Using UK company data as an accountability tool

After well over a decade-and-a-half of campaigning by the Publish What You Pay anti-corruption movement, oil, gas and mining companies are starting to report payments to governments under long-awaited mandatory disclosure rules. Although the voluntary Extractive Industries Transparency Initiative (EITI) has resulted in a growing body of available payment data since 2003, company disclosures on a worldwide basis began only under transparency laws in Norway in 2015 and in France and the UK in 2016. Similar laws in other EU member states and in Canada will require company reporting from 2017, and US companies are due to report from 2019.

By 2019 an estimated 84% or more of the world’s 100 largest oil and gas companies by market capitalisation, and at least 58% of the largest 100 mining companies, will be required by law in one jurisdiction or another to disclose their payments. The global extractives transparency standard will have well and truly arrived.

Getting oil, gas and mining companies to publish their payments to governments is necessary to deter opaque or corrupt deals and poor revenue management. But civil society’s work does not stop there. We also need to act as watchdogs by using company disclosures to hold governments and companies to account so that squandering natural resource revenues becomes a thing of the past.

Open data makes numerical analysis of payment disclosures easier. But resulting CSV files and data-filled company PDFs are not always the best tools for citizens and civil society to use when discussing payments or questioning government officials. Hence the need for data infomediaries to work with the data and enable citizens and civil society to assess company reports and hold duty bearers to account.

Project activity

As part of the Data Extractors programme, PWYP UK has focused on payments to governments made in 2015 as disclosed under UK regulations and rules by UK-incorporated and London Stock Exchange-listed oil, gas and mining companies. Drawing on PWYP’s strength as a global coalition, we selected UK-based companies operating in four resource-rich developing countries with active PWYP national coalitions and affiliates: Royal Dutch Shell in Nigeria; BG Group (now part of Shell) and Petrofac in Tunisia; BP and Shell in Indonesia; Shell and BP in Iraq.

Large sums of money are involved:


Country Company Total reported payments in 2015 (US$)
Nigeria Shell $4,951,993,935
Iraq Shell $1,359,249,519
Iraq BP $67,700,000
Indonesia BP $885,896,787
Indonesia Shell $1,000,000
Tunisia BC Group $101,365,00
Tunisia Petrofac $12,863,00
Total payments in project scope $7,380,068,241


We used infographics in three cases, and a straightforward information and data summary in the fourth case, to highlight important company disclosures as a basis to question governments on their revenue receipts, and about how they govern natural resources and allocate revenues.

Nigeria

Taking Shell’s 2015 payments in Nigeria, we summarised key data in an infographic and included questions that colleagues at PWYP Nigeria agreed would be useful to put to the Nigerian government. The infographic uses a Piktochart format originally devised by PWYP data consultants OpenOil. PWYP Nigeria agreed that the infographic would be a useful engagement and accountability tool to ask Nigerian government entities to verify Shell’s reported payments for their country’s oil and gas, and to ask about the valuation of payments in kind.

In August 2016 PWYP Nigeria sent the infographic with accompanying letters to Nigerian government entities that Shell had reported as receiving payments: the Department of Petroleum Resources, the Federal Inland Revenue Service, the Central Bank of Nigeria, the Niger Delta Development Commission and the Nigerian National Petroleum Corporation. Two months later, none of the government entities had proved responsive. The Central Bank had written twice to say it cannot provide the information requested, and the Niger Delta Development Commission failed to attend an arranged meeting. PWYP Nigeria subsequently submitted Freedom of Information requests for the information and is considering raising the issue in public via the press.

In compiling the Nigeria infographic, PWYP UK noted an anomaly in Shell’s data with regard to the valuation of certain production entitlements paid in kind. We mentioned this in a blog that was cited by an online legal article, and we began a dialogue with the company about the matter. The dialogue led to Shell providing some supplementary information but refusing to disaggregate between oil and gas payments in kind, making it impossible for data users to check its pricing of in-kind production entitlement payments. We are considering how to take this issue forward.

Tunisia

PWYP UK contacted the PWYP-affiliated Tunisian Coalition for Transparency in Energy and Mines, who confirmed that infographics along the same lines as the Nigerian example would be a useful tool for dialogue with the Tunisian government. It was agreed to focus on payments made in 2015 by BG Group (Tunisia’s largest gas producer, acquired by Shell in early 2016), mainly for gas but also partly for oil, and by Petrofac for gas.

We put relevant data and questions for the Tunisian government into two infographics. Tunisian colleagues wanted three priority questions included in the infographics: about the constitutional provision to allocate a percentage of natural resources revenues for regional development; about the government’s 2012 commitment to join the Extractive Industries Transparency Initiative (EITI); and about social responsibility payments to local authorities.

