Norwegian oil major takes big stride forward on transparency by publishing payments to governments
Date: 14 Apr 2005
Statoil, the Norwegian oil company, has made an important contribution to the global effort for greater transparency of payments from the oil industry to governments, by publishing a breakdown of its tax payments to each country around the world.
Oil companies rarely disclose how much they pay to the governments of developing countries where they operate. The citizens of these countries have no reliable way of knowing how much oil revenue their government is receiving. All too often, the result has been gross corruption and waste, which undermines efforts to reduce poverty and makes countries more unstable. As investors managing some $8.3 trillion in funds have highlighted, lack of transparency poses a significant business risk as companies are susceptible to local conflict and accusations of complicity in corrupt behaviour, thereby impairing their ‘license to operate’.1
In its Sustainable Development Report for 2004, Statoil has published details of direct and indirect tax payments to 26 countries, including several in the developing world. The company has also disclosed that it paid US$2.6 million in signature bonuses to the government of Brazil upon the signing of new licenses in the country last year. [2]
“This is an important step forward by Statoil which proves that oil companies can be much more open about their payments to governments if they choose to be,” said Henry Parham, international co-ordinator of the Publish What You Pay Coalition (PWYP), whose 270 member NGOs are campaigning for greater transparency of revenue flows to governments from the oil, gas and mining industries.
Although many oil companies support the principle of publishing their payments to each government, for example through the Extractive Industries Transparency Initiative (EITI), hardly any have actually done so for all their operations around the world. This was demonstrated in the recent “Measuring Revenue Transparency” report by PWYP member Save the Children UK.3
“Statoil is showing that it is serious about improving the transparency of its dealings with governments,” said Parham. “That said, there are some important gaps which Statoil needs to fill in future if its disclosures are to be fully credible.”
For example, Statoil has not disclosed payments to governments which are made in kind rather than in cash. In many countries, a government’s biggest source of income from oil does not come from tax payments but from its share of oil production, known as “profit oil”. Statoil has told PWYP that it is willing to disclose this information but needs to negotiate with its investment partners and may be constrained by confidentiality clauses in its contracts with some countries.
“While voluntary efforts by individual companies like Statoil are welcome, we need a more comprehensive approach to the problem of revenue transparency, because this is the only way that we can bring in all oil companies and ensure that progress is not blocked by governments which don’t want their finances scrutinised,” said Parham.
The EITI, an international initiative launched by the British government, is working towards greater transparency of revenue flows by encouraging developing countries to publish their earnings.4 But as the recent Commission for Africa’s report has pointed out, the onus should not only be placed on developing countries, but on developed country governments.
Publish What You Pay calls on G8, EU and other countries that are home to oil and mining companies to work for greater transparency through relevant laws, stock exchange listing requirements and accounting standards. This is the only way to ensure a consistent global standard for revenue transparency so that all oil companies follow Statoil’s example.
Contacts:
Henry Parham
Coordinator, Publish What You Pay
Direct line: +44 (0) 20 7031 0204
coordinator@publishwhatyoupay.org
Gavin Hayman
Global Witness
Direct line: +44 (0) 20 7561 6361
[1] Investors’ Statement on Transparency in the Extractive Sector (March 2005), see: www.publishwhatyoupay.org/english/pdf/relstatements/investors.pdf
[2] A copy of Statoil’s 2004 Sustainable Development Report is available at www.statoil.com
[3] The measuring transparency framework developed by Save the Children UK provides a means of assessing progress made companies and ‘home’ governments towards greater revenue transparency. The performance of 11 home governments (Australia, Canada, France, Italy, the Netherlands, Norway, Russia, South Africa, the UK and the USA) and 25 oil and gas companies operating in several developing countries was assessed using a range of different indicators. The first reports, published in March 2005, highlight that disclosure of company payments to governments is by far the exception, not the rule. One company is publishing for every country of operation and other piecemeal disclosures are being made in some countries, but overall the results for companies are poor. The report calls on developed countries to take advantage of upcoming reforms of accounting standards and harmonisation of securities legislation to incorporate a requirement for country-by-country publication of extractive company payments. For further information go to: www.publishwhatyoupay.org/measuring_transparency
[4] For further information on the EITI go to: www.eitransparency.org
