Transparency in Oil Industry.

Added on - 16 Sep 2019

  • Dissertation

    type

  • 22

    pages

  • 4888

    words

  • 108

    views

  • 0

    downloads

Showing pages 1 to 6 of 22 pages
Running Head: Transparency in Oil IndustryEnvironmental EconomicsTransparency in the oil industry
Transparency in Oil Industry1Table of ContentsIntroduction.................................................................................................................................................1Extractive Industry Transparency Initiative and the Resource Curse...........................................................2EITI in Azerbaijan.......................................................................................................................................5EITI in Liberia...........................................................................................................................................11Conclusion.................................................................................................................................................15References.................................................................................................................................................17
Transparency in Oil Industry2IntroductionThere has been a great recognition from the last decade of the significance of transparency. It isrequired for the economic growth and the social development, especially for oil-producingorganizations. The continuous enhancement in the prices of the international oil over the last twoyears, bring large benefits for different oil manufacturing countries. This also demands a greaterrange of accountability and transparency from the broad range of stakeholders (Van Alstine,2014). In this paper, we will study about the transparency level in the oil industry by studying therole of extractive industry transparency initiative. This will help us in measuring the impact ofEITI on the transparency of oil industry in different countries. The Extractive industrytransparency initiative is work as a standard for bringing transparency in oil industries ofdifferent countries. More than 50 countries work under the standards formulated by the EITI formanaging their oil industries. It provides international support in both consumer countries andoil-producing countries (Obeng-Odoom, 2014). Its purpose is to enhance the level of voluntarycooperation between civil society, private oil organizations, and governments to increasetransparency in the mining and oil sectors. In this paper, we analyze the level of transparency inAzerbaijan and Liberia oil sector. It represents that while various efforts have already been takento strengthen the level of transparency, sustained and continued action is required to identify theremaining gaps in these areas. Transparency is an essential task for the success of anorganization. Transparency is required to enhance accountability and to improve the use of oilrevenue or also strengthen the fiscal policies to meet the different development priorities of thecountries. Bringing transparency proves helpful in development and poverty reduction in acountry. Thus, it can be said that transparency is considered an important function in a particularindustry. Economic development and growth of a country mainly depend on the transparency
Transparency in Oil Industry3level of its existing companies. In the same manner, EITI also plays an important role in bringingsuccess and growth in the oil industry. The prevalence of corruption and poor transparency inpublic management is not limited to oil-producing countries, but oil-rich economies appear to bein this respect particularly vulnerable (Mahdavi, 2014). Efforts are made to enhance thetransparency level in the oil industry can, therefore, be instrumental in changing the completeperceptions about governance in the different countries. Therefore, it is the responsibility of thegovernment of the countries to pay more attention towards the exhaustible nature of oil.Extractive Industry Transparency Initiative and the Resource CurseExtractive industry transparency initiative is considered as a global standard to promote theaccountable and open management of extractive resources. It mainly focuses on addressing themain issues in the mining, oil and gas sectors (Azerbaijan Validation, 2016). On the other hand,resource curse is considered as a paradoxical situation in which countries with non-renewableresources experience large growth or even economic contraction. It can be said that resourcecurse in a country occurs when they focus their energies on a single industry such as mining andignores the other available major sectors. The EITI is considered as a multi-stakeholder initiativewhich involves different state-owned and multinational extractive organizations, homegovernments, international financial institutions, civil society groups and investors, hostgovernments, and industry or business associations, which have formulated different means orways of revenue transparency (VALIDATION REPORT, 2015). It mainly concentrates on theprudent utilization of natural resources wealth and concludes that the management of suchwealth should be exercised in the national development interests. It can be said that the EITImainly operates on the principle of independent, full, active and free measurement of the waysthat extractive organizations interact with government and influence society and communities.
Transparency in Oil Industry4During 2015, the 49 countries were reported to be in the process of implementing the EITI(https://eiti.org/implementing_country/35#extractive-industries-contribution). Among thesecountries, 33 are considered EITI compliant. Rest countries were known as the candidates of theEITI. Due to the resource curse, a particular nation becomes completely dependent on the grossdomestic product or prices of different commodities. Mainly corruption in a particular countryoccurs when the framework of income distribution and resource rights are not established in thesociety. This will bring unfair practices and regulations in a particular industry.The main proposal of the EITI is to publish revenue data to hold governments accountable. Thiswill motivate it to establish good practices to regulate the environment of different oil industriesin a significant manner (AZERBAIJAN EXTRACTIVE INDUSTRIES TRANSPARENCYINITIATIVE 2014). EITI adopt efficient standards which state that wealth from a country'snatural resources should provide benefits to every citizen. Due to this reason, all standards aredeveloped by the EITI with more efficiency because it requires high standards of accountabilityand transparency. Generally, the idea of EITI was initiated during 2002, but it was officiallyestablished in 2003. It was established during the high-level meeting of different representatives,industries, society groups and governments in the United Kingdom. This meeting was mainlyoccurring on the formulation of different principles of EITI which will guide an oil and gasindustry in performing their day to day functions. It is mainly considered non-profitorganizations.There are different drivers for compliance which helpful in bringing transparency in the oil andgas industry. One of them is the regular publications of all necessary material of gas, oil andmining payments by different organizations to governments and all types of revenue are receivedby the governments from these organizations. It is the responsibility of the EITI to disseminate
Transparency in Oil Industry5that publication to a large number of potential audience and public. Second, when the widepublications and such reporting is insufficient, revenues and payments are made to be a credibleor independent audit of reputable international standards. Another one is the internationalrecognition which enables EITI to bring such standards which prove its efficiency(VALIDATION REPORT, 2015). There are different countries which want to be the part of theEITI. Due to the international recognition, it needs to focus more on the efficiency of itsstandards because they play an important role in the success of oil and gas industry of aparticular country. The fourth driver for compliance is investment attraction. Its efficiencyenables it to be the investment attraction of different countries. Most of the countries want toinvest in it so that they can take its membership, but only some countries are able to do so. Dueto high investment attraction capability, it is considered the very popular standard for success ofoil and growth industry. This success enhances the GDP of a particular country. Anotherimportant driver is business environment improvement. Standards of the EITI bringstransparency in different functional activities of a particular country which ultimately leadsimprovement in the business environment of different oil and gas organizations. Improvement inthe business environment brings various growth opportunity to get success in future(https://eiti.org/sites/default/files/documents/2014_azerbaijan_eiti_report.pdf).There are approximate 51 implementing countries which try to become the member of the EITI.It operates in fulfilment of its various objectives. The prime objective of the EITI is to grow thedemand-side of the social accountability by offering the public insight into revenues. All theserevenues are mainly generated from the exploitation of different mineral resources of differentcountries. Another objective of the organization is to build a platform for the public debate byfocusing on the spending efficiency of extractive sector revenues. This can also be done by
desklib-logo
You’re reading a preview
card-image

To View Complete Document

Become a Desklib Library Member.
Subscribe to our plans

Unlock This Document