Building accountability in state-owned enterprises and commodity trading

Opening data, building trust

Opening up state-owned enterprises and commodity trading

Triggered by disclosure requirements, data on transactions between governments, state-owned enterprises and commodity traders are now being published

Understanding the responsibilities of state-owned enterprises in each country is critical for sound public financial management, as they can play a critical role in exploiting natural resources and managing the extractive sector.

Many countries receive a share in the commodities extracted, either in addition to or in place of tax revenue. These “in-kind” revenues occur when governments opt to receive products instead of cash, or loans in return for assured trades. Governments can then choose to use their resources domestically or to sell them
on the international markets, often through commodity traders.

These transactions are high value. The average cargo size is around 900,000 barrels, which in the case of crude oil is worth USD 45 million at a price of USD 50 per barrel. These transactions pose a high risk for mismanagement.

The role of the state-owned enterprise represented above by a national oil company in the contracting, selling and refining of the state’s share of oil, gas and minerals. Revenues from the sale go to the government.

 

Working together with governments, commodity traders and civil society

In 2015, the EITI established a multi-stakeholder Working Group to advise and guide the EITI’s efforts to improve the disclosures on “first trades”. Albania, Cameroon, Chad, Côte d’Ivoire, Ghana, Indonesia, Mauritania and Nigeria participated

in a targeted effort to produce new guidance. This was endorsed by companies, civil society groups and governments and included a reporting template allowing for effective collection, interpretation and use of first trade data.

Opportunities and challenges

The experiences of this working group and pilots in implementing countries have also resulted in clarifications to EITI Requirements. These significantly improve the usefulness

of the information published by state-owned enterprises. Future data will help reveal the use of resource-backed loans and pre-payment deals which are becoming an increasingly significant source of finance for some countries, but can
be a source of high risk when commodity prices are volatile.

 

  • National oil companies control
    80 %
    of proven oil and gas reserves across the globe and account for over half of oil and gas production.
  • 40
    EITI countries have reported revenues from state-owned oil and mining companies.


 

Iraq: Highly reliant on oil revenues and increasingly transparent

Iraq relies on oil revenues for 95% of government revenues. All oil and gas produced in Iraq belongs to the state with the State Organisation for Marketing of Oil (SOMO) selling crude oil to international buyers. The proceeds of oil sales are transferred to the treasury, and annual government revenues are highly dependent on oil prices, and can vary between USD 40 and 80 billion per year.

Since 2011, EITI Reports have provided detailed information on the oil produced from each field, the oil consumed domestically, and the oil sold on the international market. As a result, citizens can monitor how much oil is sold at what price and what proceeds are transferred to the treasury.

NRGI National Oil Company Database

EITI data was a critical source for NRGI’s National Oil Company Database, which features more than 70,000 data points on more than 70 NOCs worldwide.