Ensuring Sustainable International Investments and Maintaining Extractive Transparency

The need to eradicate corruption, ensure transparency in the extractive industry and encourage sustainable international investment in resource – rich nations have become a global agenda to be discussed frequently, with the aim of achieving results in no distant time. Vale Columbia Center for Sustainable International Investment, defined sustainable international investment (SII) as investment that maximizes economic, social and environmental benefits and minimizes risks for all stakeholders. Vale Center based this description on the premise that sustainable international investment is in the mutual interest and also should be shared responsibility of investors, governments and all stakeholders.It has become a major struggle among governments and investors to maintain equity and ensure that people in resource rich nations benefit from vagaries of investments done in their communities. Investors want to be sure that their investments will be protected and expect maximum returns on their investments that would appeal to their shareholders.

 

Many of the resource-rich countries still wallow in poverty because revenues generated from selling these resources were mismanaged through corruption by various governments and their international collaborators. There are accusations that while seeking investment opportunities, executing projects or acquiring extractive licenses, immense corruption between foreign companies and governments of resource –rich nations were done severally to the detriment of the masses. Funds were diverted through various shameful practices to private accounts. According to Global Watch, citizens of resource-rich countries cannot hold governments and extractive companies to account and ensure that mineral resources are used in a fair and sustainable way unless they have full information about the management of these resources.Recently many of the international extractive companies and some of their top management officers have been found guilty or are going through prosecutions for involvement in aiding corruption through bribery in their operations in diverse resource-rich nations.

 

Extractive transparency International is strongly of the opinion that it is imperative for oil and gas companies to walk extra miles in helping to prevent corruption. According to ETI, oil and gas companies need to be more detailed in their financial reporting – especially at a country level. This will enable various agencies and watchdogs to track money and hold government accountable. ETI also expects companies to inform them and the public of what they are doing to prevent corruption.So far, it is like the song been played by ETI has not penetrated deeply into the ears of various extractive and service companies. Corruption is still alive based on reports that emerge from time to time. International oil companies consider it a daunting task to wash themselves off from the grease of corruption because this is the process by which many of them won their blocks, billion dollar contracts in resource-rich nations.To the chagrin of extractive transparency observers, extractive industry country-by-country reporting has been meager.

 

The Transparency in Corporate Reporting report released by Transparency International showed that only few companies like Statoil – a Norwegian oil and Gas Company has given up to 50% country-by-country report, thereby leading the pack. Others that followed closely to Statoil are: Rio Tito, a United Kingdom/Australian basic materials company which has given up to 23.70% reports, BHP Billiton, an Australian/United Kingdom basic materials company with 23.60% reports, Reliance industries, Oil & Natural Gas Corp., both India oil and gas companies with 18.30% and 15.90% reports respectively.  Since 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, all domestic and foreign companies registered with the U.S. Securities and Exchange Commission (SEC) must publicly report how much they pay governments for access to their oil, gas and minerals. These payments which must be reported on a country-by-country and a project-by-project basis, and expected to  cover a wide range of the material benefits that accrue to governments from extractive deals. The goal of Dodd-Frank reporting requirement, also known as the Cardin-Lugar Transparency Amendment is expected to help eradicate  corruption from the oil and gas mineral extraction industry.

 

It is shocking to note that big oil and gas majors and super service companies such as Royal Dutch Shell, Chevron, ExxonMobil, Schlumberger, Total, BG Group, ENI, Gazprom, CNOOC , PetroChina ConocoPhillips have not given up to 5% country-by-country reports on their Transparency in Corporate Reporting as demanded by Transparency International. Knowing the strength of the big companies and their ties with governments, feet-dragging attitude in given reports make the atmosphere cloudy, making one to doubt the efficay of the initiative -  whether corruption would actually be extricated or minimized in the extractive industry.

 

The need to promote international initiatives on extractive transparency, under global trends, the Foreign corrupt practices act and the importance of ensuring sustainable international investment will form a significant part of the panel session in the upcoming 7th Annual Sub-Saharan Africa Oil & Gas Conference slated for May 1 -2, 2014 at the Marriott Westchase, Houston. The panelists will include: Dr. Emeka Duruigbo - Professor of Oil & Gas Law, Texas Southern University, Nicolas Maennling – Economic Researcher at Vale Columbia Center for Sustainable International Investment, Sebastian Spio-Grabah – Chief Analyst of Damina Advisors, Elvis Angyiembe – Compliance Attorney, WeatherFord and Cris Farrar – Counsel with DLA Piper.

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