Uchenna Izundu
OGJ International Editor
LONDON, Sept. 8 -- Norway must tighten safeguards of its Oil For Development (OFD) program to prevent misuse of funds to fuel conflict and corruption in Sudan’s oil industry, said Global Witness Ltd., the London-based anticorruption organization.
In a Sept. 7 report, Global Witness warned there is confusion over conditions attached to the 24 million kroner ($4 million) awarded by OFD to Sudan to develop its oil and gas resources. Norway also offers funding for a petroleum envoy, capacity building, and technical assistance.
Global Witness charged lack of respect for human rights and the rule of law, good governance, and transparency in Sudan does not meet Norway’s criteria for cooperation.
The nongovernmental organization said it asked Norwegian officials to explain the policy for engagement with Sudan, “but their reply did not answer the question,” said Global Witness officials.
“Unless there is clarity as to what measurable improvements in good governance and human rights [OFD] expects from Sudan…it is impossible to know whether it is achieving its aims,” they said.
“The World Bank has stated that transparency in the Sudanese oil sector is ‘unusually weak’ in comparison to other oil-exporting developing countries. This is a pretty astonishing statement given that other oil-exporting development countries are not known for being terribly transparent themselves,” said Global Witness campaigner Rosie Sharpe.
Sudan is one of Norway’s core cooperation countries, and the Norwegian government has rebuffed the accusations from Global Witness. Norway's Minister for International Development Erik Solheim said the engagement with Sudan is based on a clear expectation of improved good governance in the oil business.
“The most important human rights issue in Sudan today is to avoid war. Norway's support for this is our most important contribution to the country,” Solheim said. “We take up the need for better governance and human rights regularly in meetings with the central government in Khartoum and the regional government of South Sudan. The main objective of OFD in Sudan is to strengthen the peace agreement between the North and the South and ensure the principles of transparency.”
A spokesman from the ministry told OGJ it has no plans to change its policy in light of the report, “as good governance is already an important cross-cutting theme in all OFD cooperation programs.”
Data discrepancy
The report entitled “Fuelling Mistrust: the need for transparency in Sudan’s oil industry” voiced concern about conflicting oil production data published by the southern government, the Khartoum government in the north, and the operator Chinese National Petroleum Corp. (CNPC), and the implications for oil revenues. Analysis by Global Witness showed discrepancies of 9-26%.
In 2005, to stop the 22-year civil war dividing the north and south of Sudan, a comprehensive peace agreement was signed to distribute oil revenues between north and south. The agreement will end in 2 years, paving the way for a referendum on southern independence.
Global Witness said, “The Khartoum government publishes figures on its earnings from the oil industry, but neither the government of Southern Sudan nor Sudanese civil society have any way of verifying them. Khartoum is wholly responsible for marketing and exporting the south’s oil: it compiles the figures on how much oil is produced and the price for which it sold. The southern government is not involved [in the transaction], despite the fact that oil revenues make up 98% of [its] income.”
Global Witness said its investigation revealed the following:
-- Oil production numbers given by the Khartoum government for Blocks 1, 2, and 4 in 2007 were 9% less than that 270,000 b/d given by CNPC in its annual report.
-- Oil production figures published by the Khartoum government for Blocks 3 and 7 in 2007 were 14% less than the figures published by CNPC.
-- The volume of oil the Khartoum government and other sources state was produced in Blocks 1, 2, and 4, and Block 6 in 2005 is 26% less than that stated in CNPC’s annual report.
-- The only block in the north exempt from revenue sharing is the only one where production figures nearly match.
Oil revenues
Global Witness calculated as of March the southern government was due $180 million in additional oil revenues, excluding those from the disputed Abyei oil fields in central Sudan, which have a different oil revenue-sharing formula agreement.
Dating back to 2005, a total undercount of 10% would mean “the southern government would be owed more than $600 million,” Global Witness said.
Abdullah Massar, a presidential adviser in Khartoumdenied those claims and said the south is represented in all state agencies dealing with oil.
However, Pagan Amum, secretary of the Sudan Liberation People’s Movement, told the BBC, “[The North is] rejecting any kind of transparency, and there is a complete absence and exclusion of southern Sudan and its representatives from the management and selling of this Sudanese product.”
Recommendations
Global Witness recommended an independent third-party audit of oil production and sales back to 2005 and that the government passes legislation to demand transparency from oil companies in disclosing their payments.
Global Witness said, “The peace agreement’s international guarantors, including the UK, US, and Norway, need to do more to promote transparency. China and Japan, who are the main customers for Sudanese oil, should also push for greater transparency, which will help ensure stability and a reliable supply.”
The organization expressed concern about the south becoming landlocked if it votes for independence in 2011 and becomes dependent on oil export pipelines via the north of Sudan.
“Any proposed revenue sharing post-2011 should include independent third party monitoring, funded by Sudan’s donors,” said Global Witness.
Contact Uchenna Izundu at [email protected].