Please identify a selection of examples of revenue sharing models in the oil or gas sector in fragile or conflict-affected states, and summarise how they operate and what factors have contributed to their success or failure.
Examples of revenue-sharing models in fragile and conflict-affected states include:
Indonesia: The government has adopted an asymmetric revenue sharing
model. The primary objective of this arrangement is to prevent
resource rich conflict-affected regions from seceding. The arrangement
has fulfilled this aim, although it has not succeeded in achieving the
levels of equality between regions that were anticipated when it was
Iraq: The revenue sharing model currently applied in Iraq has suffered
from ambiguity. For example, existing agreements on revenue sharing
are not clear about who is responsible for the management of oil and
gas revenues. Moreover, the Kurdistan Regional Government (KRG) and
the federal government are engaged in an ongoing dispute over oil and
Nigeria: The formula-based revenue sharing model adopted in Nigeria
has been in place for some years. However, the model has proven to be
inefficient and oil revenues have resulted in widespread corruption.
Moreover, the revenue sharing arrangement has not resulted in
development in the oil producing Niger Delta.
Sudan: The Agreement on Wealth Sharing (AWS) was an important
component of the Comprehensive Peace Agreement signed between the
governments of Sudan and Southern Sudan in 2005. Implementation of the
agreement, which included provisions for the equal division of oil
revenues between the North and the South, was more successful than
expected. However, the South is believed not to have received its fair
share of revenues and relations between the North and the South
deteriorated after South Sudan’s independence in 2011. Oil remains a
major source of tensions between the two countries.
Strachan, A. Oil and gas revenue sharing (GSDRC Helpdesk Research Report 1123). Governance and Social Development Resource Centre, University of Birmingham, Birmingham, UK (2014) 8 pp.