New data on governance of national oil companies: Why transparency and oversight matter

A man walks near storage tanks at a state-owned Pertamina fuel depot in Jakarta, Indonesia, May 8, 2018. REUTERS/Willy Kurniawan - RC187A6D7BD0

National oil companies (NOCs) are in the headlines a lot of late. In preparation for a $15 billion bond offer, Saudi Aramco disclosed its financial statements for the first time, showing that it is the world’s most profitable company. On the other side of the scales, amidst the chaos that has engulfed Venezuela, the dueling camps of Nicolás Maduro and Juan Guaidó are battling over how to handle the tens of billions of dollars in debt facing the state-owned oil and natural gas company PDVSA, and for control of its U.S. subsidiary.

Away from the attention of the international media, discussions rage about how to manage prominent NOCs in other countries as well. Ghana’s parliament and the Ghana National Petroleum Corporation (GNPC) are locked in intense debate about GNPC’s budget, including its ambitious social spending and plans to build a refinery, with important implications for the company’s growth agenda and the national economy. In the wake of its election, Indonesia faces challenging decisions around how to manage the ambitions and incentives of NOC Pertamina. And in Kazakhstan, the state has pushed back plans to begin to offer shares of KazMunayGaz to the public in an initial public offering, citing economic uncertainty.

Decisions about how to manage NOCs matter a lot; economies in resource rich countries can rise or fall based on what these companies do and how they are governed. Some NOCs—including Colombia’s Ecopetrol and Norway’s Equinor—have delivered strong returns on public investment and are generally well regarded by their peers across the oil industry. Yet in too many places these companies have struggled to develop into commercially efficient actors or to increase the long-term benefits their countries derive from exploration and production. And in extreme cases, they have actively contributed to large-scale corruption.

The Natural Resource Governance Institute (NRGI) conducted a survey of 71 NOCs worldwide in order to assemble the world’s largest open database of NOC operational and financial information. We believe that the database, launching on April 25 at, will help improve oversight—and aid NOCs’ leaders—by providing a stronger basis for understanding what peer companies are doing elsewhere and facilitating research on patterns across NOCs. The database contains more than 70,000 data points covering more than 100 indicators. (A launch event will be held in Washington, D.C. on April 25.)

Beyond the vicissitudes of the volatile oil market, two persistent challenges impede the development of effective and well-governed NOCs. The first is a lack of transparency. NOCs have historically been opaque. These companies often rank among the most important economic actors in their economies, but too often they share little valuable information with the citizens they are intended to benefit.

We wrote about the challenges of state-owned enterprise transparency in this space last year. The good news is that there has been some progress. The Extractive Industries Transparency Initiative (EITI) has strengthened its reporting rules, and NOCs in EITI member countries will now be expected to disclose audited financial statements and to report more extensively on the traditionally opaque oil sales contracts that generate billions of dollars every year. The Organization for Economic Cooperation and Development has circulated new “Anti-Corruption and Integrity Guidelines for State-Owned Enterprises,” with valuable guidance on company reporting systems. And many NOCs are implementing increasingly sophisticated systems for letting their citizens know what they are doing.

Still, too many NOCs fail to provide both governmental and informal oversight actors (including the media and the public) with the core information necessary to hold the companies to account. We found that some NOCs provide a wealth of data on exploration and production, revenues, spending, and payments to government. Reporting practices have grown stronger among NOCs in Eurasia, Latin America, and Europe. But in many cases—especially among companies based in the Middle East and North Africa—NOCs still skip these basic steps of disclosure, as illustrated by the table below, which shows the proportion of NOCs in each region that report on each of 10 key indicators. We found information sufficient for us to complete the database field “total NOC assets,” for example, for only 35 percent of the Middle Eastern/North African NOCs and 20 percent of the sub-Saharan African NOCs in the sample. Across the companies in the database, reporting on expenditure and on employment levels remains particularly spotty.

Table 1: National oil company reporting, by region, 2015

National oil company reporting, by region, 2015

Source: Natural Resource Governance Institute, “National Oil Company Database Report,” 2019

Even where NOCs are transparent, however, that is not the end of the story. Which brings us to our second persistent challenge: oversight. Public sector actors tasked with monitoring NOC performance and ensuring a good return on public investment in these companies—including in regulatory bodies, parliament, and supervisory ministries—often lack the resources to do so effectively. Worse, in some cases, a lack of checks and balances has enabled corrupt political actors to actively interfere in the management of NOCs to push them toward corrupt ends. Nongovernmental oversight actors in the media and civil society have it even tougher, as they often lack access to decisionmakers and face steep deficits in financial and technical resources.

One of the major impediments to oversight is the complexity of NOC portfolios. Governments often call upon these companies to do it all, from financing the budget to executing public services, and this can make it hard to benchmark exactly what their priority goals should be.

National oil company total revenues as a percentage of general government revenues, 2013

National oil company total revenues as a percentage of general government revenues, 2013Source: Natural Resource Governance Institute, “National Oil Company Database Report,” 2019

The combination of strong reporting and a vigorous system for oversight is critical to ensure that these companies maximize their incentives to perform effectively in the public interest. And for a number of oil-rich countries, the stakes could not be higher. We identified at least 25 countries worldwide in which the NOC, on its own, collects revenues equivalent to at least one-fifth of total government revenues. In these countries, the fundamental ability of the government to use oil revenues for development depends at its core on how well the NOC is run, how much revenue it transfers to the state, and the quality of its spending.

Looking at this new collection of data makes it clearer than ever that to maximize the chances for meaningful development—and reduce the serious economic and governance risks that seemingly come out of the ground with oil—it is critical for resource-rich countries to invest in making NOCs more accountable. For NOCs and their governments, this means emphasizing the importance of consistent public reporting, benchmarking against well-defined objectives and enhancing corporate governance and internal safeguards against corruption. For international organizations and NGOs, this means doubling down on advocacy around disclosures—especially around company expenditures—and providing regular forums for experience-sharing among companies.