The Challenge Of Transparency  In Oil And Gas

Globally, players and companies in the oil and gas industry battle to clear their names from numerous corruption allegations while trying to appear clean before their host country and the international community. However, there are numerous reasons for this. To operate their enterprise, oil and gas companies have a requirement to make a huge investment in infrastructure, particularly in the areas of pipelines, transport, and many others.

When the infrastructures are provided, there is the likelihood of incentive for the local governments and host communities to push for contract renegotiation. And in doing that, they are likely to increase the tax, expand the corporate social responsibility and make huge demands, while in some cases, attempt to confiscate oil companies’ assets is made.  Therefore, to recover investment funds, provide corporate social responsibility, pay due tax and levies and meet other unforeseen demands, oil companies need high-profit margins.

As we have seen in Nigeria and other oil-producing countries, there exist weak institutions. Arising from that, there exists very limited public accountability over revenues and utilization. Thus, groups and individuals who raise concerns over revenues and accountability are often overlooked, while some are lured and those who prove to be stubborn in their demand are intimidated mainly in collaboration with state and local forces.

The oil and gas industry is characterized with intricate fiscal, legal, and commercial contracts prevailing revenue flows, and this creates room for government officials to easily maneuver revenue for personal enrichment and also conceal their activities. And that makes it very difficult for the citizens to get the accountability they demand.

Because oil and gas revenue is fundamental to state economy, there exists excess state involvement, and that creates the opportunity for state and its agents to engage in a huge corruption.

Having acknowledged the huge corruption in the oil and gas and the impediments citizens and the international community face in addressing the phenomenon, the

The Extractive Industries Transparency Initiative (EITI) came into being in 2003, with the core aim to lessen corruption and enhance accountability for the proficient use of oil and gas revenues. Also, the Financial Action Task Force, (FATF) established in 1989, seeks to address money laundering.

With support from the World Bank, oil producing countries, International Oil Companies and investors converged and set principles for transparency in the oil and gas sector known as the EITI standards. And, in these standards, countries that have signed on to them have agreed to make available data on natural resource revenue to the public and to EITI. Conversely, companies who are ETITI membership are to make available information on government payments. This is primarily to step up accountability in the natural resource revenue. Interestingly, by

2014, 48 countries had implemented EITI standards while over 237 reports published.

On the 21st day of July 2010, the United States Congress passed the Dodd-Frank Act. This was another effort geared towards increasing transparency and accountability in the oil and gas sector. Section 1504 requires that America companies that are involved in the extractive industries disclose project-level payments made to foreign governments. However, some argued that the law would present an unjust competitive advantage to companies that are not listed in the United States which would not be obligatory to report such data.

By 2011, the Open Government Partnership (OGP) was set up; this provides an international platform for domestic reformers committed to making their governments more open, accountable, and responsive to citizens. Since then, OGP has grown from eight countries to 75 participating countries and 15 sub-national governments. In all of these countries, government and civil society are working together to develop and implement ambitious open government reforms.

The OGP is a multilateral initiative designed to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance. By July 2016, Nigerian joined OGP as the 70th country with four action plans: Fiscal Transparency, Anti-Corruption, Access to Information and Citizen Engagement.

At the moment, there is a rapid increase for initiatives that encourage “open governance” (transparency, accountability) and parts of the process is geared towards addressing corruption and to deliver sustainable growth using natural resource revenue.

However, in spite the international, national, public, private, civil society and citizens’ involvement, achieving the target outcome continues to pose a huge challenge. This was followed by diverse opinions and debates on what the best procedure to follow to achieve the desired impact.

For instance, by September 18, 2017, the World Bank, International Finance Corporation, the Partnership for Transparency’s Anti-Corruption Forum, and Brookings brought experts together to discuss new developments on how transparency, accountability, and participation initiatives can contribute to reducing corruption and achieving sustainable development.

Initiatives on transparency in the oil and gas are applauded globally; this is because oil and gas payments are shrouded in secrecy. And what this means is that citizens find it very difficult in knowing how much money their government is making from their natural resources and their utilization.

The push for transparency in the oil and gas is endless, the benefits stretch beyond citizens and communities. When there is a relative transparency, investors can assess the host country and project specific governance, reputational and tax risks. Also, for companies, it helps to endorse a more secure investment climate and a social license to operate. Beyond the narrative, transparency is a core factor that will reposition resource governance. And when this happens, it will provide a tool for governments to enhance the capacity for tax collection and management, while the state and citizens will be the most beneficiaries.

Audu Liberty Oseni, Publish What You Pay-Nigeria