Corruption and reduced oil production: An additional resource curse factor?

Prominent contributions to the resource curse literature suggest weak governance and corruption are important factors behind the wide welfare variations observed among oil producing countries. How weak governance and corruption influence revenue management and expenditure decisions, as well as the possible welfare benefits derived from oil, are broadly discussed. How they impact upon volumes of oil produced has, however, attracted little attention. This paper combines a review of the resource curse and oil production literatures with findings from qualitative interviews with oil sector experts to appreciate the feasibility of connections between corruption and oil production below its potential. We make particular reference to environments where regulatory institutions or political accountability are weak and focus primarily on producer government and oil firm relations. Drawing on insights from geology, political science and economics, we suggest suboptimal production solutions can impact volumes of oil actually produced and create constraints on long term revenues for oil producing countries. We argue greater disclosure of information on oil production efficiency on a field-by-field and country-by-country basis will assist further investigation of the relationships between corruption and volumes of oil produced. (C) 2012 Elsevier Ltd. All rights reserved.