High Level of Corporate Secrecy in Oil and Gas Sector, Survey Finds
By Thein Lei Win 27 June 2014
RANGOON — As resource-rich Burma gears up to join the global anti-corruption scheme for the oil, gas and mining sector, a survey by a London-based advocacy group found widespread corporate secrecy in the sector, which has long been plagued by corruption.
Of the 47 local and international companies which won major oil and gas blocks in October and March, only 13 responded to questions about their ownership, Global Witness said on Thursday. The Netherlands’ Berlanga Holding B.V., Italy’s Eni, Anglo-Dutch Shell and Thailand’s PTTEP South Asia, a subsidiary of publicly traded PTTEP, are among those that did not respond, it said.
“Company secrecy threatens Myanmar’s fragile progress towards a fairer and more open management of its resource wealth,” Global Witness said in a statement. “Putting company ownership details into the public domain provides a crucial safeguard against corruption,” it added.
The survey “is the first public review of company ownership (in the sector), and it provides a snapshot of the level of transparency to which companies are willing to commit,” a Global Witness spokesman said.
Burma’s oil and gas deposits, hydropower, timber and minerals were once accessible to only a handful of companies, many of them linked to or friendly with the powerful military.
Millions of dollars of revenue from past exploitation of natural resources have not been accounted for in publicly available state data. Some 85 percent of Burma’s people live on less than $2.25 per day, according to the United Nations.
Under the military junta which ruled the country for half a century, there was little independent oversight of national revenue or spending, but the quasi-civilian government which came to power in 2011 vowed to change this.
Burma’s application to join the Extractive Industries Transparency Initiative (EITI), a global standard under which governments and companies agree to report how much is paid for extracting natural resources, will be considered on July 1-2.
“Myanmar is coming out of decades of opaque business deals which have resulted in civil society being very suspicious of business, particularly in the extractives sector,” said Vicky Bowman, a former British diplomat now leading the Myanmar Centre for Responsible Business.
“The government is also applying to be a member of the EITI. For these reasons, it is important that companies in the Myanmar extractives sector make their ownership clear, so that citizens understand who is benefiting from the new investment,” she added.
Need for Transparency
Only two Burmese private companies – Myanmar’s Machinery & Solutions and Myanmar Petroleum E&P Co. Ltd – provided full details of their ultimate owners, Global Witness said.
Precious Stone Mining was one of the local companies awarded an onshore block in October 2013, partnering with Pakistan’s Petroleum Exploration (PVT). Yet Precious Stone’s spacious but sparsely furnished office in a Yangon apartment block attached to a shopping center had no pamphlets, posters, or information on its track record in the oil and gas sector.
When a Thomson Reuters Foundation reporter visited the office on Wednesday, the staff were unaware the company had won the contract and declined to answer questions.
Experts say foreign investors are required to have a local partner if they win shallow water or onshore blocks.
“There are only a handful of Myanmar companies with real oil and gas sector experience, and only a very few of these pass the due diligence tests of major Western companies,” Bowman said.
“Since these few companies’ capacity to take on new investment is already under strain, some foreign companies appear to have been willing to partner with local companies with little oil and gas experience, in order to bid. It is unclear how far (state-owned Myanmar Oil and Gas Enterprise) took past experience into account in awarding the blocks,” Bowman added.
Global Witness is urging all oil and gas companies in Burma to reveal their ultimate owners and include this information in their reports to the EITI.
It also asked the government and parliament to introduce laws requiring such disclosure.
Transparency is not a high priority under existing laws. The Myanmar Companies Act is 100 years old and does not ask companies in Burma—generally private family enterprises—to make details of their ownership and activities public.