In compiling the Petrofac infographic, PWYP UK noted deficiencies in the company’s data regarding the valuation of royalties and the identity of recipient government bodies. We notified the company about this, and the company responded by publishing a corrected payments report containing the previously missing information.

The Tunisian coalition are studying Tunisia’s published resource contracts and will use points from the infographic as part of their planned forthcoming dialogue with the government. The coalition presented their work on BG Group’s and Petrofac’s disclosures at an open data workshop for Tunisian civil society and media organised by the Natural Resource Governance Institute in November 2016. PWYP UK has offered the Tunisian coalition to engage with Shell/BG Group and Petrofac headquarters to seek further information about their social responsibility payments to local authorities.

Indonesia

PWYP UK’s fellow Data Extractors PWYP Indonesia agreed that an infographic highlighting payments to Indonesian government entities by BP and Shell would be a useful engagement tool. We created an infographic combining both companies’ payments and including verification questions for the government.

Colleagues at PWYP Indonesia report that government officials have refused to verify the disclosed payments and have said that civil society must wait for the next Indonesian EITI report to check the data. PWYP UK has suggested in response that, as in Nigeria, PWYP Indonesia make a formal Freedom of Information request to pressure the government to release the information.

Iraq

The PWYP-affiliated Iraqi Transparency Alliance for Extractive Industries are also interested in using payment disclosures by Shell and BP to seek greater accountability from their government and the companies. With the need for translation into Arabic, we agreed to start with a simple summary presentation of the payments and other relevant information. The Iraqi alliance, which is particularly concerned about risks of corrupt accounting for operating costs, plans to cross-check the data with the country’s forthcoming EITI report on 2015 and and indicated that it has already identified a significant discrepancy in the tax payment data reported by Shell.

Project outcomes, impact and conclusions

PWYP UK’s Data Extractors project has been one of the first collaborations between PWYP coalitions in home and host countries to hold host governments and companies to account for specific extractive sector payments. Possibly for the first time outside the EITI, civil society in host countries has asked, or is in the process of asking, government entities to account for key payments disclosed by foreign extractive companies. And unlike in the EITI, civil society is questioning payments made no more than a year ago.

Interim outcomes in Nigeria and Indonesia have proved disappointing but not surprising in view of the major change in attitude and practice towards greater openness and accountability that we seek from host governments. It is too soon to assess even initial outcomes in Tunisia and Iraq.

At the same time, civil society engagement with the disclosed data sends an important signal to host governments that civil society is vigilant and will be ready to expose corrupt or questionable dealings. And the project has demonstrated to two companies – Shell and Petrofac – that civil society is monitoring their disclosures and expects them to fully address their legal obligations.

The project confirms that there is no simple “magic bullet” to bring about the open and accountable extractives sector that PWYP works for. Despite its urgency, the change we seek is likely to occur only incrementally over the longer term and will require persistent coordinated effort across the global PWYP coalition.

This case study was produced by Miles Litvinoff, Coordinator of PWYP UK, as part of the PWYP Data Extractors programme. As part of the programme, our members find and present complex information, using examples of companies and government data.

Extractive companies publish worldwide payments under UK law

Mandatory reporting by oil, gas and mining companies under European Union country-by-country disclosure laws began in the UK and France in 2016. Key aspects of the reporting requirements – which have equivalents in Norway, Canada and the USA – are especially useful in preventing corruption: granularity (disaggregation by project and by recipient government entity); comprehensiveness (all countries of operation without exemptions); and timeliness (the most recent financial year).

Eighty-six extractive companies reported under UK law in 2016

UK-incorporated extractive companies must disclose payments within 11 months of each financial year-end, and London Stock Exchange-listed (Main Market) extractive companies within 6 months (unless the LSE is their secondary listing). UK-incorporated companies must provide open and machine-readable data. For most in-scope companies, the first reporting deadline was 30 June 2016 (if LSE-listed) or 30 November 2016 (if UK-incorporated and unlisted).

According to an assessment by PWYP UK and NRGI, by end-2016 disclosures of 2015 or 2015/16 payments to governments had been published by 86 UK-incorporated and/or LSE-listed oil, gas and mining companies (plus one forestry company). Prominent reporting companies include Anglo American, BG Group (now part of Royal Dutch Shell), BHP Billiton, BP, Cairn, Centrica, Gazprom, Glencore, Lukoil, Premier Oil, Randgold, Rio Tinto, Rosneft, Royal Dutch Shell, Soco, Total (main reporting obligation in France), Tullow and Vedanta. LSE-listed China Petroleum & Chemical (subsidiary of Chinese state-owned Sinopec Group) should have reported payments made in Angola and China but appears not to have.

