New PWYP UK study explores UK EITI and mandatory payments data variances

Publish What You Pay UK has published Comparing UK EITI and Mandatory Payments to Governments Data for 2016, an assessment of payments to the United Kingdom government made in 2016 as reported by oil, gas and mining companies operating in the UK. PWYP UK’s 12-page report compares data released via the UK Extractive Industries Transparency Initiative (EITI) with payments disclosed under UK and other European Union member state regulations implementing the EU Accounting and Transparency Directives’ country-by-country reporting requirements for extractive companies.

PWYP UK undertook the study to understand better how the EITI and mandatory reporting complement each other in practice – the two regimes are intended to be, and in many key ways are, complementary – as well as to explore a sample of extractives data in greater depth and to contribute to discussions about “mainstreaming” or “systematic disclosure” in the EITI.

This data assessment investigates the degree of consistency between extractives companies’ total disclosed payments to UK government entities in 2016 as reported under the two transparency regimes, and the extent of and reasons for major variances. Outside of Norway, which has begun to practise “systematic disclosure”, this UK-focused study may be the first of its kind at country level.

Initial findings and dialogue with companies

Of 58 extractive companies reporting via the UK EITI on 2016 – the most recent year for which data was available in September 2018 – 29 had also published a corresponding mandatory payments report. Data published by 16 of these 29 companies showed variances of less than 10% between the two sets of total reported payments to UK government entities. The remaining 13 companies’ data displayed statistically more significant variances, ranging from just under 12% of the company’s total reported UK EITI payments to more than 9,000%, and in money terms from £0.36 million to more than £40 million.

PWYP UK Graph 1
PWYP UK Graph 2

After eliminating obvious potential reasons for the variances as far as possible, PWYP UK contacted the 13 companies concerned, in several cases via the industry body Oil & Gas UK, to request clarification. Most companies were willing to provide enough information to fully explain differences between the two data sets.

Reasons for the data variances and conclusions

Dialogue with companies was needed to understand the variances completely. Explanations received show that differences of scope between the two transparency regimes determining how some main payment types were reported are significant, although the specifics vary. Companies have confirmed that the main factor is the inclusion or exclusion of subcategories of payments and of interest and negative payments (refunds), especially relating to taxes. In some cases, inclusion of subsidiary companies in UK EITI reporting that were not included, or that disclosed separately or for less than 12 months, in mandatory reporting is also a factor, as are differences in reporting period and – most easily resolved – in currency exchange rates applied.

The extent to which similar issues arise in other countries that implement the EITI, and where operating companies also report payments under mandatory disclosure rules – either in the UK, other EU member states, Canada or Norway – remains to be seen. Lessons from Norway’s experience with systematic disclosure will be useful.

Both the EITI and mandatory payments to governments reporting provide hard-won mechanisms to deter corruption and mismanagement, and opportunities for citizens of resource-rich countries and other oversight actors to hold governments and companies to account for their stewardship of the planet’s non-renewable natural resources and of the resulting financial flows. Civil society organisations, parliamentarians, journalists, investors and companies themselves can reap important public benefits from the two extractive industry transparency regimes. Comparing EITI vs mandatory reports is only one of numerous approaches to using extractives data that civil society is currently exploring as part of its work to bridge the gap between extractive industry transparency and full accountability.

Download PWYP UK’s assessment report, Comparing UK EITI and Mandatory Payments to Governments Data for 2016, here.

Accessing and using UK-based extractive company reports on payments to governments data

PWYP UK’s short practical multi-lingual guide to accessing 90 UK-based extractive companies’ payments to governments reports is available now in English, French and Spanish.

More than 90 oil, gas and mining companies incorporated in the United Kingdom or listed on the London Stock Exchange (LSE) now publish their reports on payments to governments each year under UK law every year. Forty more extractive companies report in other European Union countries, 700 in Canada and 8 in Norway. Equivalent reporting legislation awaits implementation in the United States. Similar laws have been drafted and proposed in Switzerland, Ukraine and Australia. The UK government has recently concluded a positive initial review of its payments to governments regulations.

