Report / Nov. 20, 2008

StatoilHydro's Libyan corruption scandal shows need for oil industry disclosure laws

 A scandal over questionable oil industry payments in Libya, brought to light by the giant Norwegian company StatoilHydro, underlines the need for tougher regulations to deter companies from making undisclosed payments in return for access to oil rights.

The scandal has revealed questionable payments to consultants in Libya in the early 2000s by a company now controlled by StatoilHydro, and similar payments by Spain's Repsol YPF and France's Total. It also revealed that in Angola, StatoilHydro is in partnership with a local private oil company despite suspicions that the company's undisclosed owners may include government officials, in a country perceived to be one of the most corrupt in the world.

Opacity and secrecy have provided a cover for the deep corruption that brings poverty, bad government and human suffering to many oil-producing countries, so StatoilHydro has set a welcome example of openness in its handling of this scandal which has not been emulated so far by either Repsol or Total.

But the scandal shows that oil companies cannot necessarily be relied on to come clean about how they win access to oil reserves, even where there is a serious risk of corruption. To avoid a destructive race for the world's remaining supplies of oil and minerals, tougher regulation is needed to shine light on hidden payments and secret deals.