Payments in which countries?

Disclosures from the above named 18 companies provide data on 84 host countries. These include resource-rich developing and transition states where extractive revenues may be hidden or associated with the “resource curse”, and developed economies that also may fail to gain optimal outcomes from resource extraction (see graph and table of some of the countries where these 18 companies report).
Anglo American 8Anglo AmericanBG Group 7BG GroupBHP Billiton 11BHP BillitonBP 12BPCairn 1CairnCentrica 2CentricaGazprom 4GazpromGlencore 9GlencoreLukoil 2LukoilPremier Oil 3Premier OilRio Tinto 7Rio TintoRosneft 2RosneftShell 13ShellSoco 2SocoTotal 17TotalTullow 6TullowVedanta 4VedantaAngola 3AngolaAustralia 7AustraliaAzerbaijan 2AzerbaijanBrazil 9BrazilCanada 8CanadaChina 3China Democratic Republic of Congo 3Democratic Republic of CongoEquatorial Guinea 2Equatorial GuineaGabon 3GabonIndia 4India Indonesia 6IndonesiaIraq 3IraqKazakhstan 5KazakhstanKenya 3Kenya Malaysia 2MalaysiaNigeria 2NigeriaPeru 4PeruPhilippines 2PhilippinesQatar 2Qatar Republic of Congo 3Republic of CongoRussia 5RussiaSouth Africa 5South AfricaTanzania 3TanzaniaUK 10UKUSA 6USAZambia 3ZambiaZimbabwe 2Zimbabwe

Example country Prominent companies disclosing payments under UK regulations
Angola BP, Gazprom, Total
Australia Anglo American, BG Group, BHP Billiton, BP, Glencore, Rio Tinto, Shell
Azerbaijan BP, Total
Brazil Anglo American, BG Group, BHP Billiton, BP, Premier Oil, Rio Tinto, Rosneft, Shell, Total
Canada Anglo American, BHP Billiton, BP, Centrica, Glencore, Rio Tinto, Shell, Total
China BHP Billiton, Shell, Total
Democratic Republic of Congo Glencore, Soco, Total
Equatorial Guinea Glencore, Tullow
Gabon Shell, Total, Tullow
India BG Group, BHP Billiton, BP, Vedanta
Indonesia BHP Billiton, BP, Premier Oil, Rio Tinto, Shell, Total
Iraq BP, Shell, Total
Kazakhstan BG Group, Gazprom, Glencore, Lukoil, Total
Kenya BG Group, Total, Tullow
Malaysia BHP Billiton, Shell
Nigeria Shell, Total
Peru Anglo American, BHP Billiton, Glencore, Rio Tinto
Philippines Shell, Total
Qatar BP, Shell
Republic of Congo Soco, Total, Tullow
Russia BP, Gazprom, Lukoil, Rosneft, Total
South Africa Anglo American, Glencore, Rio Tinto, Total, Tullow, Vedanta
Tanzania BG Group, BHP Billiton, Glencore
UK BG Group, BHP Billiton, BP, Cairn, Centrica, Gazprom, Premier Oil, Shell, Total, Tullow
USA Anglo American, BHP Billiton, BP, Rio Tinto, Shell, Vedanta
Zambia Anglo American, Glencore, Vedanta
Zimbabwe Anglo American, Rio Tinto

How good is the reporting?

This growing body of extractives data is essential – if not sufficient – to inform citizens, civil society, journalists and parliamentarians about the revenues generated by exploitation of their countries’ natural resources, how well the money compensates for negative social and environmental impacts and which government entities get paid (see PWYP’s Chain for Change).

The first year’s reporting in the UK needs improvement, however, and company disclosures are not always complete.

Difficulty in locating some reports and lack of open data
All UK-incorporated companies’ reports are available online in open data from Companies House, but there is no annual index; site users need to insert a blank space in the search box to produce a list of reports. LSE-listed companies’ disclosures currently lack a central location, making it hard to know how many have reported, and need not be in open data format. (Similar challenges occur with companies reporting in France.) LSE-listed companies are required to announce their report on the National Storage Mechanism but many do not, and none have used the correct classification. However, all LSE-listed companies will be required to upload their reports centrally in open data from 2018.