Publish What You Pay has campaigned for years for laws requiring extractive companies to disclose their payments to governments worldwide, country by country and project by project, every year, as a complement to the EITI. Now that we have a growing body of public mandatory payment data, it would be good to increase our use of the data.

New two-page guide from PWYP UK

To help PWYP coalitions, member organisations and others in civil society access and use the 90-plus UK-based extractive companies’ payments to governments reports, PWYP UK has produced a short practical multi-lingual guide to accessing these reports. The two-page guide is available in English, French and Spanish, with links to UK-incorporated company reports here and UK-listed (London Stock Exchange) company reports here.

The guide shows how to access data on payments made to governments in 2015, 2016 and 2017 all over the world. Companies that have published their payments this way include Aggregate Industries/LafargeHolcim, Anglo American, Antofagasta, BHP Billiton, BP, China Petroleum & Chemical (Sinopec), Gazprom, Glencore, Lonmin, Lukoil, Premier Oil, Randgold, Rio Tinto, Rosneft, Royal Dutch Shell, Seplat, Soco, South32, Total, Tullow and Vedanta.

As well as explaining how to access reports via the two official UK web portals, the guide also briefly explains NRGI’s www.resourceprojects.org portal. This provides access to mandatory payment data published across the EU (including in the UK) and in Canada and Norway.

Why should civil society access the reports and use the data?

Payments to governments reporting helps deter and prevent corruption and fiscal mismanagement. Companies that are required to publish their payments are less likely to enter into corrupt or questionable deals with governments. Governments are less likely to mismanage the revenues knowing that the money received is publicly reported.

Civil society can achieve more by understanding and publicising the payments made and reported by companies in particular countries and for specific projects. Knowledge empowers. If we detect surprising or questionable payments, we can call for the government and company involved to explain. We can use the data to help citizens and local communities judge if individual oil, gas or mining projects are good value and to demand accountability for how each government spends the money. This includes judging whether a project’s public revenues and how they are spent compensate fairly for negative social and environmental impacts at national or subnational level.

Fiscal transparency is also potentially a step towards greater transparency and accountability for extractive industry impacts on livelihoods, human rights and the environment. If we can also achieve full beneficial ownership disclosure and contract transparency (better still, open contracting) – as well as disclosure of payments to governments for the first sale oil, gas and minerals (commodity trading) – we will be well on the way to opening up the extractive sector.

The UK government, the European Commission and others have asked civil society for evidence that payments to governments reports really do help improve extractive industry governance and ultimately citizens’ lives. The more we can make this happen and demonstrate it is happening, the more secure will be the political achievement of opening up extractive company payments and government revenues to public scrutiny.

Data-based advocacy partnerships

Building on its 2016 Data Extractors project, PWYP UK is interested in working with other PWYP coalitions and members around the world to analyse payments and conduct data-based advocacy focused on UK-based extractive companies’ transparency reports. To discuss possible collaboration, please contact mlitvinoff@pwypuk.org in English, French or Spanish.

Transparency champions and PWYP call on UK to maintain oil and mining disclosure momentum

Leading advocates of country-by-country payments to governments reporting by oil, gas and mining companies have joined Publish What You Pay (PWYP) UK in calling on the United Kingdom government to continue to lead the global push for greater transparency in the extractive industries as part of the fight against corruption and for citizen empowerment in resource-rich countries.

Open Society Foundations founder George Soros, US Senator Benjamin Cardin, former Vice-President of the European Parliament’s Economic & Monetary Affairs Committee Arlene McCarthy OBE, the Columbia Center on Sustainable Investment, UK MPs Caroline Flint (Labour) and Liberal Democrat Deputy Leader Jo Swinson, oil company Kosmos and PWYP UK have all made written submissions this month to the UK government.

Greg Clark MP, Secretary of State at the UK Department for Business, Energy and Industrial Strategy (BEIS), is undertaking a review of the UK’s Reports on Payments to Governments Regulations, under which UK-registered and London Stock Exchange-traded extractive and forestry companies are required to report their payments to governments at project level for all countries where they operate. The review of the 2014 regulations is a statutory requirement. Mr Clark is due to report to Parliament on the conclusion of his review early in 2018.

PWYP UK’s 46-page submission to the review emphasises the value of mandatory payment reporting in deterring corruption and fiscal mismanagement, preventing conflict, enhancing public understanding and citizen empowerment, and delivering business benefits for companies and investors. The submission includes 28 brief case studies highlighting civil society’s use of companies’ payment disclosures to promote accountability across the sector.

“In times of political uncertainty it is critical that the UK upholds its leading role in the fight against corruption and that progress towards a more open and accountable global extractives sector remains on course. Oil, gas and mining are notoriously corruption prone.”

Miles Litvinoff, PWYP UK Coordinator, commented: “In times of political uncertainty it is critical that the UK upholds its leading role in the fight against corruption and that progress towards a more open and accountable global extractives sector remains on course. Oil, gas and mining are notoriously corruption prone.”

While commending the UK for its leadership on this issue, including for ensuring that companies’ disclosures are available to stakeholders in an open data format, PWYP UK has also identified areas where incomplete and inconsistent company reporting is occurring, and makes recommendations to the government to address weaknesses in the regulations and their implementation.

Among other improvements, PWYP UK is calling for more clarity on requirements for project-level disaggregation, joint venture and payment-in-kind reporting; for full identification of recipient government entities; for disclosure of payments to governments for the sale of oil, gas and minerals; and for better accessibility of reports and clearer information for companies on how to report.

“PWYP UK hopes that the government will take note of our recommendations to make the regulations more fit for purpose,” said Litvinoff.

In her letter to the Secretary of State, Arlene McCarthy, who led negotiations on chapter 10 of the European Union Accounting Directive – on which the UK regulations are based – for the European Parliament, urges the UK government to “build on the gains made thus far – not only in the UK and the EU but also in Norway, Canada and the United States” and to continue “momentum for a greater degree of accountability in this historically opaque sector, where so much potential public benefit has in the past been squandered”.

The UK regulations are part of a global standard of mandatory extractive sector transparency currently implemented in all 28 European Union member states, plus Canada and Norway, which complements the more voluntaristic (for governments) Extractive Industries Transparency Initiative. The original mandatory disclosure law, Section 1504 of the 2010 US Dodd-Frank Act, is yet to be implemented. Campaigns are under way in Australia, South Africa, Switzerland, Ukraine and other countries for similar extractive sector reporting laws.

Jo Swinson MP was Minister for Employment Relations and Consumer Affairs and oversaw the UK regulations’ coming into force in 2014. Her letter says: “It was crucial at the time for the United Kingdom to deliver on its commitment … to advance global standards of transparency in the extractive sector”, and notes that “the comprehensive payment reports now being published by UK-regulated oil, gas and mining companies” are delivering “substantial public benefit”.

Payment reports are delivering “substantial public benefit” – Jo Swinson MP

Caroline Flint MP reminds the Secretary of State that “Oil, gas and minerals are finite resources that provide many developing countries with a relatively brief opportunity to mobilise domestic revenues on behalf of their populations, which will be necessary to meet the Sustainable Development Goals.”

The submission by the Columbia Center on Sustainable Investment (CCSI), part of the Columbia University Law School, underscores investors’ need for “the global standard for payment transparency” that the UK regulations sustain. CCSI outlines “seven areas in which public payment data such as required by the UK Regulations may add material insight to investment analyses and improve investment environments”.

According to US-based oil and gas exploration and production company Kosmos Energy, which listed on the London Stock Exchange in 2017: “We believe resource revenues are more likely to be managed in the best interests of a country if payments and receipts are made transparently, and if accountability measures are in place for the use of these revenues.”

Extractive companies’ reports on payments to governments under the UK regulations are available online at https://extractives.companieshouse.gov.uk (UK-incorporated companies) and http://www.morningstar.co.uk/uk/NSM (London Stock Exchange main-market-traded companies). PWYP member organisation the Natural Resource Governance Institute has compiled much of the data from the UK and other jurisdictions in a central and searchable location at http://resourceprojects.org/.

