By Aaron Sayne, Alexandra Gillies, Andrew Watkins, Natural Resource Governance Institute
This post originally appeared on resourcegovernance.org on April 6, 2017
Oversight actors can detect and prevent corruption in the oil, gas and mining sectors if they ask the right questions. Corruption schemes can be complex and opaque, yet clear patterns and similar signs of problematic behavior do exist across resource-rich countries.
To find these, we examined over 100 real-world cases of license or contract awards in the oil, gas and mining sectors in which accusations of corruption arose. The cases come from 49 resource-producing countries.
Based on this work, we developed a list of 12 red flags of corruption in extractive sector license and contract awards, with real-world illustrations for each. This list can provide a concrete, practical tool for many types of actors, not least:
Download the full report on resourcegovernance.org
Tomorrow has arrived. Canadian-listed mining, oil and gas companies operate in more than 100 countries around the world – including some of Africa’s poorest countries. After years of calling on the Canadian government to require companies like these to disclose payments to foreign governments, ONE members and ONE partner organizations like Publish What You Pay Canada finally have what they have been asking for: data.
Thanks to a Canadian law that came into force in 2015, these companies are now required to report – for the first time ever – their contributions to governments. Data like this can empower citizens in some of the poorest countries to hold their governments accountable for how that money gets used and to help identify and curb corruption.
Payments to Libya, Zambia, Senegal & Nigeria
The data released so far shows large payments made to at least 18 African governments. Here are a few examples:
First Quantum Minerals, a Canadian metal mining company, reports that it paid $293 million to the Zambian government in 2016, an amount roughly equivalent to one-fifth of Zambia’s 2017 education budget. These payments were mostly royalties and taxes for the Kansanshi project, the largest copper mine in Africa.
In 2016, First Quantum Minerals’ Kansanshi project, the largest copper mine in Africa, generated $293 million, mostly in royalties and taxes, for the Zambian government. This amount is amount roughly equivalent to one-fifth of Zambia’s 2017 education budget.
Suncor Energy, a large Canadian energy company, paid $29 million in taxes and royalties to Libya’s National Oil Corporation in 2016 for the exploration of oil fields in Libya. $29 million is a sizeable sum for a country struggling to recover from a civil war and address an ongoing ISIS insurgency.
Teranga Gold Corporation is the Canadian gold mining company that owns and operates the only large-scale gold mine in Senegal. It reports that it paid $71 million to the Senegalese government in 2016, which is equal to nearly a fifth of the budget for Senegal’s Ministry of Health.
Canada’s Teranga Gold Corporation owns and operates the only large-scale gold mine in Senegal. Its 2016 payment to the Senegalese government is equal to nearly a fifth of the budget for Senegal’s Ministry of Health.
CNOOC Limited, the Chinese state-owned oil company, owners of the Canadian oil and gas company Nexen, paid $109 million in 2016 to the government of Nigeria. $109 million is almost half of Nigeria’s 2017 capital budget for the Federal Ministry of Education.
Follow the money
Data like this gives valuable clues to citizens of recipient countries and can help them to follow the money. For instance, the First Quantum Minerals data shows that the company paid $376,000 to benefit national parks, wildlife and schools in Zambia. Someone in Zambia can now dig deeper: Which national park agencies, wildlife groups and schools? What has the money been used for? Locals can hold decision makers to account for how the money was actually spent by getting answers to questions like these. The data also highlights the value of detailed, project-level payment information, which provides citizens with highly useful data for tracking revenue streams.
But this is just the beginning! If every country in the world followed Canada’s lead and required companies to publish this data, citizens would have a complete picture of how their country’s natural resources were being sold. Citizens of Zambia could demand that money from their country’s copper goes towards things like education, health, infrastructure and ending poverty, so that all citizens benefit from their country’s natural resource wealth. At ONE, we’re working with partners around the world to make that a reality.
By making this data public, the Canadian government has taken a critically important leadership role to help enable people to hold their governments to account. But the Canadian government could make the data easier to use by requiring companies to publish the information as “open data”. In data-speak, that means in an open, machine-readable format; for example, as a CSV file that can be opened in Excel instead of a PDF. Some governments like the U.K. already require that data be provided in machine-readable formats. Although PDF is a more common format, open data formats like CSV would allow people to more easily analyze and identify the payments that flowed to their government.
Luckily, a number of companies (i.e. Potash Corporation and Mosaic) have already gone above and beyond by voluntarily publishing their data in an open data format, demonstrating that doing so isn’t a heavy lift for companies.
Transparency is the backbone of a just and well-governed society. The disclosure of new data on payments to governments in the mining, oil and gas sectors will provide citizens with previously unthinkable opportunities to ask their governments important questions about how these payments get used.
You can explore the data at the Canadian Extractive Sector Transparency Measures Act website. All figures are converted to Canadian Dollars.
The following case study is part of the Publish What You Pay International Secretariat’s Data Extractors program, a global initiative that trains Publish What You Pay members and activists around the world to put extractives data to use to fight for a more open and accountable natural resource sector.
This case study began with a not-so-simple question: Is the United States getting a good deal for the depletion of its natural resources?
Publish What You Pay – United States ( PWYP-US) has worked for 13 years to open the books of oil, gas and mining companies to create a more open and accountable extractives sector. More than a decade into this effort, many of the world’s largest oil, gas and mining companies now disclose their project-level payments to governments, either voluntarily or in compliance with legal requirements. Yet, a few major US oil companies – namely ExxonMobil, Chevron and ConocoPhillips – remain strongly opposed to these simple financial disclosures.
Like the citizens in resource-rich countries around the world, citizens of the United States also need to know if they are getting a good deal on their natural resources. Thoroughly answering this question, however, is incredibly complex and involves the careful analysis of contracts, as well as relevant tax and royalty regimes governing the extractives sector. As a starting point, this case study focuses on how much some of the largest extractives companies paid in taxes to the US federal government in 2015.
Read the full case study on the Publish What You Pay International Secretariat site.
By Joseph Williams, Natural Resource Governance Initiative
This post originally appeared on www.resourcegovernance.org on June 13, 2017
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 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 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).
Click here for the archives to see our full list of posts.