Commodity trading

In many resource-rich countries, the state receives a share of oil, gas and minerals that are being extracted. These physical revenues can occur because the state or a state-owned enterprise (SOE) operates or owns shares in a producing license, through the existence of production-sharing contracts, or when companies make payments such as royalties with physical commodities rather than money. The state or the SOE then sells these physical resources, often to trading companies. Given that governments implementing the EITI have to account for all revenues received from natural resources, trading companies increasingly figure in EITI Reports.

How the EITI Standard covers commodity trading

EITI Requirement 4.2 focuses on disclosure of the sales of the state’s share of production and other ‘in-kind’ revenues:

“Where the sale of the state’s share of production or other revenues collected in-kind is material, the government, including state owned enterprises, are required to disclose the volumes sold and revenues received.”

According to this requirement, all material commodity sales by SOEs or other government agencies related to the government’s share of production or other revenues collected in kind must be disclosed in the EITI Report, including exports sales as well as sales to domestic buyers and refineries. This typically means that SOEs will disclose the volumes of commodities sold and the revenues received, broken down by buying company. In some countries, like Iraq, the buyers of the oil from the government also disclose how much they pay to the government, allowing an Independent Administrator to reconcile these figures in EITI Reports. 

Implementation of this requirement has been particularly challenging for many multi-stakeholder groups. The EITI Board is currently exploring options to increase support to implementing countries to address these issues.