FEBRUARY 2011 OIL REVENUES IN ANGOLA MUCH MORE INFORMATION BUT NOT ENOUGH TRANSPARENCY GLOBAL WITNESS | OSISA ANGOLA | OIL REVENUES IN ANGOLA 2 Open Society Initiative for Southern Africa-Angola (OSISA-Angola): VISION: Building Vibrant and Tolerant Democracies in Southern Africa (Angola). MISSION: To promote societies that are open, tolerant, democratic, participatory and transparent and that respect and uphold the rule of law, freedom of the press and information, human rights and good governance. Global Witness Global Witness is a UK-based non-governmental organisation which investigates the role of natural resources in funding conflict and corruption around the world. References to Global Witness Note on the February 2011 edition: in this report are to Global Witness The first edition of this report, Limited, a company limited by published in December 2010, included guarantee and incorporated in a comparison between published England (Company No. 2871809) Angolan oil prices and an average value for Sonangol’s oil exports. This comparison has been removed from the new edition because it drew on data Global Witness Limited from Sonangol’s accounts which were Buchanan House based on technical cost estimates, not 30 Holborn on market prices, and were therefore London not comparable to market prices United Kingdom published by other entities. EC1N 2HS This edition also contains added points Email: [email protected] of information on the distinction between Sonangol’s oil exports as an agent of the Angolan state, and as a participant in concession agreements. GLOBAL WITNESS | OSISA ANGOLA | OIL REVENUES IN ANGOLA 3 CONTENTS Contents 9. How much money does Angola receive 37 from oil bonuses? Executive summary 4 9.a Signature bonuses 38 9.b Signature bonuses in 2006 38 Introduction 7 9.c “Social bonuses” 39 Why oil revenue transparency matters in Angola 7 9.d Sonangol’s reporting on bonuses in 2008 39 Are the Angolan government’s data reliable? 9 Systemic problems with the official data 10 10. Tracing oil revenues into the Angolan 39 Box: Understanding the oil revenue data: How much 12 national budget help are Sonangol’s accounts? Conclusion 41 1. Understanding the full picture of oil revenue flows 13 1.a How much oil did Angola produce in 2008? 14 Specific findings of this report 42 1.b How much oil did Angola export in 2008? 16 1.c What prices did Angolan oil sell for in 2008? 19 Recommendations 44 1.d How much oil was sold by the Angolan 22 government in 2008? Tables and Data n The reliability of Angola’s official data 11 2. What kinds of payments do oil companies make 23 n Angolan crude oil production for 2008 16 to the government? n Angolan crude oil exports in 2008 17 n Production and export figures for hydrocarbon 18 3. How much Concessionary Revenue did Angola 26 liquids, according to Angolan and U.S. governments earn in 2008? n Average dollar price per barrel, by block, 20 Box: The difficulties of checking Angolan official 28 given by the Ministry of Finance for 2008 data on concessionary revenues n Average per barrel price of Angolan crude in 21 2008, by source 4. How much did Angola earn from price cap excess 32 n Crude oil exports by Sonangol, in million barrels 22 fees in 2008? n Concessionary Revenues by block for 2008 27 n Petroleum Income Tax earned by Angola in 2008 33 5. How much Petroleum Income Tax (IRP) did Angola 32 n Petroleum Transaction Tax earned by Angola in 2008 34 earn in 2008? n Dividends paid by Sonangol to the Angolan 36 government 6. How much Petroleum Transaction Tax (TTP/ITP) 34 n Oil bonuses reportedly paid in 2006 38 did Angola earn in 2008? n Revenues from oil taxes in 2008, according to 40 government reports 7. How much Petroleum Production Tax (IPP/TP) 35 did Angola earn in 2008? 8. Dividends paid to the government by Sonangol 36 GLOBAL WITNESS | OSISA ANGOLA | OIL REVENUES IN ANGOLA 4 EXECUTIVE SUMMARY Angola now publishes detailed reports about its earnings from oil, but these reports are not reliable enough to ensure transparency for Angola’s citizens. As a poor developing country recovering from civil in Angola, and the revenues that flow to the war, Angola relies heavily on revenues from oil state from oil. The government has taken further which accounts for two-thirds of the government’s steps since signing a three-year, US$1.4 billion income. But civil society groups, the International loan agreement with the IMF at the end of 2009, Monetary Fund and other observers have long notably the publication for the first time of the raised concerns about lack of transparency in the audited accounts of Sonangol, the powerful state government’s management of these revenues. oil company which dominates the public finances of Angola. A well-documented history of severe official corruption in Angola has