Role of state-owned enterprises

In 2012, the IMF reported that “some 80 percent of world petroleum reserves are controlled by state companies and 15 of the 20 largest oil companies are state-owned”. State-owned enterprises (SOEs) are less common or dominant in the mining sector but may still play an important role in some countries.

SOEs may own and operate projects, either outright or in joint ventures. State equity is used by many countries to secure additional government take (beyond tax revenue) from extractive projects. This is sometimes motivated by non-fiscal concerns such as: a desire for direct government ownership, a “seat at the table,” or to facilitate the transfer of knowledge. 

In many resource-rich countries, the state receives a share of oil, gas and minerals that are being produced. These physical revenues can occur because the state or a state-owned enterprise (SOE) operates or owns shares in a producing license, through the existence of production-sharing contracts, or when companies make payments such as royalties with physical commodities rather than money.

The state or the SOE then sells these physical resources, often to trading companies. In some countries, the management of the state’s share of oil and gas is often an area of perceived corruption and limited accountability. Lack of transparency about how much the state receives from the sale of its oil and gas also creates a distorted picture of government revenues from the extractive sector.

The EITI therefore requires detailed reporting on the role of SOE in the extractive industries, where this is applicable.