Over-aggregated or omitted data
Several companies have broadly – and geographically – aggregated data for multiple different oil and gas fields or mines: Shell (“Gulf of Mexico (West)”, “Northern North Sea”, “Sabah Inboard and Deepwater Oil”, “SPDC East”, “UK Offshore”); BHP Billiton (“Gulf of Mexico”); BP (“Gulf of Mexico Central”); Glencore (“DRC Copperbelt Region”). Very broad project aggregation may result in companies hiding suspect payments and arguably contravenes the law’s purpose.

Other companies fail to identify the government entities they pay, which PWYP considers a legal infringement. Lukoil lumps together payments to unnamed “state authorities”. Aggregate Industries (part of LafargeHolcim, which reports in France) identifies only unnamed “national” or “regional/local” governments. Petrofac initially failed to identify government entities but subsequently corrected this.

Companies are required to specify in-kind payments by value and volume and to explain how the value was determined. To verify price per barrel, value should be divisible by volume. However, Shell has for at least one project in Nigeria combined oil and gas in-kind payments in a single figure, making the price per barrel for each incalculable, and when requested refused to fully clarify. Petrofac originally combined cash and in-kind payments in Tunisia in a single uncheckable figure but then amended its report.

BP omits payments by non-subsidiary joint ventures (JVs), and Shell excludes payments by JVs over which it has joint control. Given the frequency of JVs in resource extraction, and because JV production entitlements are often the largest payment to a government, non-reporting of JV payments by non-operating partners – which could be reported proportionately – will leave large sums of money undisclosed.

Disclosures by Total and some other companies contain omissions of certain types of payments that require further investigation.

What next?

Civil society has been active in accessing and analysing the data, including via PWYP’s Data Extractors programme and PWYP US’s Extract a Fact site. Our work with the data will be the subject of future blogs.

The UK will review its regulations in 2017, followed by the European Commission’s EU-wide review in 2018. Civil society needs to engage with these processes to defend the value of mandatory reporting and, where possible, persuade policy makers to close loopholes and strengthen the law.

Using UK company data as an accountability tool

After well over a decade-and-a-half of campaigning by the Publish What You Pay (PWYP) anti-corruption movement, oil, gas and mining companies are starting to report payments to governments under long-awaited mandatory disclosure rules. By 2019 an estimated 84% or more of the world’s 100 largest oil and gas companies, and at least 58% of the largest 100 mining companies,
will be required by law to disclose their payments. The global extractives transparency standard will have well and truly arrived.

Getting oil, gas and mining companies to publish their payments to governments is necessary to deter corrupt deals and poor revenue management. But resulting CSV files and data-filled company PDFs are not
always the best tools for citizens and civil society to use when discussing payments or questioning government officials. That is why data infomediaries are needed to work with the data to enable citizens and civil society to assess company reports.

In this case study, part of the PWYP Data Extrators, PWYP UK Coordinator Miles Litvinoff highlights how:

  • Civil society in host countries has used, or plans to use, data reported by UK companies under the EU Directives to proactively ask government entities to account for key payments disclosed by foreign extractive companies.
  • Unlike in the EITI process, payments in question were made no more than one year ago, which significantly enhances accountability.
  • Using mandatory payment disclosures, and supported by open data techniques and products, five PWYP country coalitions will have initiated dialogue with government entities in four host countries and with international extractive companies including Shell on the comprehensiveness of company disclosures, on what constitutes a “fair deal” for citizens and on host government accountability.

Brexit must not undermine global progress on extractive industry transparency

By a slim majority, United Kingdom citizens have voted for the UK to leave the European Union and have brought about the resignation of Prime Minster David Cameron. The UK, the European Union and much of the world look set for a period of renewed economic and political instability, rather than the steady and purposeful reform that many of us work for.

UK commentators such as Richard Murphy and contributors to #MoreInCommon – founded in loving memory of the so recently murdered campaigning Member of Parliament Jo Cox – are already envisaging more hopeful and healing scenarios for politics and society. For those working in the fight against corruption, and for transparency and accountability in the extractive and other industries, it is crucial that we secure and build on the gains of recent years.

In the coming days the United States Securities and Exchange Commission is due to release its long-delayed country-by-country reporting rules under the Dodd-Frank Act section 1504. PWYP activists in the USA and beyond are watching closely in anticipation that the US transparency rules will robustly require companies to make public, project-level disclosure, with a strong project definition, and company names disclosed.

Effective rulemaking by the SEC in the USA, following recent years’ legislation in Norway, the EU and Canada, will powerfully consolidate the global extractives transparency standards that G8 governments committed to in their 2013 communiqué and ensure that the great majority of global oil, gas and mining companies are required to report in one jurisdiction or another.

