8th Plenary Meeting of the Policy Dialogue on Natural Resource-Based Development Launch of the Thematic Dialogue on Commodities Trading Transparency Joseph Williams 16 June 2017
Overview of presentation Scale of the issue Two key reasons why physical commodities trading transparency needs to be tackled Increased international attention to the issue
1) Scale of the issue From 2011 to 2013, oil sales by the governments of Africa s top ten producers totalled $254 billion, an amount equivalent to 56 percent of those countries total public revenues. Swiss traders accounted for $55 billion of payments.
Global overview of payment transparency laws US: Dodd Frank 1504 EU Accounting and Transparency Directives Passed June 2010; initial SEC rules 2012 but lawsuit vacated them in 2013 New rules published June 2016 then disapproved February 2017 Payment disclosure by US-listed oil, gas, and mining companies at project level Passed mid-2013; 28 EU countries had to transpose (implement) by mid-2015 Consistent with 1504; also includes large private companies and logging companies Reports out under UK, Danish, French, Cypriot law (approx. 120 companies) Norwegian Regulation on Country By Country Reporting Passed December 2013; in force January 2014 Consistent with 1504/EU Directives Goes further: all subsidiaries, revenue, cost, investments Canada ESTMA G8 commitment June 2013 Extractive Sector Transparency Measures Act (private and listed companies) Legislation Dec 2014; in force June 2015 Approximately 1000 reports expected by May 2017; 19 reports released to date Going global? Switzerland (draft law December 2016), Ukraine (draft law) Australia? BRICS/MINT and other major economies?
Insights into UK reporting to date 92 UK listed or registered companies have disclosed $136 billion to government entities in 112 countries (more than twice the number of EITI countries) Companies include: BP, Shell, Gazprom, Rosneft, Rio Tinto, BHP Billiton, Glencore Top 6 recipient governments: Russia, UAE, Azerbaijan, Australia, Nigeria, Angola (1 EITI country) BUT trading transactions are not included
Company examples: BP 2013 BP made tax payments to governments amounting to $13.9 billion across all counties 25 of operation. However, in 2013 BP through EITI reporting that it had made commodities trading payments to the Iraq NOC SOMO of $4.2 billion Conclusion: in one year, for one country, BP made tradingrelated payments which were equal to 30% of all its other tax payments across all its other 25 countries of operation. Beyond the scope of BEPS
Company examples: Total in Iraq Total in Iraq: in 2015 Total s tax and license fee payments were $4.4 million However, Total made commodities trading-related payments totalling $4.2 billion in 2013 (factor of 1000) 2015 a mere $1.4 billion in trading-related payments
Company examples: Shell Breaking news this week Shell revealed it had made payments to governments of $15 billion to 31 countries in 2016 $9 billion (nearly two-thirds) were production entitlements Included 134.2 million barrels of oil equivalent (BOE) to the Malaysian government What is the government doing with these barrels of oil equivalent, who is buying them, how much is being paid?
2) Susceptibility to corruption NRGI recently summarized 11 real-world situations where corruption or the perception of corruption has arisen around NOC oil and gas sales. Corruption risks appear at several stages of the process by which governments and NOCs sell their oil and gas. The examples below fall roughly into three categories: Selection of buyers Negotiation of terms Transfer of revenues and government accountability Detailed disclosure on payments to governments can begin to address and mitigate risks in all three areas.
Increased international attention EITI includes these transactions in its framework (since 2013) Commitments made at London Anti-Corruption Summit Trafigura has disclosed information voluntarily for the past 3- years (but where are the others?) IMF and OECD have drawn attention to the need for greater transparency around these transactions
Conclusion Payments to governments related to trading are vast and yet generally opaque There are payments to governments frameworks in place where such transactions could be included Some more work needed on mineral and gas trading This dialogue is an important forum to take the discussion forward