meant that revenues This report assesses the extensive official data which could have been used to promote the published by the Angolan government in order country’s development have been siphoned off to answer the question: do these data provide or wasted. Global Witness has published a series concerned Angolan citizens with a comprehensive of reports since 1999 raising concerns about and reliable picture of how much revenue the corruption in the oil sector. The Open Society government earns from oil? Without such a Initiative for Southern Africa (OSISA) Angola picture, it is impossible for citizens to monitor has long worked for more open and the flow of revenues and press the Angolan accountable government. government to use these funds in their long-term interest. Since 2004, the Angolan government has responded to concerns about its lack of The simple answer is that the official data on oil transparency by publishing large amounts of production, exports, domestic sales, prices and official data about oil production and exports above all, revenues, are not reliable. None of the figures appear to be independently verified (with the partial exception of Sonangol’s accounts, which are audited by an international accounting There are too many firm). Thus even in cases where different agencies’ problems for the official figures are consistent with each other, there is no data on oil revenues to be external assurance that the figures are accurate. accepted as reliable or In fact the figures from different agencies show numerous gaps, discrepancies and anomalies comprehensive which are hard to explain, based on the available GLOBAL WITNESS | OSISA ANGOLA | OIL REVENUES IN ANGOLA 5 This gap may have a technical explanation THE MAIN FINDINGS OF but if so, this explanation is not provided in THIS REPORT ARE THAT: official reports. n Angola’s official figures for oil n Sonangol reported earnings of more production and exports in 2008 are than a billion dollars in 2008 from price not independently verified. The Ministry cap excess fees, which are levied on oil of Petroleum’s figures are roughly companies in Angola when oil prices are comparable to estimates by external higher than expected. These earnings are agencies. The Ministry of Finance not separately recorded in government reports a massive 87 million fewer reports, making them impossible to track. barrels of oil exports than the Ministry of Petroleum, which is not plausible. n There is a gap with a notional value of more than a billion dollars between the n The government publishes several reports of the Finance and Petroleum average prices for oil sales in 2008: the Ministries on oil income tax and gaps price from the Ministry of Petroleum with a notional value of several hundred is close to that of credible external million dollars between the ministries’ estimates but the Finance Ministry has reports on production and transaction two average prices, one nearly US$10 a taxes paid by oil companies. These barrel higher than the other. figures appear unaudited in any case. n The figures published by Sonangol n Sonangol reports that it paid US$436 and the ministries for the volumes of million in dividends to its shareholder, the oil sold by the state oil company, which Angolan government, in the 2007/8 fiscal is Angola’s single biggest source of year. Neither ministry reports the receipt revenue, do not always match each other. of dividends on anything like this scale. There is a massive gap, with a nominal value of US$8.55 billion, between n In some cases, figures for oil revenues the ministries. are published but the underlying data, which determine the size of these n Signature and other bonuses paid flows, are confidential. For example, the by oil companies to the government government does not appear to publish appear to be poorly reported in official the fiscal prices at which oil companies’ documents. In 2006, the media reported taxes are calculated, or the findings of that Angola earned more than US$3 its cost and tax audits of oil companies. billion in signature bonuses, but a Finance Ministry report only records (The references for these findings “oil bonuses and premiums” of just appear in the relevant sections of under US$1 billion. the main text). GLOBAL WITNESS | OSISA ANGOLA | OIL REVENUES IN ANGOLA 6 information. This report does not allege that the The report also examines a key revenue stream, figures show evidence of corruption and fraud and signature or other bonuses paid by oil companies, it is possible that, with independent verification, for 2006 (because several billion dollars were at least some of them could be confirmed as reportedly paid in bonuses in that year, though accurate. But at present, there are too many the sums since then have been much smaller).