As well as accepting written submissions to the review, the UK government contracted PwC, one of the big four accountancy firms, to conduct stakeholder interviews with companies, investors, government officials and civil society. Members of the PWYP global coalition from sub-Saharan Africa, mainland Europe, North America and the UK took part in 10 interviews.

PWYP UK looks forward to seeing Secretary of State Greg Clark’s report to Parliament on his conclusions in early 2018.

Civil Society Organisations withdraw from UK EITI

Undue interference by UK Government officials in the civil society nomination process jeopardises genuine multi-stakeholder dialogue in long standing transparency initiative.

Several years of positive progress by a UK Government anti-corruption initiative, the UK Extractive Industries Transparency Initiative (EITI), are at risk due to a recent imposition by UK Government officials which undermines the initiative’s multi-stakeholder nature.

The decision by UK Government officials this week to give one organisation, Extractive Industries Civil Society (EICS), authority over certain civil society nominations to the UK EITI’s multi-stakeholder group has pushed ten full member organisations of the UK EITI Civil Society Network and more than twenty individual associate members, including academics, to withdraw from the UK EITI process. Among the organisations withdrawing are Global Witness , Natural Resource Governance Institute, Transparency International UK , and Publish What You Pay UK .

Miles Litvinoff, Coordinator of Publish What You Pay UK, said:

“Government officials’ decision to overlook the strong concerns expressed by the Civil Society Network is deeply worrying and goes against the democratic principles fundamental to the EITI and to the UK as a country.”

Joseph Kraus, Director, Transparency & Accountability (interim) at the ONE Campaign and a member of Publish What You Pay UK’s Steering Group, said:

“Should the UK Government persist with this decision, it will set the UK EITI process on an uncertain path. The UK will face difficulties in passing EITI Validation, a quality assurance mechanism that assesses countries’ compliance with the requirements of the EITI Standard, which the UK is due to undergo in 2018.”

The Civil Society Network (CSN) facilitates mainstream civil society engagement in the UK EITI and has released a statement which can be read here.

Contact: Miles Litvinoff, Publish What You Pay UK Coordinator, mlitvinoff@pwypuk.org, +44 7984 720103.

Note to editors

  • The Extractive Industries Transparency Initiative (EITI) is an international standard for openness around the management of revenues from natural resources. It is designed to improve accountability and public trust for the revenues paid and received for a country’s oil, gas and mineral resources.
  • In 2003, the UK Government helped break new ground by launching the EITI which has since been paving the way for better governance in the oil, gas and mining industries worldwide.
  • The EITI makes relevant information available to citizens, in particular about the revenues generated by their country’s mineral wealth, to enable them to hold their government to account.
  • In over a decade, USD 2.3 trillion in revenues from the exploitation of natural resources have been disclosed and are open to public scrutiny thanks to EITI reporting in over 50 member countries. This includes the UK which joined the initiative as an implementing country in 2014 and released two EITI reports for the fiscal years 2014 and 2015.
  • The EITI established an unprecedented governance approach in the sector whereby three constituencies – government, companies and civil society – have equal weight in making decisions about how the country’s mineral wealth is managed.
  • To ensure the dialogue between the three constituencies is meaningful, the EITI Standard prohibits any form of interference in constituency processes, including the nomination process of representatives.
  • The UK EITI Civil Society Network (CSN) facilitates broad and mainstream civil society engagement in the UK EITI and is made up of 10 full member organisations and 20-plus individual associate members, including academics whose work relates to the extractive industries. CSN members Transparency International and Global Witness were instrumental in the establishment of the EITI internationally in 2003.
  • Civil Society Network withdraws from UK Extractive Industries Transparency Initiative (EITI)

    The UK EITI Civil Society Network (CSN) regretfully announces its withdrawal from engagement with the UK EITI.

    The Extractive Industries Transparency Initiative (EITI) is an international standard for openness around the management of revenues from natural resources. It is designed to improve accountability and public trust for the revenues paid and received for a country’s oil, gas and mineral resources.

