Natural Resource Transparency (UK0094)

Objective
To work with others to enhance company disclosure regarding payments to
governments for the sale of publicly owned oil, gas and minerals and help to
establish and implement a common global reporting standard.
● To continue leading an international dialogue on increased transparency
around sales of publicly owned oil, gas and minerals.
● To undertake a scoping study to review what potential national action
the UK could take to enhance company disclosure around the world
regarding sales of publicly owned oil, gas and minerals. As part of this
review, we will consider a form of cross-departmental guidelines on
reporting these specific payments to governments.
● To maintain our commitment to the Extractive Industries Transparency
Initiative (EITI) and to implementation of the UK-transposed EU
Directives for mandatory reporting by companies.
● To provide clarity for UK-listed extractive companies, under the
Disclosure Guidance and Transparency Rules; transparency disclosures
are required to be in both open machine-readable data format and in
human-readable format suitable for dissemination to as wide a public as
possible.

What is the public problem that the commitment will address?
Corruption and fiscal mismanagement in the international natural resources
(oil, gas and mining) sector have long been a major concern for governments,
extractive companies, investors and civil society.
The UK and other countries have achieved good progress in promoting natural
resource transparency and accountability over the last 15 years, through both
voluntary reporting under the Extractive Industries Transparency Initiative
(EITI) and mandatory reporting rules now in force in the UK, across the EU, in
Canada and in Norway, and awaiting implementation in the United States.
However, significant gaps remain in the scope and coverage of extractive
companies’ disclosures of payments to governments and in the clarity and
accessibility of the disclosed data.

How will the commitment contribute to solve the public problem?
The largest payment stream missing from mandatory disclosure is payments to
governments for the sale of publicly owned oil, gas and minerals (commodity
trading), an area where corruption risk is acute.
Governments’ and state owned enterprises’ sales of the state’s production
share in the extractive industries are huge, typically US$ billions per year, and
vulnerable to large-scale abuse.
From 2011 to 2013, for example, the total value of sales by the national oil
companies of Africa’s top ten oil producers was equal to 56% of their
combined government revenues and more than ten times international aid to
these countries.
At company level, total payments to governments for oil and gas by Swiss
trader Trafigura amounted to US$21.2 billion in 2016, significantly more than
the US$15.1 billion disclosed by Royal Dutch Shell, Europe’s largest oil
company, as total payments for its oil and gas extraction around the world in
the same year. Swiss-headquartered company Glencore voluntarily revealed it
paid USD$12.6 billion to purchase crude oil from governments in 2017, almost
five times more than its tax and royalty disclosures under the Transparency
Directive. A further Swiss trader, Gunvor, has committed to make similar
disclosures. No UK oil major has made a similar commitment, and while Swiss
traders have revealed total payments above, they only disaggregate payments
to the country level in EITI implementing countries, where the minority of their
payments are made (Natural Resource Governance Institute figures).
Extractive company reporting under UK transparency rules currently suffers
from several deficiencies that clarification of the disclosures’ content and
format would ameliorate:
● Non-inclusion by at least seven companies of their share of joint venture
payments;
● Over-aggregation of projects by at least twelve companies;
● Non-identification of recipient government entities by at least 28
companies;
● Lack of volume data for, and over-aggregation of, in-kind payments by at
least four companies;
● Failure of a number of UK-listed extractive companies to report under
revised requirements for financial year 2017 in both open
machine-readable data and human-readable format.
The commitments will build on progress to date by continuing efforts to
explore, identify and (where practical and permissible) implement incremental
enhancement in extractives transparency.

Lead implementing organisation
Department for International Development (DFID)

Timeline
September 2018 - August 2021

OGP values
Public Accountability, Access to information

Other actors involved - government
DFID, BEIS, HM Treasury, Financial Conduct Authority

Other actors involved - CSOs, private sector, working groups, multilaterals, etc
Natural Resource Governance Institute (NRGI), Publish What You Pay UK
(PWYP), Global Witness, Transparency International-UK, Oxfam GB and Open
Contracting Partnership

Verifiable and measurable milestones to fulfil the
commitment

Continue to lead an international dialogue on increased
transparency around sales of publicly owned oil, gas
and minerals.

The UK will undertake a scoping study to review what
potential national action we could take to enhance
company disclosure around the world regarding sales of
publicly owned oil, gas and minerals. As part of this
review, we will consider a form of cross-departmental
guidelines on reporting these specific payments to
governments in this sector.

Maintain our commitment to the Extractive Industries
Transparency Initiative (EITI) and to implementation of
the UK-transposed EU Directives for mandatory
reporting by companies.

In light of the BEIS Post Implementation Review of the
UK mandatory reporting regulations and the European
Commission consultation in respect of the Accounting
Directive chapter 10 (due end 2018), we will be open to
working with stakeholders and delivery partners in
exploring the scope for enhancing the effectiveness of
reporting requirements.

We will clarify for UK-listed extractive companies, under
the Disclosure Guidance and Transparency Rules, that
transparency disclosures are required to be in both
open machine-readable data format and in
human-readable format suitable for dissemination to as
wide a public as possible.

5. Natural resource transparency

Main Objective

“To work with others to enhance company disclosure regarding payments to governments for the sale of publicly owned oil, gas and minerals and help to establish and implement a common global reporting standard.