Civil society must also continue to play its crucial part in ensuring the integrity of the Extractive Industries Transparency Initiative. The EITI’s advances over the years have almost always come as a result of strong and evidenced-based civil society advocacy. Calls for the EITI to be more responsive on social and environmental issues must be addressed if the EITI is to achieve greater relevance for extractives-affected communities. We also urge more countries that host extractive operations to commit to implementing the EITI.

In the UK and the EU, we cannot let the UK referendum vote distract us from ensuring that newly implemented transparency legislation remains strong and effective in deterring and exposing corruption and mismanagement. PWYP’s Data Extractors programme has a key role in monitoring company reporting, building capacity in civil society across the world to use the data on company payments and government revenues, and holding companies and governments to account for the finite natural resources they extract and the social licence that allows them to operate.

Globally, we also need to see more law-making. Jurisdictions with major extractive companies operating at home and overseas include Australia – whose forthcoming implementation of the EITI we welcome – as well as Brazil, China, India, Russia and South Africa. Each of these countries should implement mandatory reporting for its home-registered oil, gas and mining companies.

In addition, major commodity trading hubs – notably, Switzerland, the UK, the USA, Singapore and the Netherlands – need to introduce mandatory reporting for their home-registered oil, gas and mineral trading companies, whose payments to governments account for a very large proportion of government revenue in Azerbaijan, Iraq, Nigeria and other resource-dependent countries in Africa, Asia and Latin America. On trading transparency it will be especially important that the UK upholds its Anti-Corruption Summit and Open Government Partnership commitments.

Whatever the future holds for the UK and the EU, the world’s poor and marginalised people must not be denied fair shares of the benefits derived from our planet’s finite natural resources.

Shell reports 2015 payments to governments using open data

In April 2016 Royal Dutch Shell became the first United Kingdom-incorporated oil, gas or mining company to submit its report to the UK company registrar Companies House under the UK’s 2014 Reports on Payments to Governments Regulations (as amended 2015). Shell’s report discloses details of payments made in 2015 to government bodies in 24 countries amounting to $21.8 billion. Shell’s first mandatory payments report marks a major new stage in the global campaign for extractive industry transparency and accountability, and an important step forward for open data corporate disclosure.

Shell’s global footprint

It is encouraging for transparency campaigners to see Shell report under the new UK mandatory transparency regime. Shell’s 2015 report differs from its previous voluntary disclosures by including for the first time, as required by EU and UK law, disaggregated project-level data (which it previously argued against) and by reporting on payments of €100,000 or more made in every country where it operated during the year, including China and Qatar (where it formerly claimed reporting might be problematic for legal reasons).

Initial analysis of the size and distribution of Shell’s payments by country helps reveal the company’s global footprint:

Shelll payment graphic 2

The rest of this blog considers the importance of open data in making payment reports such as Shell’s more accessible and useful to citizens and civil society, and suggests a few questions potentially worth pursuing.

Open data

Besides reporting in a conventional pdf format document on its own website, Shell has provided the payment information in open data format using the UK company registrar’s XML schema. Open and machine-readable data reporting under the UK regulations enables the public to export the data in four zipped CSV files for analysis (more on CSV/Comma Separated Values files here).

Shell is the first extractive company to disclose its payments to governments in compliance with the UK’s open and machine-readable data reporting requirements. Statoil (Norway), Total (France) and Tullow (UK) all published their payments to governments in March 2016 but not as open data. The UK Department for Business, Innovation & Skills (BIS) imposed the open data reporting requirement for UK-incorporated companies as a result of advocacy led by PWYP.

The rationale for open, machine-readable extractive industry data was recognised by the G8 countries in their 2013 Open Data Charter:

“Open data sit[s] at the heart of this global movement [for “more accountable, efficient, responsive, and effective governments and businesses”] … [P]eople can use open data to generate insights, ideas, and services to create a better world for all … Open data can increase transparency about what government and business are doing … about how countries’ natural resources are used, how extractives revenues are spent … All of which promotes accountability and good governance, enhances public debate, and helps to combat corruption.”

London Stock Exchange-listed extractive companies that are not UK incorporated, such as Gazprom, Glencore, Rosneft, Sinopec, Statoil and Total, are currently exempt from the UK’s open data reporting requirement. But this will change for financial years starting in 2016, in line with the UK’s current consultation (see PWYP UK’s response here) and third OGP National Action Plan (2016-18). Colleagues at the Natural Resource Governance Institute (NRGI) have, however, rendered Total’s payment report on 2015 into open data here and provided a handy visualisation.

Using the data files

Three of Shell’s four open data CSV files – “government payments”, “government totals” and “project payments” – identify the country where payments were made (using World Bank country codes). After uploading any of these three files into a Google spreadsheet, as done with “project payments” here (Insert – New sheet – File – Import – Upload), a pivot table can be produced (Data – Pivot table – Report Editor – Rows – Add field — CountryCodeList – Values – Add field – Amount) to highlight the total amount of payments for each of the 24 countries where Shell has reported: see Pivot table 1 (full country names added in column C).

The pivot table can be copied and sorted to produce a ranked list of where Shell made its total government payments in 2015 (Report editor – Order: Descending – Sort by: SUM of Amount). Pivot table 2 clearly shows that Shell’s largest total payments in 2015 were made to Nigeria (US $4.95 billion), Malaysia ($4.41 billion) and Norway ($4.15 billion), followed by Oman and Iraq. The UK, at the foot of the table, was the only country where government bodies made an overall repayment to the company ($122.9 million). The table can be turned into a visual chart like the one above (in this case by exporting the data into https://public.tableau.com/s).

Payments can be further analysed, for example to reveal which government body received most payments during the year. Shell’s “government payments” CSV file results in Pivot table 3, where the state-owned Nigerian National Petroleum Corporation tops the list, having received $3.607 billion or 16.52% of Shell’s total payments to governments in 2015. The US Internal Revenue Service comes at the foot of the list, having repaid $237.7 million to Shell in taxes.

We can also rank projects by size of payments. Shell’s “project totals” CSV file produces Pivot table 4, where MY15001 / Sarawak Oil and Gas in Malaysia turns out to be the project generating most payments ($3.611 billion or 16.54% of the total).

Further questions

  • What accounts for Shell’s large tax repayments in the UK and US in 2015?
  • Is it satisfactory that Shell aggregates payment data for single “projects” like “SPDC East” and “SPDC West” in Nigeria, or “Gulf of Mexico (West)” and “Gulf of Mexico (Central)” in the USA, whereas its 2015 Annual Report separately identifies projects on a more disaggregated basis, such as Bonga Phase 3, Erha North Phase 2, Gbaran-Ubie and Soku in Nigeria and the Mars, Stones and Ursa deep-water fields in the US Gulf of Mexico? How many of these aggregated “projects” meet the EU and UK criteria of operational and geographical integration and substantially similar terms, and how many should in fact be disaggregated to fulfil the letter and the spirit of the transparency requirements?
  • Why was Shell’s production entitlement payment in kind of 76,215 KBOE (kilobarrels of oil equivalent) to the Nigerian government for the SPDC East project valued at a market price as low as $20.89/barrel, compared with otherwise average values for Nigerian payments in kind of $51.59/barrel (and a Central Bank of Nigeria price no lower than $37.80 in late 2015)?
  • Shell states (report pdf, page 2) that it reports production entitlement payments for “projects operated by Shell” and by implication not for joint venture projects in which it is not the operator. How much money paid by operators during 2015 to governments on Shell’s behalf for joint ventures in which Shell is a non-operating partner will go unreported?
  • These and other questions arising from Shell’s disclosures will be of interest to civil society in the weeks and months to come.

    London Summit marks progress on extractives trading transparency

    Leaders and politicians from more than 40 countries, as well as business people and NGOs, joined UK Prime Minister David Cameron in London today for the Anti-Corruption Summit. Leaders included Nigerian President Buhari, Afghan President Ashraf Ghani and Norwegian Prime Minister Erna Solberg. Their goal was to discuss and agree ways to jointly expose and tackle corruption around the world.

    Overall, the Summit has been a welcome and potentially game-changing event, with important new commitments such as on beneficial ownership disclosure and today’s announcement by the UK to enhance company disclosure regarding payments to government for the sale of oil, gas and minerals. For those – including PWYP – keen to achieve transparency in extractives sector trading, the Summit marked useful progress but its proposals on trading transparency were not ambitious enough.

    “Corruption is one of the greatest enemies of our times,” said President Buhari during the Summit’s opening session this morning. PWYP agrees: secrecy, in particular in oil, gas and mining, comes at high cost to citizens in resource-rich but poor countries.

    “It’s key to ensure that transparency in the extractive industries sector takes the front burner – considering that for many economies this is the centre of their economy,” commented Faith Nwadishi of PWYP Nigeria.

    Just a few weeks ago, the Panama Papers brought to light how widely a lack of transparency has allowed for tax evasion and avoidance to the detriment of citizens. Today’s Summit came at an opportune time.
    “The Panama papers have exposed to the whole world the issues that PWYP Norway has been working on for ten years,” said Mona Thowsen of PWYP Norway.

    Existing extractives sector transparency laws have left a major gap — they currently do not extend to payments for oil, gas or minerals traded on commodities markets around the world, which remains a major area of opacity and corruption risk. In Angola, for instance, the IMF revealed that the national oil company had illegally and secretly spent $32 billion in oil sale revenues between 2007 and 2010. In Nigeria, damaging oil trading deals signed by the previous administration cost the country’s treasury as much as $16 per barrel.

    With many governments deriving very large incomes from the sale of oil, gas and minerals – including Iraq, Libya, Nigeria and Angola – it is not possible to get a full picture of the role played by the extractives sector in those countries without this information. Ahead of the Summit, PWYP, NRGI and others called on participating leaders to make strong concrete commitments to address this lack of transparency in extractives trading – as highlighted in recent statements, letters and briefings.

    “With the implementation of the EITI, Iraq, through pressure from civil society, has been able to include in its report numbers from external sales of its oil, gas and minerals. Since 90% of the Iraqi annual budget depends on revenues from external sales, it is important for us to know how much exactly flows in from these transactions,” said Ali Neema of the Iraqi PWYP coalition. “But we need these numbers to be published for all trading companies and all countries in an updated fashion, beyond what the EITI can provide.”

    Although the Summit communiqué makes no joint commitment on extractives trading transparency, the UK, Switzerland, Nigeria, Norway, Ghana, Australia, Italy, Japan, the Netherlands, Germany, Afghanistan and Georgia all committed at the Summit, together with the European Commission, to work to enhance company disclosure regarding payments to government for the sale of oil, gas and minerals and to explore the scope for a common global reporting standard on extractives trading.

    “This is a positive outcome that we at PWYP will work to build on so that we can secure the strong mandatory transparency standard for oil, gas and minerals trading that the world urgently needs,” concluded Elisa Peter, Executive Director, PWYP

    The London Anti-Corruption Summit: a key opportunity for extractives trading transparency

    Government leaders gather in London this week to attend UK Prime Minster David Cameron’s Anti-Corruption Summit. Publish What You Pay and the Natural Resource Governance Institute (NRGI) are calling on the UK and other participating governments to ensure that the Summit addresses one of the largest remaining areas of corruption risk in oil, gas and mining: commodity trading.

    Companies’ payments to governments related to commodity trading are usually secret and often one of the largest income flows for resource-rich countries. In Angola, Iraq, Libya and Nigeria the majority of total government revenues come from crude oil sales – often to UK, other EU, Swiss or US companies.

    Corruption risks in oil, gas and minerals trading have been acknowledged by the Africa Progress Panel, the UK Financial Conduct Authority, the Swiss government, the Organisation for Economic Co-operation and Development (OECD) and others.

    Despite the establishment of a global financial transparency standard for most areas of the extractive industries, physical trading of oil, gas and minerals remains a “wild west” frontier as unaccountable as the huge and secretive financial flows exposed recently in the Panama Papers leaks.

    The Summit communiqué should clearly state the intention of participant governments to achieve greater transparency in physical commodity trading transactions between companies and governments. The UK should commit to revising its own extractive sector reporting regulations to include these transactions, advocate for EU-level change, and lead an international process to end trading secrecy that includes other major trading hubs like Switzerland, Singapore and the United States.

    PWYP, NRGI and others have written to Prime Minister Cameron calling for UK leadership on this issue. The heads of both organisations have also emphasized the urgency of addressing trading transparency in their contributions to an Anti-Corruption Manifesto due to be presented to government leaders on 12 May.

    The London Summit is a crucial opportunity for government leaders to commit to the disclosure of payments to governments for the sale of oil, gas and minerals. Citizens suffering corruption and gross financial mismanagement in many of the world’s poorest yet resource-rich countries deserve nothing less.

    Read the joint PWYP / NRGI briefing on trading transparency here.

    Read the joint press release by PWYP / NRGI here.

    PWYP and others urge action on oil, gas and minerals trading at London Anti-Corruption Summit

    PWYP, NRGI, Global Witness, Christian Aid, the Global Organization of Parliamentarians Against Corruption (GOPAC), the UNCAC Coalition, SwissAid, Berne Declaration and others have written to UK Prime Minister David Cameron. We are urging him to ensure that the 12 May Anti-Corruption Summit in London addresses one of the major remaining areas of opacity and corruption risk in the oil, gas and minerals sector: physical commodity trading.

    The Anti-Corruption Summit: London 2016 will bring together world leaders, business and civil society who jointly are to expected to agree a package of practical steps for global action to expose, punish and drive out corruption in all walks of life. The Summit is preceded by Tackling Corruption Together, a conference for civil society, business and government leaders, in London on 11 May.

