What is the issue?
Oil and gas production provides a major source of Government income for a number of developing countries. When used appropriately these revenues can make a much-needed contribution to economic and social development, but if managed poorly they can exacerbate poverty, corruption, conflict and poor governance.
Publish What you Pay campaign
An umbrella group of non governmental oganisations (NGOs) is campaigning for companies to declare publicly the revenues they pay host governments in taxes, royalties, signature bonuses and other payments. The Publish What You Pay campaign argues this transparency will reduce corruption and encourage debate on how government revenue is spent.
However, two key difficulties exist with putting this policy into practice. Firstly, in many developing countries, companies are in joint ventures, often including the state oil company. Under the conditions of most joint venture agreements, companies are prohibited from disclosing such information unless they first obtain the permission of all partners.
Secondly, this information will not provide a complete picture of the total revenue that a government receives from oil. Many governments also receive revenues from their state oil companies that receive an equity share of all oil produced. In Nigeria, for instance, the money paid by foreign oil companies accounts for only some 30 percent of the country’s total revenue from oil.
Extractive Industries Transparency Initiative (EITI)
Recognising these issues and wishing to develop a practical system that would provide greater transparency of revenues, the UK government launched the Extractive Industries Transparency Initiative (EITI). This voluntary initiative, announced by Tony Blair, the British Prime Minister, at the World Summit on Sustainable Development in 2002, advocates transparency in the amounts host governments receive from natural resources – both from private companies and state oil companies. The approach won support from key stakeholders (including Shell, other oil companies, the World Bank and a number of host governments and NGOs) who are working collectively to implement the initiative in host countries. The October 2006 EITI Conference agreed to the establishment of a multi-stakeholder to oversee the future operation of EITI, supported by a secretariat. Subsequently, it was agreed that the EITI secretariat would be based in Oslo, Norway.
Related links
The Extractive Industries Transparency Initiative – EITI – opens in new window
Publish What You Pay - opens in new window
