Oil Company Data on Payments to Governments is Now Coming Thick and Fast

Some days are more exciting than others when oil and gas companies disclose the payments they make to governments. We have seen a number of big days like this over the past years. 

Statoil became the first company to report under a mandatory payment disclosure regime in early 2015, undermining U.S. oil lobby arguments.

Shell, which had fought so vigorously against project-level payment disclosure laws, published its first payments to governments report under U.K. law in April 2016 and included information on China and Qatar, countries it previously claimed prohibited disclosure.

BP, which had barely published any country specific information (save for seven EITI countries, often with huge time lags), reported on USD 15.2 billion worth of project-level payments in 23 countries in June 2016.

These disclosures were exciting, and staggered. Over the last fortnight, similar reports have poured in.

On 31 May, Italian oil giant ENI published its first report (search for "ENI"). It includes information on payments of nearly EUR 5 billion in 2016 to government entities in 30 countries including Nigeria and the infamous OPL 245 oil block. The lack of any information on China is a concern, though, and requires follow up. ENI’s production in China was 2,000 barrels of oil equivalent per day in 2016. In 2015, where ENI’s production was 3,000 barrels of oil equivalent per day, it made tax payments of EUR 1.4 million according to a voluntary report.  

By last Friday, approximately 600 companies (not allowing for duplicates where a consolidated report was filed for multiple companies), had reported under Canada’s Extractive Sector Transparency Measures Act (ESTMA). The reports will take some time to sort through and NRGI is working on this with our partner PWYP Canada. In the meantime, there have been some pleasant surprises.

Chevron
Chevron has published its report for relevant subsidiaries under Canada’s ESTMA. We expected information related to its operations in Canada to be in this report. Indeed, Chevron’s U.K. subsidiary has reported on its U.K. operations under U.K. law, as is the case with the subsidiaries of other large U.S. companies like ExxonMobil and ConocoPhillips operating in the U.K. What we did not expect to find was Chevron’s Canadian subsidiaries reporting CAD 3.28 billion in payments to Indonesian and Nigerian government entities for projects such as its Rokan PSC in Indonesia or the Agbami field (OML 127/128) in Nigeria due to the way the corporation is structured. While this by no means captures all of Chevron’s payments to government worldwide, it is the first time Chevron has reported under a mandatory disclosure law in some of the key countries for which these laws were intended to increase transparency. Chevron was instrumental in lobbying for the disapproval of an effective transparency rule in the U.S. earlier this year. Today its anti-competitiveness claims look more ridiculous than ever.

CNOOC Ltd
CNOOC Ltd agreed to list on the Toronto Stock Exchange as per requirements when it acquired Canadian company Nexen. As a result, CNOOC Ltd has disclosed USD 2.6 billion in payments to government entities in 17 countries. This is the most comprehensive disclosure report we have seen so far by a Chinese state-owned company and puts it far ahead of ExxonMobil and Chevron in terms of the information on payments to governments it makes available to citizens around the world. CNOOC’s disclosures also raise questions as to why its peer Sinopec, which is listed on the London Stock Exchange, has not reported under U.K. law for its Angolan and Chinese operations. In another interesting quirk of these disclosure regimes, CNOOC has also filed its full payments to governments report in open data format (take your pick out of CSV, JSON or XML) with Companies House under U.K. law in order to meet the disclosure obligations of its U.K. subsidiary.

Royal Dutch Shell
To top all of this off, today Shell has published its report on payments to governments in 2016. It is available on Shell’s website, as well as via Companies House in CSV, JSON, or XML format. It is available as a stock exchange announcement, as well. This year, Shell has reported on USD 15 billion in payments made to governments in 31 countries.

This is up from 24 countries last year, partly due to Shell’s acquisition of BG Group (which explains the inclusion of Trinidad & Tobago and Tunisia). It’s a decrease in terms of payments, down from USD 21.8 billion last year. Nigeria is the largest payment recipient at USD 3.6 billion. In Canada, Shell has again reported payments to a number of First Nations entities. Like last year, Shell is actually receiving large tax refunds in the United States (USD 254 million) and the U.K. (USD 142 million). Shell’s project-level data needs careful examination to ensure the company is not aggregating legal agreements together to obscure project level reporting.

Finally, production entitlements account for nearly two-thirds of all payments reported by Shell. This is important. For example, Shell’s report reveals that it made in-kind payments (mainly in the form of production entitlements) totalling 134.2 million barrels of oil equivalent (BOE) in 2016 to at least three government entities in Malaysia, including Petronas, the national oil company. The question then becomes: What is the government doing with these barrels of oil equivalent and who is buying them? It is crucial that the buyers of these in-kind payments and the payments they make to purchase this production are included in these payment disclosure laws given the size of the transactions and their susceptibility to corruption. Thankfully, the launch of an international dialogue looking at this issue is taking place this week at the OECD in Paris to take forward commitments made by major trading hubs such as the U.K. and Switzerland at the 2016 London Anti-Corruption Summit.

A significant reporting shift
We are definitely at an inflection point. In addition to the ESTMA disclosures described above, over 90 companies have reported payment information under U.K. law for 2015. A similar number are reporting for 2016 (Shell’s report is one such disclosure.) In total, over USD 136 billion was paid to governments in 112 countries around the world by companies reporting under U.K. law for 2015. NRGI will detail this more fully in an upcoming report.

I encourage everyone—campaigners, investors, analysts, government official and others—to dive into these reports. The more eyes we have on them, the more likely we will see this transparency lead to empowerment of oversight actors and greater accountability.

There remains much work to be done, including ensuring these reports are more easily accessible; querying the reports with companies; improving the underlying legislation; analyzing them for insights; and using them to bring about accountability more purposefully in countries where accountability is lacking most. Please do get in touch if you would like to be involved with this work.

Joseph Williams is a senior advocacy officer with the Natural Resource Governance Institute (NRGI).