Iraq Come Clean on Oil Revenues

[Rayzur]

09 Jan 2012

Iraq comes clean on oil revenues

Monday, Jan 09, 2012

Iraq disclosed it earned $41bn from oil and gas exports in 2009, in a move designed to increase transparency in its energy sector.

However, critics said the disclosures don't go far enough, and urged the Iraqi oil ministry to fulfil a longstanding promise to publish its contracts with foreign oil companies.

Iraq revealed the details of its export earnings under the Extractive Industries Transparency Initiative, or EITI, a global public-private coalition that pushes for fuller disclosure of transactions between resource companies and governments.

To be compliant with the EITI, a country has to reconcile what companies say they pay in taxes, royalties and signature bonuses with what governments say they have received. It is designed to tackle the "resource curse" afflicting a number of big oil-exporting countries where the presence of abundant natural resources has often led to widespread corruption and poor governance.

Iraq is the only Middle Eastern oil producer eligible to join the EITI. Yemen was classified as EITI compliant but was suspended last year during an uprising against the regime of Ali Abdullah Saleh, the president.

Clare Short, the former UK minister for international development, who is chair of the International EITI Board, said Iraq's publication of its oil revenues would help its people to "see how much the government receives from the country's vast natural resources and start to ensure that Iraq's resource wealth is properly managed."

Iraq has roughly 10 per cent of the world's proven oil reserves, but wars and sanctions ravaged its oil industry and starved it of much-needed investment.

However, output - though still far from the peak of 4m barrels a day reached in the 1970s - has begun to recover strongly in the last year or so, following a series of bidding rounds that awarded service contracts to a clutch of international oil companies. These have since significantly pushed up production from existing fields. Iraq now has a target of reaching 12m barrels a day by 2017, though analysts have said that may be too ambitious.

The oil industry is seen as crucial to Iraq's economic recovery from the aftermath of the 2003 US invasion and the years of sectarian violence that ensued. In 2009, revenues from oil exports accounted for around 65 per cent of Baghdad's federal budget and 95 per cent of foreign exchange earnings.

But the sector is still widely perceived to be corrupt. Last year, Iraq was ranked 175 out of 182 in Transparency International's corruption perceptions index.

The EITI report compared the volumes produced by oil companies in Iraq with the Oil Ministry's crude exports, and reconciled revenues reported by Iraq's state oil marketing organisation and buyers of Iraqi oil abroad. It came up with a figure of $41bn in revenue from total oil and gas exports in 2009.

Critics said the report was a good first step but Iraq still had a long way to go to improve transparency. "Iraq has been promising for two years now to publish the contracts it signed with international oil companies, and that hasn't happened," said Greg Muttitt, author of "Fuel on the Fire: Oil and Politics in Occupied Iraq."

By Guy Chazan in London

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