    We oppose the decision by senior UK Government officials on 26 September 2017 to give one organisation, Extractive Industries Civil Society (EICS), authority over certain civil society nominations to the UK EITI Multi-Stakeholder Group (MSG). This decision contravenes sections 1.3 and 1.4 of the EITI Standard and is a breach of civil society’s right to determine its own representatives independently.

    The CSN, which represents broad and mainstream civil society engagement with the UK EITI, a number of whose member organisations were instrumental in the establishment of the EITI internationally in 2003, has an agreed and published process for filling civil society MSG places, which was adopted by consensus.

    In July 2017 we wrote to Margot James MP, Parliamentary Under Secretary of State for Small Business, Consumers and Corporate Responsibility, who is the UK’s EITI Champion, expressing our concern at one organisation’s control of half of the civil society MSG seats and calling for a democratic, fair and transparent process for civil society selection.

    In a further effort to find a solution in September 2017, and following consultation with government officials at the Department for Business, Energy and Industrial Strategy, the CSN agreed to amend its Membership Principles to make reference to diversity and local UK communities affected by the extractive industries. The CSN also invited EICS to apply to join the CSN, which it refused to do. We have always sought in good faith to find a solution to the challenges faced on the issue of civil society representation.

    The decision to give special status to one civil society organisation over its peers goes against the EITI’s founding principles. We withdraw from the process with immediate effect.

    Full member organisations of the CSN:

    The network also has more than 20 individual associate members, mostly affiliated to non-governmental organisations or academic institutions.

    Time for London’s Alternative Investment Market to embrace extractives transparency

    The London Stock Exchange’s (LSE) Alternative Investment Market (AIM) was launched in 1995 for smaller and growing international companies looking to raise capital for expansion. AIM describes itself as “the most successful growth market in the world”. The UK government has sung its praises. Lesser known than the LSE’s Main Market where larger, more established international companies’ securities are traded, AIM has over the years helped more than 3,700 companies raise more than £100 billion.

    Approximately 200 oil, gas and mining companies trade on AIM. Although generally smaller than LSE Main Market companies, AIM companies have grown over the years. AIM extractive companies’ combined market capitalisation runs into the billions of pounds, which can make them significant actors relative to the size of host country economies where many citizens are still desperately poor. They operate in 40 developing and transition countries, including 22 lower- and lower-middle-income countries as defined by the World Bank, and in all the BRICS.

    Fraud and corruption

    The LSE recently asked for views on proposed changes to the AIM rules, including rules of corporate governance. Investigations by Global Witness, Rights and Accountability in Development (RAID) and others have revealed significant cases of fraud, corruption and other abuses involving AIM extractive companies. The risks involved are acknowledged by the UK government: “The absence of good governance and the lack of transparency around [payments to governments] reduce the positive impact that extractive industries can have on economic development … [and] negatively impacts on, and increases the risk for, … companies and investors active in the extractives sector through civil unrest and poor business environment.”

    Publish What You Pay UK responded to the recent LSE consultation by proposing that all LSE AIM-traded oil, gas and mining companies be required to annually report their payments to governments following the same rules that apply to the 90-plus LSE Main Market-traded and large private UK-registered extractive companies now disclosing their payments each year under UK law. AIM extractive company reporting should meet the same requirements. The UK regulations’ £86,000 disclosure threshold, applied per single payment or series of related payments, will prevent AIM extractive companies from being unreasonably burdened by having to report inconsequential payments.

    Benefits of transparency

    Benefits would be considerable. First, there would be consistency in addressing investor and reputational risk. The LSE already requires extractive companies to disclose payments to governments of more than £10,000 on applying for admission to AIM, as well as to annually report estimated reserves and resources. Regular payment reporting by AIM extractive companies will help citizens hold their governments to account for revenues received, better inform investors and improve the UK’s, the LSE’s and AIM’s reputation for corporate governance.

    The LSE’s discussion paper recognises AIM investors’ need to fully understand the businesses in which they invest and the associated risks. Payment to government disclosure helps investors make informed decisions and promotes confidence in the market. This is why large numbers of European and North American institutional investors and fund managers support both the EITI and mandatory public country-by-country project-level reporting.

