- Bad governance leads to lower revenues from extractives sector

On 5 October we at the EITI International Secretariat together with the Norwegian government’s Oil for Development (OfD), hosted a briefing for Norway based EITI partners and other interested parties. The briefing titled "Improving extractive industries governance" started off with updates from the EITI and OfD, outlining their progress. Farouk al-Kasim, the Iraqi-Norwegian geologist who played a crucial role in the early days of Norway’s oil, was a featured speaker. Mr al-Kasim spoke about how poor governance and lack of transparency leads to mismanagement of oil fields and reduces the overall benefits a country gets from its natural resources. According to him, this poor management is characterised by oil companies being allowed to pump as much oil as quickly as possible, reducing production life and resulting in low recovery rates and lower revenues to governments. With global demand for oil likely to rise faster than new discoveries in the coming years, it is in every one's interest to ensure improved governance as this will result in greater recovery of discovered oil and more revenue for the inhabitants in resource rich countries.

In response to Farouk, Willy Olsen - also with many years in the oil industry - gave his reflections on the challenges of resource management. His main message was that by creating transparency of the payments and receipts, as implementing the EITI does, the problem of corruption is often then moved to other parts of the value chain. He stressed that more needs to be done in other areas as well, such as the awarding of service contracts. According to Willy, there is also a great need for capacity building in civil society to enable them to take on their role as watchdogs of public spending in their own countries.

Willy’s remarks pointed exactly to the reflections made by EITI's Head, Jonas Moberg, in his latest blog entry. Jonas points out that although the EITI focus might be narrow, we are beginning to notice how EITI’s efforts are raising awareness and leading people to investigate other parts of the value chain. By implementing the EITI, the hard figures that civil society need to hold their governments to account are becoming available.

Oil for Development presented their new check-list for petroleum-related governance. By assessing petroleum-related governance in the countries wishing to cooperate with OfD against these indicators, OfD hopes to be able to better identify the needs for assistance and measure progress over time.

During the seminar, Deputy Director General at the Norwegian Ministry of Petroleum and Energy, Gro Anundskås, gave an update on Norway's implementation of the EITI. Norway was admitted as an EITI Candidate in February of this year and the first Norwegian EITI Report is expected in mid-November. Norway will most likely undertake Validation in early 2010. The Norwegian example shows that when institutions and transparency are in place, implementing the EITI is a fairly simple and low-cost undertaking.

The presentations from the event is available below: