 2006. For less than 10 percent of this sum, the world could have funded the U.N. Millennium Development Goals on reducing poverty, famine, disease, and illiteracy, says the report released on Monday. The international community estimated in 2006 that meeting the goals would cost about 73 billion dollars.

The survey also finds that the most transparent firms fared well financially, suggesting there is no trade-off between profits and openness.

"Revenue transparency is a win-win equation," said Cobus de Swardt, the group's managing director. "The benefits to all, especially the world's poorest, can be enormous."

When companies and governments are fully transparent, citizens, journalists, civil society, researchers, and investigators can track revenue flows, hold public officials to account, and discourage corruption, says Transparency International.

A free and independent press is essential to the health of a functioning democracy

With oil prices at record highs and industry revenues among members of the Oil Producing and Exporting Countries (OPEC) cartel alone expected to approach 1 trillion dollars in this year, the report says, "the question of transparency has never been more critical."

Governments have ultimate responsibility to ensure transparency and to make certain that their citizens enjoy the benefits of oil extraction, Transparency International says, adding that it is preparing reports devoted to assessing the performance of officials in the countries where oil majors are based or operate.

In its latest report, the group urges firms to come clean without further delay. It recommends that firms report all revenue payments to governments on a country-by-country basis. At present, it says, a few firms provide only global and regional figures. The group also wants companies to publish their reserves, production costs and anti-graft measures, including details of punishments meted out to staff involved in corruption.

Building on its years of advocacy and on broader efforts including those of the Extractive Industries Transparency Initiative (EITI, an umbrella for governments, firms, and lobbies), Transparency International also is urging governments, stock exchanges and regulatory agencies to mandate such reporting for companies operating at home and abroad.

Regulatory agencies and companies, it adds, should agree to publish information in a uniform and accessible format that facilitates comparison.

Unless these changes are made, the report says, a new generation of global players -- firms from emerging Asia, Latin America, and the former Soviet Union -- will perpetuate the so-called resource curse of poverty, repression, and environmental degradation thus far blamed on corruption and mismanagement by crooked Third World rulers and collusive Western firms.

Among developing-country firms in greatest need of openness on operations at home or abroad, the report highlights the China National Offshore Oil Corp. (CNOOC), China National Petroleum Corp. (CNPC), India's Oil and Natural Gas Corp. (ONGC), Malaysia's Petronas, Indonesia's Pertamina, the Kuwait Petroleum Corp., Russia's Lukoil, and Venezuela's PDVSA. Keeping these firms company at the bottom of the report's transparency league is U.S.-based ExxonMobil, rated the world's largest oil company in financial terms.

Firms at the top of the table -- but still falling short of the transparency standards sought by the report -- include PetroChina, Mexico's Pemex, Brazil's Petrobras, and Anglo-Dutch conglomerate Shell.

A number of the companies cited have defended their disclosure practices or announced initiatives aimed at increasing transparency. Some declined to comment on Transparency International's report while others were quoted as disagreeing with the group's methods or conclusions. The report acknowledges that the industry has made progress but argues this remains insufficient.

© 2008 Inter Press Service

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