    AIM needs to maintain appropriate levels of corporate governance as its traded companies grow in size and as expectations regarding corporate accountability rightly become more demanding. With a current average market capitalisation of approximately £50 million, AIM oil, gas and mining companies are far from small in the eyes of ordinary people, and not all AIM companies will plan to graduate to trading on the Main Market. These factors make it inappropriate to apply fewer transparency requirements to AIM extractive companies than to their Main Market counterparts.

    Public country-by-country project-level reporting is increasingly accepted as the industry norm. As Tom Butler, chief executive of the International Council on Mining and Metals (ICMM), said in early 2017: “[T]he global trend is in the [pro-transparency] direction. The train has left the station. It is driven by investors and other stakeholders and the desire of the industry to maintain its social license to operate. One way to maintain that is for everyone to see that the taxes and other payments the mining industry makes are applied sensibly to the development of the country.”

    No UK institution should be encouraging a race to the bottom in terms of corporate transparency standards.

    It is high time, then, for the LSE to extend annual payment disclosure beyond Main Market-traded extractive companies to AIM-traded ones. In the UK government’s words: “Shareholders, investors, employees, competitors, civil society groups, the media and other external stakeholders view companies’ disclosure of payments … as an example of principled leadership. … Regular … [r]eports on payments and revenues can improve the creditworthiness of both companies and countries.”

    Read PWYP UK’s submission to the AIM Rules Review 2017.

    This blog was written by Miles Litvinoff, Coordinator of PWYP UK.

    Raising Global Standards of Transparency in the Extractives Sector

    A guest blog by Eleni Chatzivgeri, Lynsie Chew, Louise Crawford, Martyn Gordon and Jim Haslam.

    The new mandatory rules for large and publicly listed extractive companies according to the EU Accounting Directive (transposed as UK SI 3209) represent a significant step forward in terms of mandatory transparency reporting for the extractives sector.

    Our report into the early application of these new rules explores the effectiveness of the rules in the current global context drawing on data taken from the first round of reporting in the UK, for periods beginning on or after 1 January 2015.

    In conducting our research we reviewed a sample of reports filed under the new rules to assess both compliance with the regulations and the usefulness of the information published. Our research also entailed a detailed review of the legislation as well as a number of interviews with a wide range of stakeholders.
    Our findings in terms of compliance with the rules were encouraging, with the majority of companies in our sample complying with the requirements of the rules and several going over and above the letter of the law to provide additional useful information.

    We found that mandatory reports for UK registered companies were generally easy to access from the Companies House Extractives website. And companies registered in the UK provided their reports in XML format, which made the output data on spreadsheets easy to analyse, although a preparer we interviewed did comment that the process of uploading this data in the format required by Companies House was difficult and required specialist IT input.

    Analysis was more difficult for publicly listed companies required to comply but who were registered outwith the UK, as these reports tended to be in PDF and were not centrally deposited with Companies House but rather made available on individual company websites. Similarly where companies produced supplementary documents further explaining their contributions these were not made available along with the mandatory report deposited with Companies House but were rather made available on companies’ own websites.

    In order to make the reports more accessible to civil society, a central depository would be extremely useful, this could be on Companies House or elsewhere but should include mandatory and voluntary filings from UK registered companies as well as filings from overseas companies publicly listed on the UK’s London Stock Exchange).

    Our report makes several recommendations for improvements in the legislation. The addition of an audit requirement, at least limited assurance, and/or a requirement to reconcile the information provided to annual accounts would be progress, as we feel the reliability of the information would be improved by being audited or assured, and a reconciliation would better enable users to contextualise the payments within the broader company performance. To this end some companies provide reconciliations or further explanations of how key figures are calculated or how provisions have been interpreted. This additional disclosure was very valuable in allowing the data to be used to properly assess the economic contributions made by companies.