    In many oil producing countries, the national oil company sells oil to international traders. Two of the world’s largest traders of oil are BP and Royal Dutch Shell, and other major players like Glencore and Sinopec are publicly listed in the UK. Payments to governments from oil trading transactions can be vast, yet are largely opaque. Commodity trading hubs should extend natural resource payment disclosure rules
    to include oil, gas and minerals trading. The Anti Corruption Summit is the ideal moment for joint international action to emerge.

    Read the letter here. Letters were also sent to other UK ministers.

    Read PWYP and NRGI’s trading transparency briefing.

    The UK publishes its first EITI report

    On 15 April the United Kingdom published its first Extractive Industries Transparency Initiative (EITI) report, after being an EITI candidate country since 2014. The report provides, for the first time, and for calendar year 2014, a detailed public breakdown of taxes, licence fees and other payments made to the UK government by 71 named oil, gas, mining and quarrying companies that operate in the UK and its territorial waters, along with a similar breakdown of extractive revenues received by UK government agencies.

    UK EITI report cover

    The UK EITI report also includes, as required under the EITI Standard (adopted in 2013, updated in 2016), a chapter providing a wide range of information about the UK’s extractives sector. This includes a summary of the UK’s legal framework and fiscal regime for oil, gas, mining and quarrying; contracting and licensing arrangements, including details of and links to publicly available licences and contracts; the contribution of the extractive sector to the UK economy (by far the largest contribution comes from North Sea oil and gas); and disclosures about beneficial ownership made by privately owned reporting companies.

    The UK was a founding supporting country of the EITI when it was established in 2003. Now, as an EITI-implementing country, the UK has a Multi-Stakeholder Group (MSG), comprising representatives of government, industry and civil society, to oversee the reporting process. The UK MSG appointed accountancy and consulting company Moore Stephens as the “independent administrator” required to reconcile disclosed company payments and government revenues and to highlight any significant unreconciled discrepancies in the data.

    The UK EITI report covers UK government extractive revenues totalling £3.23 billion in 2014 and extractive company payments to the government totalling £2.43 billion for the same year, including project-level disclosures where relevant. The disclosure threshold is £86,000 for any single payment or stream of similar payments (consistent with with chapter 10 of the EU Accounting Directive 2013 and the UK Reports on Payments to Governments Regulations 2014).

    The difference between the reported 2014 UK government receipts of £3.23 billion and companies’ reported payments of £2.43 billion represents £802 million of taxes paid to the government but not disclosed to the independent administrator by six oil and gas companies, plus £10 million of other material payments not reported by companies. This sizeable reporting gap poses a challenge for the UK EITI, because reporting of all relevant payments by extractive companies is required for a country to achieve compliance under the EITI Standard. The second UK EITI report, due for publication in 2017 and covering calendar year 2015, will undergo the EITI’s formal validation process and be a crucial test.

    Besides publishing the EITI report online, the UK government has published the report’s payment, revenue and contextual data in open data CSV (comma separated values) files, here and here, to meet its commitment in the UK’s Open Government Partnership National Action Plan 2013-15 to make extractives data more readily available and machine-readable for users.

    The MSG would like to hear readers’ comments on the UK EITI report. Comments can be sent to business.transparency[a]bis.gsi.gov.uk or to the writer of this blog. A public launch event for the report takes place on 19 April.

    Civil society has made an important contribution to the UK EITI process. Publish What You Pay UK was asked by the Department for Business, Innovation and Skills in 2013 to coordinate civil society participation in the UK EITI, and the UK EITI Civil Society Network was established for this purpose. Members of the network elect full and alternate civil society representatives to the MSG, so far including representatives of Global Witness, the Natural Resource Governance Institute, Transparency International UK and Publish What You Pay UK. Potential new civil society members who are interested in joining the network and agree to uphold our membership principles are very welcome to contact the author of this blog, who coordinates the network.

    Miles Litvinoff (mlitvinoff[a]pwypuk.org) coordinates Publish What You Pay UK and the UK EITI Civil Society Network.

    PWYP UK urges UK Treasury to require open data reporting by all London Stock Exchange-listed extractive companies

    July 2015 – With the UK Treasury still appearing reluctant to prescribe open data payment reporting for non-UK-incorporated London-listed extractive companies, PWYP UK members have written to the Financial Secretary to the Treasury, David Gauke MP, highlighting this inconsistency with the UK’s Open Government Partnership and 2013 G8 commitments on open and machine-readable data and urging a rethink.

    Read the letter here.