In the oil and gas sector, there are several revenue sharing models in operation around the world. These range from those that favour the derivation principle i.e. each subnational government’s share is related to the oil revenue originating in its territory, to those that are more like intergovernmental transfers (Ahmad and Mottu, 2002, pp. 15-16).
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 designed.
- 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 gas revenues.
- 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.