    The rules could benefit from clarification in several key areas; namely the definition of when projects can be reported on an aggregate basis and when companies should report payments made under joint venture arrangements. The legislation, as it is currently drafted, potentially engenders several different interpretations in these areas in practice, which could result in a lack of consistency or potentially allow for manipulation of the rules, resulting in payments going unreported. Operationally we also feel that there is a lack of clarity surrounding who is responsible for administering these rules and ensuring compliance, as there currently appears to be no institutional mechanism by which non-compliance is identified and remedied (so that one would need to fall back on a cumbersome inefficient process of appeal to the Registrar and the Secretary of State).

    Considering these rules in the wider context we also feel it is important to highlight that these mandatory requirements have been implemented in addition to the Extractive Industries Transparency Initiative (EITI). And for large companies will soon be joined by mandatory transfer pricing documentation requirements implemented under the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Sharing (BEPS) Action 13.

    While all of these initiatives are positive, we would urge policy makers and civil society to take a wider view to ensure no duplication of effort and output as this is beneficial to both preparers and users. Despite these concerns raised, this commitment to transparency on a mandatory basis is an important step and one which should be embraced by civil society and companies committed to ethical, transparent business practices.

    To those in the Publish What You Pay movement and activists pursuing greater transparency in the extractives sector, we urge you to access these freely available reports, to use the information in your advocacy and to feed back where the legislation could be improved. We already note here that there has been significant usage by NGOs of the first reports.

    For companies preparing these reports, we encourage you to go above the minimum requirements of the rules and to explain the data supplied to allow for greater understanding of your contributions.

    To the UK government, we would encourage you to clarify the mechanism for reporting non-compliance and to review your systems to ensure that they are streamlined to allow companies to comply with these important requirements without undue bureaucracy.

    This law was a great improvement in relation to transparency and subsequently holding governments to account. It is a very positive statutory provision. Refinement in the way of clarification and improvement can be a further step forward.

    Download the full report here.
    Raising Global Standards of Transparency in the Extractives Sector

    A note on the authors of this guest blog

    Eleni Chatzivgeri, Lynsie Chew, Louise Crawford, Martyn Gordon and Jim Haslam are UK accounting academics whose research interests include the interface of accounting and wider regulatory forces and issues in enhancing accounting’s social relevance. Eleni is based at the University of Westminster and Lynsie at University College London. Louise and Martyn are based at Robert Gordon University and Jim Haslam is at the University of Sheffield. Jim and Louise are leading the project as academics with long experience in the issues of concern, including having authored a number of papers in this area.

    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
    8
    Anglo American
    BG Group
    7
    BG Group
    BHP Billiton
    11
    BHP Billiton
    BP
    12
    BP
    Cairn
    1
    Cairn
    Centrica
    2
    Centrica
    Gazprom
    4
    Gazprom
    Glencore
    9
    Glencore
    Lukoil
    2
    Lukoil
    Premier Oil
    3
    Premier Oil
    Rio Tinto
    7
    Rio Tinto
    Rosneft
    2
    Rosneft
    Shell
    13
    Shell
    Soco
    2
    Soco
    Total
    17
    Total
    Tullow
    6
    Tullow
    Vedanta
    4
    Vedanta
    Angola
    3
    Angola
    Australia
    7
    Australia
    Azerbaijan
    2
    Azerbaijan
    Brazil
    9
    Brazil
    Canada
    8
    Canada
    China
    3
    China
    Democratic Republic of Congo
    3
    Democratic Republic of Congo
    Equatorial Guinea
    2
    Equatorial Guinea
    Gabon
    3
    Gabon
    India
    4
    India
    Indonesia
    6
    Indonesia
    Iraq
    3
    Iraq
    Kazakhstan
    5
    Kazakhstan
    Kenya
    3
    Kenya
    Malaysia
    2
    Malaysia
    Nigeria
    2
    Nigeria
    Peru
    4
    Peru
    Philippines
    2
    Philippines
    Qatar
    2
    Qatar
    Republic of Congo
    3
    Republic of Congo
    Russia
    5
    Russia
    South Africa
    5
    South Africa
    Tanzania
    3
    Tanzania
    UK
    10
    UK
    USA
    6
    USA
    Zambia
    3
    Zambia
    Zimbabwe
    2
    Zimbabwe

    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.

    Case study: 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.