Fuelling Mistrust: The need for transparency in Sudan's oil industry

High resolution photos and maps from the report are also available for download (Click here).

Oil production figures underpinning Sudan’s peace agreement don’t add up, warns Global Witness

The 2005 peace agreement, which brought to an end to the conflict between north and south Sudan, one of Africa’s longest-running and most bloody wars, was based on an agreement to share oil revenues. However, new evidence uncovered by Global Witness raises serious questions about whether the revenues are being shared fairly. ”If the oil figures published by the Khartoum government aren’t right, the division of the money from that oil between north and south Sudan won’t be right,” said Global Witness [1] campaigner Rosie Sharpe.

The Global Witness report, Fuelling Mistrust: the need for transparency in Sudan’s oil industry, is the first public analysis of Sudan’s oil figures. It documents how the oil figures published by the Government of National Unity in Khartoum are smaller than the equivalent figures published by the China National Petroleum Corporation (CNPC), the operator of the oil blocks. While the respective figures for the only block located entirely in the north, and therefore not subject to revenue sharing, approximately match, those for blocks which are subject to revenue sharing do not. There were discrepancies of [2]:

9% for the Greater Nile Petroleum Operating Company’s blocks in 2007
14% for the Petrodar Operating Company’s blocks in 2007
26% for the Greater Nile Petroleum Operating Company and Petro Energy’s blocks in 2005
These findings cover six of the seven productive oil blocks in Sudan. A comparison of government and company figures was not possible for the White Nile Petroleum Operating Company’s block as no company figures were available.

Mismatches of this magnitude represent potentially massive sums of money. If it were found that the oil figures published by the Government of National Unity had been under-reported by, for example, 10%, the southern government would be owed more than $600 million (on the basis that the Government of Southern Sudan has received more than $6 billion in oil revenues since the signing of the peace agreement). This is more than three times the south’s combined annual budgets for health and education.

“Our findings do not necessarily mean that Khartoum has cheated the south out of money, but they do highlight the need for transparency. Unless the Government of Southern Sudan and Sudanese citizens can verify that the revenue sharing is fair, mistrust will grow and the peace agreement could be jeopardised,” said Sharpe.

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, despite the fact that oil revenues make up 98% of their income.

“The oil production and sales figures upon which the revenue sharing depend should be verified by independent third party audit and by legislation passed by Sudanese lawmakers that requires oil companies to disclose their payments,” said Sharpe. “The peace agreement’s international guarantors, including the UK, US and Norway, need to do more to promote transparency. China [3] and Japan [4], who are the main customers for Sudanese oil, should also push for greater transparency, which will help ensure stability and a reliable supply.”

Arabic Forum