The report acknowledges some promising recent developments, but raises significant questions about the implementation of the current oil wealth-sharing agreement
Persistent calls for clear and transparent information on Sudan’s oil revenues have yet to yield satisfactory information, says a new report published by Global Witness today. With a referendum on independence for southern Sudan just days away, oil sector transparency is now more important than ever to preserving the fragile peace between north and south. The report, "Crude Calculations", acknowledges some promising recent developments, but raises significant questions about the implementation of the current oil wealth-sharing agreement. The report’s key observations include: The report’s key observations include:
The explanations provided by the Sudanese government and CNPC, the main oil company in Sudan, for why the company’s oil production figures were significantly larger than those published by the government, do not stand up to scrutiny_.
The Sudanese government and CNPC have so far declined to provide Global Witness with any data to back up their explanations for the discrepancies, despite originally saying that this would be possible, and despite considerable efforts by Global Witness to obtain the information.
The Sudanese government no longer publishes as much information as it did before June 2009, making it even more difficult for citizens to verify that the oil revenues have been shared fairly.
Some action has been taken to begin an independent audit of the oil sector, as previously recommended by Global Witness.
“With both sides hugely reliant on oil revenues from the south, this issue is paramount going into the referendum,” said Global Witness Campaigner Rosie Sharpe. “Suspicions over the sharing of oil revenues under the current peace deal have greatly added to the mistrust between the two parties - so the single best way to ensure stability after the referendum is to put a transparent and verifiable new oil deal in place_.”
Following up on Sudan
On 18 August 2010, Global Witness participated in a government-sponsored seminar in Khartoum on oil sector transparency, at which both the government and CNPC attempted to explain the 9-26% discrepancies between their oil production figures which were highlighted in our September 2009 report "Fuelling Mistrust" As the north and south negotiate a new oil deal, the purpose of this report is to analyze the explanations provided at the seminar based on the information currently available. (1)
Explanations from Sudanese government
The main explanation given by the Sudanese government was that the oil company’s production figures consist of a mix of oil and water, whereas their production figures do not. This implies that CNPC, a major, international oil company, publishes in its annual reports the number of barrels of oily water it extracts. Global Witness spoke to several oil industry experts who discredited this explanation. CNPC’s primary explanation was that the oil production volumes are measured in different places – in the oil field and at the final point of export – and that it is typical for an oil company to consume or lose 5-15% of oil between these two points. If this is true, it implies that oil companies in Sudan consumed or lost $500 million worth of oil in 2010 alone. (2) A Sudan oil analyst told Global Witness: “I cannot believe they [CNPC in Sudan] consume 5-15% of their oil on the operations”.
The government also made several commitments at the seminar in August to improve transparency in the oil sector, and has since followed through on some of them, including moving forward with an audit. “It is heartening to hear that an independent audit of the oil sector is now moving ahead. But if it is to increase transparency and trust in the sector, it needs to be conducted promptly, by a credible auditing company given full access to the necessary data, and with the results made publicly available,” said Sharpe. / Ends Contact: For more information contact Dana Wilkins in the US on +1 (802) 999 5568 or Rosie Sharpe in the UK on +44 (0)20 7492 5893. Notes to editors:
(1) The explanations given by the government were: That the company figures may include water, gas and solids; and That the company figures were measured at non-standard pressures and temperatures. It is unheard of for a large, internationally operating oil company like CNPC to publish production figures including large amounts of water in its annual reports to investors. Regarding non-standard measurements, again Global Witness consulted industry experts who maintained that this explanation was typically “irrelevant” when reporting oil production volumes. One oil analyst that Global Witness spoke to said that he had “certainly never heard of [temperature and pressure] affecting reported [production] figures in annual reports”. The explanations given by CNPC were: That volume was lost due to company consumption for purposed such as fuel for boilers and power plants, running the pipelines and natural wastage; and That volume was lost during normal processing, claiming that a 5-15% loss of crude oil between the field and point of export is the international norm. If it is true that 5-15% of crude oil production is consumed or lost by the oil consortia, then this raises the question to how the government ensures that such losses are being minimized. After all, at present, such losses affect the government’s oil income.
(2) The Sudanese federal and southern governments earned over $4.5 billion from oil in 2010 alone [GoSS Ministry of Finance and Economic Planning, Report on the sharing of the wealth from the oil revenues for September 2010, available at www.petrolgoss.net