By Miles Litvinoff, Publish What You Pay - United Kingdom
This post originally appeared on PublishWhatYouPay.org on June 25, 2018
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 firstname.lastname@example.org in English, French or Spanish.
By David Mihalyi, Natural Resource Governance Institute, and Jim Cust, the World Bank
This post originally appeared on resourcegovernance.org on November 29, 2017
Resource-rich countries tend to experience slower economic growth and more social problems than do less-endowed countries—a phenomenon dubbed the “resource curse.” But it turns out that in many cases, economic growth begins to underperform long before the first drop of oil is produced; this we call the “presource curse.”
In a recent research paper, we found that, following oil discoveries, growth systematically underperforms the forecasts made by the International Monetary Fund. For certain countries with weak institutions, the discoveries have even led to significant growth disappointments, compared with pre-discovery trends.
We propose that the presource curse is driven by elevated expectations. Expectations can in turn drive suboptimal behavior. For example, governments may be pressured by voters to embark on risky borrowing on the back of overly rosy projections.
To find out more, read our new article published in Finance and Development.
The underlying World Bank research paper provides econometric evidence of this phenomenon.
Elsewhere, we discuss how expectations of resource wealth drove policy making in Ghana, Lebanon, Mongolia, Mozambique and Sierra Leone. On the other hand, Tanzania is an example of a country that so far has avoided the presource curse.
Our brief on premature funds discusses the risks of governments creating sovereign wealth funds in countries when resource revenues are small, distant or uncertain.
David Mihalyi is an economic analyst with the Natural Resource Governance Institute.
Jim Cust is an economist in the Office of the Chief Economist, Africa, at the World Bank.
By Johnny West, OpenOil
This post originally appeared on OpenOil.net on March 15, 2018
This analysis was referenced in an April 8, 2018 Bloomberg article "Exxon Sparks IMF Concern With Weighty Returns in Tiny Guyana."
Guyana’s first and major oil deal, with ExxonMobil, produces results for the government which are outlier low, an OpenOil financial model reveals. Over the life of the project the government should expect to see from 52% to 54% of profits, compared to well over 60% in a cluster of comparable projects signed in other frontier countries.
The gap could cost the small South American country billions of dollars, as successful drilling continues apace in the Stabroek field, and recoverable reserves figures climb into the billions of barrels.
The relatively low performance of the Stabroek terms, first signed in 1999 and renegotiated in 2016, following the first significant discovery the previous year, holds under a wide variety of market and field size conditions.
There is also a significant possibility, as reserves growth gathers pace, that Exxon and its partners Hess and Nexen could achieve “super profits”, rates of return of over 25% and edging considerably higher under certain conditions, as this profit map of the project shows.
The agreement has become controversial in Guyana in the past year or so and the contract was published by the government at the end of 2017 to allow public scrutiny. The financial model and this accompanying narrative are based on that contract, as well as public statements and media reports giving details of reserves, development lead time and costs.
Even under conservative assumptions, Stabroek will transform Guyana. Government revenues could hit a billion dollars a year by 2024 – more than the entire current government budget.
The 52% Average Effective Tax Rate (also known as “the government take”) is lower than a general rule of thumb of 60% to 80% government take in oil projects, and also from a range of frontier projects in Ghana, Senegal, Papua New Guinea, Mauritania and Guinea, which were comparable at the time of signature. A more detailed description of the comparison methodology is laid out in the Annex to the narrative report.
What is significant here is to understand the role reserves growth scenarios could play in increasing company rates of return. At the currently stated field size of 450 million barrels in Stabroek, for example, the company does not reach “super profits”, defined here as an Internal Rate of Return (IRR) of 25% or more, until a price point of $75 per barrel for oil. But this field size relates only to the first stage of development of the field now underway, with first oil anticipated for 2020. A second phase is now under active consideration by the companies, with a projected production plateau which could be twice as high as in the first phase. If the amount of oil produced rose only modestly, compared to Exxon’s declared reserves, to 750 million barrels, the superprofit level (25% IRR) could be reached at $50 per barrel – below today’s prices. At a billion barrels, that stage could be reached with prices in the $40s per barrel.
