Managing oil revenues: international oil companies can help

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Page 195

Do international oil companies really have a stake in the economic and political well-being of the countries in which they operate? In the current global climate, proper management of oil revenues, good governance, and transparency matter for the host country, but they typically have huge implications, too, for corporate reputations and operations.

Clearly, a host country beset with such problems as corruption or environmental degradation, risks seeing its credit rating downgraded and its cost of borrowing in international capital markets rising. But a corporation’s association with political regimes that do not manage their countries’ resources well, have a reputation for corruption, are plagued with civil unrest, and are indifferent to environmental degradation can damage its image and carry real costs in terms of relations with both investors and customers.

A recent paper by Menachem Katz and Ulrich Bartsch of the IMF’s African Department-presented by Katz at the West and Central Africa Oil and Gas 2003 conference in Houston, Texas, in early June-suggests that countries and companies have...