New evidence confirms oil revenue transparency still eludes Sudan

Source: Global Witness

Large discrepancies persist between the oil production data published by the government of Sudan and those published by the main Chinese oil company operating in the country, Global Witness said today, six months after the publication of its report which first exposed the gaps.

This problem arises despite promises by the authorities in north and south Sudan to address the inconsistencies by conducting an audit. The promised audit is yet to take place. Oil transparency matters because the peace deal between north and south was predicated on an agreement to share the revenue from oil.
Global Witness has discovered that oil production figures published by the Chinese National Petroleum Company (CNPC) for 2009 for the blocks it operates in Sudan’s Upper Nile State are 12% bigger than those published by the Sudanese government.1 “The difference in question – 12 million barrels of oil – is significant. The oil is worth $370 million2 and is enough to power a city in the US the size of San Francisco for a year,” said Global Witness campaigner, Rosie Sharpe.
Sharpe said: “The authorities in the north are responsible for stating how much oil was produced. The south has no way of checking whether these figures are correct and therefore whether the revenues the southern government receive are correct. This is a critical issue and one which could be decisive in determining whether the upcoming referendum on independence passes off peacefully.”
This new data follows the September 2009 report by Global Witness which documented discrepancies of 9% to 26% between Sudanese government data on oil production and figures published by the oil company. These findings do not necessarily mean that Khartoum has cheated the south out of money, but they do further highlight the need for transparency.
“While it is impossible to know for sure which figures are correct, it is clear that both cannot be. Six months after we first raised this issue we still haven’t seen the reforms that are necessary and that have been promised. The continued discrepancies are a cause for grave concern and cast a shadow over the prospects for peace,” said Sharpe.
“The authorities in the north have not done enough to allay the suspicion held by many southerners that they are underreporting the volume of oil produced in order to transfer less money to the southern government than is due under the peace agreement. Transparency – of which a first step is conducting an audit – will be needed for both sides to trust the current revenue sharing agreement, and any future one,” said Sharpe. Global Witness put the allegations of production discrepancies to the Ministry of Finance and CNPC but has yet to receive a reply from either.
Global Witness has also discovered that the pipeline fees stated by the Sudanese government do not match those stated by the Central Bank of Sudan in 2005, 2006 and 2008.3 It is important that these fees are reported accurately. They amount to millions of dollars and if they are wrong, the oil revenue sharing will also be wrong.
Global Witness wrote to the Sudanese Ministry of Finance and the Central Bank to ask why their figures on pipeline fees do not match. The Ministry of Finance replied to state that they are calculated using two different methods of accounting meaning they cannot be compared.4 While the two accountancy methods do generate different figures – as one relies on the date the fees are incurred whereas the other relies on the date they are paid – it is difficult to see how this alone could generate such large discrepancies.