National oil companies with $3.1 trillion in assets dangerously under-scrutinised – NRGI

The Natural Resource Governance Institute (NRGI) Thursday launched the National Oil Company (NOC) database in Washington DC, as part of its goals to fill the gaps in knowledge and understanding of the growing amount of information about natural resource governance globally.

The event, which had stakeholder representations from the international development institutions, civil society organisations and the media, provided an opportunity to review research findings from the database and to discuss the challenges that lack of solid, publicly available comparative data can have on revenue, expenditures and transfers by National Oil Companies to their governments.

Impact of lack of disclosure on economies

The officials of NRGI who spoke at the meeting stated that research done using the new open National Oil Company Database, revealed that many state enterprises fail to disclose information critical to the oversight of public revenues and these National Oil Companies, with $3.1 Trillion in Assets, are dangerously under-scrutinised.

“In dozens of resource-rich countries, national oil companies are at the centre of determining the quality of governance of their macro economy and of their natural resources, which belong to the people,” NRGI president and CEO, Daniel Kaufmann, said.

“In these countries, improving governance is the development challenge of a generation, as subpar governance of their national resources perpetuates poverty and inequality.

“State-owned enterprises can weigh a country down or help propel development. Getting their governance right is crucial,” Mr Kaufmann said.

Without solid information, governments, oversight bodies and market players struggle to assess NOC performance and develop strategies for how these influential entities can generate greater benefits for citizens.

To help address this gap, the institute assembled a database on NOC production, revenue generation, fiscal transfers to the state, and operational and financial performance that cover 71 companies headquartered in 61 countries worldwide, from 2011 to 2017.

The database resides at www.nationaloilcompanydata.org.

NRGI advisor, Patrick Heller, in his presentation to stakeholders, emphasised that data on NOCs matter due to the huge influence of these NOCs in the revenue and control of natural resource reserves.

He highlighted that NOCs are also revenue collector and producers of information for the country. However, many of these state-owned enterprises fail to disclose information critical to the oversight of public assets and revenues.

Mr Heller then stressed that NOCs can reverberate citizen demonstrations when they fail to live up to their role as seen in the Giant “Car Wash” pay-for-play scandal in Brazil.

He highlighted that National oil companies (NOCs) produce the majority of the world’s oil and gas as the research findings revealed that in 2017, NOCs that published data on their assets reported combined assets of $3.1 trillion and at least 25 countries are “NOC-dependent,” meaning that the national oil company collects revenues equivalent to more than 20 per cent of all government revenues.

It was also noted that these 25 NOCs only transferred an average of 23 per cent of their gross revenue to their governments while many carry big debts, sometimes as much as 10 or even 20 per cent of their countries’ GDP. Several NOCs have required multi-billion-dollar government bailouts in recent years, becoming a costly drain on public finances.

Mr Heller identified some constraints with the report including data availability as many companies do not disclose key data on spending, profit and employment. He also mentioned the inconsistent terminology, accounting practices across companies and the need for a more standard definition and accounting framework by NOCs.

He went on to recommend that governments of resource-rich countries and their NOCs should explore a data-rich approach to facilitate policy-making and oversight. He showed the example where Nigeria’s NNPC had no record of transfers per barrel of oil equivalent in 2011 and 2016 while Ghana’s record showed paid $59 and $15 respectively.

He also advised the international aid community and local civil society organisations to prioritise the most persistent gaps in reporting expenditures, composition and distribution of transfers. Areas of attention include making the governance of the NOCs a top priority in public financial management reform while facilitating cross country learning and experience sharing as some NOCs and governments remain hungry to improve

Zainab Usman, a social development specialist at the World Bank, during the panel, noted that the political environment of resource-rich countries play an important role in policy reforms and with respect to the extractive sector, oil prices play a role.

She stated that reform orientation in developing countries like Nigeria is sometimes motivated by fluctuations in the price of oil. She recommended that these countries in their economic diversification reforms should put into considerations, global structural shifts such as climate change adaptations, carbon emission and energy efficiency paradigms.

While responding to the question on conditions for slow reform in the Nigerian extractive sector, she encouraged stakeholders to empower the existing check and balance infrastructures in the attempt to improve the transparency of the extractive sector.

The launch event also had Mark Robinson, the executive director of EITI among other key participants and was streamed online, via :http://bit.ly/NOCstream