The FAST-compliant financial model and accompanying report are part of OpenOil’s public interesting financial modelling library, part of a practise as commercial and financial analysts to governments and public policy makers.
A second stage of the model will be published in the coming weeks, to incorporate feedback from interested parties, and quantify how revenue streams could play for both investors and the government under a modified fiscal regime.
For further enquiries contact email@example.com
By Alexander Malden, Governance Associate; Toyin Akinniyi, Media Capacity Development Associate; Zira John Quaghe, Nigeria officer - Natural Resource Governance Institute (NRGI)
This post originally appeared on resource governance.org on April 10, 2018
On Monday, Shell released its payments to governments report for 2017, the company’s third year of reporting under the U.K.’s Reports on Payments to Governments Regulations. Nigeria national media closely covered the disclosure.
In the 24 hours since Shell published its report, six national media outlets in Nigeria--Punch, Vanguard, This Day, The Cable, World Stage and Leadership—have analyzed the news.
This level of immediate national press coverage reaffirms the importance of payments to government data to citizens in resource-rich countries, and how it is increasingly informing national debates on countries’ natural resources management.
Similar laws to the U.K.’s in Europe and Canada have come into force over the last few years to shed light on billions paid to governments around the world by oil, gas and mining companies. Greater disclosure of these financial flows can deter corruption and mismanagement in the natural resource sector.
Shell reported payments made to governments in 29 countries amounting to USD 22.4 billion in 2017. Nigeria is the largest payment recipient at USD 4.3 billion (NGN 1.5 trillion), a USD 700 million increase on the amount Shell paid to Nigerian government entities in 2016. As analysis by Vanguardnoted, this NGN 1.5 trillion figure represents 15 percent of Nigeria’s NGN 10.6 trillion total government revenue for 2017. (This total includes both oil and non-oil sources.)
Shell is the third international oil company to disclose payments to Nigerian government entities for 2017, with Statoil (USD 469 million) and Total (USD 1.15 billion) having already reported in March. Chevron, CNOOC, Eni and Seplat are all expected to disclose payments for 2017 by the end of May.
The stories written include analysis breaking Shell’s Nigeria payments up by recipient government entity (USD 3.2 billion to the Nigerian National Petroleum Corporation; USD 80 million to the Niger Delta Development Commission; USD 280 million to the Department of Petroleum Resources; and USD 765.5 million to the Federal Inland Revenue Service) and by payment type (USD 3.2 billion to production entitlement; USD 765.5 million in taxes; USD 245.7 million in royalties; and USD 114 million in fees).
NRGI has been working to promote the use of this data in Nigeria. In December, NRGI published Nigeria’s Oil and Gas Revenues: Insights from New Company Disclosures. The briefing explores how payments to governments data from Shell and six other international oil companies operating in Nigeria could be used to hold the government accountable for revenues generated from the sector.
NRGI is co-hosting a meeting with nongovernmental organization Connected Development in Abuja on Wednesday with around 20 Nigerian civil society organizations to launch the briefing. We aim to explore new ways in which civil society within the country can use this data as an accountability tool. NRGI has already been working to support Nigeria civil society organizations to use this data, including working with BudgIT, which produced infographics analyzing Shell’s 2016 payments to governments report.
NRGI also works with Nigeria-based journalists through the Media for Oil Reform Fellowship to promote the use of extractives industries data. Program fellow and Punch senior correspondent ‘Femi Asu was among the journalists who reported on the Shell disclosure.
As a new data source—most companies have reported for only the second or third time this year—it is exciting to see stakeholders in Nigeria engaging with payments to governments data as an informative and accountability tool.
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