• To continue leading an international dialogue on increased transparency around sales of publicly owned oil, gas and minerals.
• To undertake a scoping study to review what potential national action the UK could take to enhance company disclosure around the world regarding sales of publicly owned oil, gas and minerals. As part of this review, we will consider a form of cross-departmental guidelines on reporting these specific payments to governments.
• To maintain our commitment to the Extractive Industries Transparency Initiative (EITI) and to implementation of the UK-transposed EU Directives for mandatory reporting by companies.
• To provide clarity for UK-listed extractive companies, under the Disclosure Guidance and Transparency Rules; transparency disclosures are required to be in both open machine-readable data format and in human-readable format suitable for dissemination to as wide a public as possible.”

Milestones

1. Continue to lead an international dialogue on increased transparency around sales of publicly owned oil, gas and minerals.
2. The UK will undertake a scoping study to review what potential national action we could take to enhance company disclosure around the world regarding sales of publicly owned oil, gas and minerals. As part of this review, we will consider a form of cross-departmental guidelines on reporting these specific payments to governments in this sector..............................
3. Maintain our commitment to the Extractive Industries Transparency Initiative (EITI) and to implementation of the UK-transposed EU Directives for mandatory reporting by companies.
4. In light of the BEIS Post Implementation Review of the UK mandatory reporting regulations and the European Commission consultation in respect of the Accounting Directive chapter 10 (due end 2018), we will be open to working with stakeholders and delivery partners in exploring the scope for enhancing the effectiveness of reporting requirements.
5. We will clarify for UK-listed extractive companies, under the Disclosure Guidance and Transparency Rules, that transparency disclosures are required to be in both open machine-readable data format and in human-readable format suitable for dissemination to as wide a public as possible.

Editorial Note: For the complete text of this commitment, please see the United Kingdom’s action plan at https://bit.ly/2YPqNoV.

Commitment Analysis
The commitment aims to continue the UK’s ongoing work on transparency in the governance of natural resources and the extractives industry, in order to remain a key driving force internationally, and to explore further work in this area. It is largely a continuation of commitments made in the UK’s previous OGP action plans, particularly its work related to the Extractive Industries Transparency Initiative (EITI). The activities focus on exploratory and consultative work that will identify more concrete future actions and continue to frame the UK as a leader in this field. [17]

The UK conducted significant work in improving natural resources governance during previous action plan cycles, and as such began the current action plan with a solid foundation of leadership in this field. [18] Commitment 2 of the third action plan (2016-2018) saw UK-listed extractive companies begin to publish data under the EU Transparency Amending Directive in an open and machine-readable format and they are now required to continue doing so. Additionally, the UK convened international actors from 22 countries to discuss further progress on resource transparency and completed its third EITI report. [19] The UK‘s experience in facilitating international dialogue on the transparency of natural resources governance enables it to use its expertise and leadership to take forward the proposed milestones concerning further improvement.

The commitment is relevant to the OGP value of access to information, as it calls for clarifying to UK-listed extractive companies that transparency disclosures are required to be in both open machine-readable data format and in human-readable format. It is also relevant to civic participation because it calls for “working with” stakeholders and delivery partners in enhancing the effectiveness of reporting requirements. While this commitment is verifiable, the activities could be more precise, with better clarification of the relations between its activities. [20] They largely focus on maintaining existing relationships and discussions on the transparency of natural resources governance but will be unlikely to produce new information or instigate new processes. The commitment also does not plan to strengthen specific areas of known weakness in the governance of natural resources, in particular around compliance monitoring. [21]

Overall, the commitment focuses on continuing the international championing role that the UK has historically performed in improving the transparency of natural resources governance. However, the planned activities will not mark a departure from the status quo, so the potential impact is considered minor.

Commitment 5. Natural resource transparency

Limited

This commitment aimed to continue the UK’s work on transparency in the governance of natural resources and the extractives industry, particularly related to the Extractive Industries Transparency Initiative (EITI). The activities focused on exploratory and consultative work that would continue to position the UK as a leader in this field.

The first milestone called for continuing to lead an international dialogue on increased transparency around sales of publicly owned oil, gas and minerals. The draft self-assessment notes that during the action plan period, the UK continued to provide policy and financial support to organizations working on extractives transparency, such as EITI, the Natural Resource Governance Institute, and the World Bank’s Extractives Governance Programmatic Support trust fund. This was done through the Foreign, Commonwealth & Development Office (formerly the Department for International Development - DFID).

The scoping study on how to enhance company disclosure of sales of publicly owned oil, gas and minerals (second milestone) did not take place due to resource constraints, according to the draft self-assessment.

The third milestone sought to maintain the UK’s commitment to EITI and to EU Directives for mandatory reporting by companies. The UK continued to implement the EITI Standard and in July 2020 appointed Lord Callanan as its Champion. [33] In 2021 the UK was assessed against the EITI Standard and awarded a high score of 90 out of 100. [34]

The fourth milestone called for exploring the scope for enhancing the effectiveness of the UK’s reporting requirements. Although this activity was originally scheduled to be completed in August 2020, according to the draft self-assessment, it will likely be completed in 2022. The Department for Business, Energy and Industrial Strategy will conduct a post-implementation review into the Reports on Payments to Governments Regulations 2014, which requires large companies in the extractives to annually report their payments made to governments.

Finally, the fifth milestone aimed to clarify for UK-listed extractive companies, under the Disclosure Guidance and Transparency Rules, that transparency disclosures are required to be in both open machine-readable data format and in human-readable formats. The draft self-assessment does not provide information on what was done to clarify these requirements to companies. Thus, the IRM considers it incomplete.