NEW YORK and LONDON, 19 March 2015—The Natural Resource Governance Institute (NRGI) has commended Norwegian energy giant Statoil's detailed disclosure today of the payments it makes to 18 governments around the world.
Statoil is the first major oil company to report under a global transparency standard being adopted in a growing number of jurisdictions across the world. Released today as part of its annual report to shareholders and stakeholders, Statoil's disclosures represent a step change in the quality and quantity of information available to the public.
"Statoil is opening its books on nearly $17 billion of payments to governments," NRGI president Daniel Kaufmann said. "This much-needed disclosure brings openness to an industry which has typically been shrouded in secrecy, and will assist citizens in demanding that their governments use public funds to fight poverty and contribute to sustained economic growth, rather than lose these crucial revenues to corruption or mismanagement."
Statoil is reporting under a Norwegian law that requires all large oil, gas, mining and logging companies registered or listed in Norway to publish the payments they make to all governments. Companies must report information for each individual project (rather than aggregate them for each country of operation), with no exemptions under any circumstances. These provisions are critical, as information that is not granular is of little use to oversight actors who seek to use data to hold governments and companies accountable.
Norway's law is based on extractives transparency provisions contained in the EU Accounting and Transparency Directives adopted in 2013. The Norwegian law, which applies to financial years which began on or after 1 January 2014, also requires disclosure of information about a company's investments, revenues, production volumes, purchase of goods and services, subsidiaries, number of employees and intercompany interest expenses in all countries where the company has business activities.
The United States has had a similar law on the books since 2010—Section 1504 of the Dodd-Frank Act—but a legal challenge from the American Petroleum Institute oil lobby has forced the US Securities and Exchange Commission to rewrite its rules in order to give effect to the law. The SEC expects to propose a new rule at the end of 2015, lagging behind other countries.
NRGI senior advocacy officer Joseph Williams said: "Statoil's disclosures today send a strong message to the SEC that public, project-level reporting in all countries of operation is entirely practicable and will not in any way harm the competitiveness of such companies. It demolishes the position of the American Petroleum Institute that the US rule under Dodd-Frank Section 1504 should keep company disclosures anonymous and include exemptions."
The United Kingdom became the first EU country to implement the European provisions in December 2014, with first disclosures expected in early 2016 by companies including BP, Royal Dutch Shell, Rio Tinto and BHP Billiton. Canada has a similar law in place and the Swiss government has a preliminary law on the table.
Beyond its implications in the US, Statoil's report also undermines attempts being made by industry groups to circumvent the UK's extractives transparency law. Industry bodies have drafted guidance that would encourage companies to reduce the quality and quantity of disclosed payments. "The UK government should take heart from Statoil's disclosures today and resist attempts by elements of industry to limit the public availability of information," said Kaufmann.
Statoil today disclosed that it made payments in the form of production entitlements totalling $1 billion for its share in the Azeri-Chirag-Guneshli (ACG) production sharing contract. NRGI Eurasia director Galib Efendiev said: "The information which Statoil has disclosed today for the ACG project is essential in providing oversight actors with the means to demand that wealth generated from natural resources is used to benefit all citizens in Azerbaijan. This is particularly essential at a time when civil society organizations need all the tools they can get as civic space in Azerbaijan closes."
Statoil's report reveals in stark detail that national oil companies are the largest recipients of payments in many oil-rich countries, generally in the form of production entitlements. In Algeria, for example, the state-owned oil company Sonatrach received 99 percent ($630 million) of Statoil's payments to the Algerian government; in Azerbaijan the state-owned oil company SOCAR received 87 percent of Statoil's payments to the state. Given the significant payments they receive, it essential that state-owned enterprises are well governed with strong oversight provisions in place.
The speed with which Statoil has compiled its information on payments to governments for 2014 is also very encouraging. While the Extractive Industries Transparency Initiative (EITI) is being implemented in 48 countries around the world, no reports have been published for 2014 in any of these countries. This shows the importance of mandatory disclosure laws in ensuring timely reporting of information to improve governance and accountability.
For more information contact:
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Natural Resource Governance Institute
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The Natural Resource Governance Institute, an independent, non-profit organization, helps people to realize the benefits of their countries' oil, gas and mineral wealth through applied research, and innovative approaches to capacity development, technical advice and advocacy. We work with government ministries, civil society organizations, journalists, legislatures, private sector actors, and international institutions to promote accountable and effective governance in the extractive industries. Learn more at www.resourcegovernance.org.