In many countries, products from mining, oil and gas operations are not sold directly to end users, but are traded through intermediaries, including commodity traders. In some cases, the companies extracting resources pay governments for the right to extract resources with physical transfers of oil, gas and minerals (in-kind payments). The state or the state-owned enterprise (SOE) then sells these physical resources, both to commodity trading companies or domestic refineries. In other cases, commodity traders make payments to governments or state-owned companies for their resources in advance (resource-backed loans).   

While these trades represent a vital source of income for many EITI countries, the management and oversight of these transactions has often been opaque.  As of 2019, USD 2.5 trillion in revenues have been disclosed by EITI countries since its inception. Almost half of this revenue is linked to commodity trading. 

For countries to fully account for all revenue received from natural resources, commodity trading transparency is essential. 

Commodity trading can be an important source of revenue for governments. The scale of transactions is substantial and often represents a high portion of a country’s export earnings.  

For example, an individual cargo of crude oil can average 900,000 barrels. This quantity is worth USD 36 million at a price of USD 40 per barrel. 

Whenever a government or state-owned enterprise (SOE) receives a share of the state’s production or revenues in kind, two key aspects determine its value to the state. The first is the price and terms of the sale of the commodities. The second is the transfer of the sale proceeds to the budget. Without transparency over these terms, transactions have a high risk of corruption and can lower the budget available for public expenditures.  

In 2013, the EITI Standard required that first trades between national oil companies and commodity traders be disclosed. The bar has since been raised with an expanded requirement in the 2019 EITI Standard. The Standard requires disclosures by governments including SOEs and encourages disclosures by companies buying oil, gas and minerals from governments or state-owned enterprises. 

A working group has been established to support the targeted effort, consisting of international trading companies, NGOs, and SOE representatives. 

Requirements for EITI implementing countries 

Requirement 4.2  in the EITI 2019 Standard aims to ensure transparency in the sale of oil, gas and minerals by governments. 

According to this requirement, an SOE, government agency or third party appointed by the state must fully disclose the revenues collected from the sale of such resources, whether for export or domestic consumption. In practice, this means SOEs must disclose the volumes of commodities sold and the revenues received, broken down by buyer. The Standard recommends that the type of product, price, market and sales volume are also disclosed.   

Read more about Requirement 4.2 

Reporting guidelines for companies  

The EITI’s reporting guidelines are for use by companies buying oil, gas and minerals from governments. They aim to ensure the consistent disclosure of payments to state or state-owned enterprises (SOEs) where oil, gas or minerals are being sold on behalf of the state, where EITI requirements are applicable and relevant, or where there is commitment to transparency in commodity sales. 

Due to their nature and economic significance, payments to states or SOEs for purchases of commodities provide information on a matter of considerable public interest. Disclosure of the terms of transactions therefore helps to improve transparency and reduce the potential for corruption. 

Since 2015, leading governments, state-owned enterprises, commodity traders and civil society organisations have participated in the EITI multi-stakeholder working group on commodity trading to help the EITI become as effective a vehicle as possible for advancing the broader aim of improving transparency of commodity trading. The working group draws together expertise and guides EITI and host governments implementing the EITI in their efforts to develop and implement disclosure requirements of government owned commodities. 

The working group will continue to develop guidance and offer advice to MSGs in relevant EITI implementing countries and help address practical questions around level of disaggregation, frequency and timeliness of reporting, comprehensiveness, data reliability, format of publication and user-friendliness. It will also consider and directly contribute towards the availability of complementary information in accordance with the EITI Standard and will propose guidance for such contextual information. In doing so, the working group will take into account complementarities between EITI reporting with other sources of data, such as home country regulations or unilateral company disclosures as made by participating companies to the working group.  

The EITI welcomes wide participation in the working group. Participation of commodity trading companies, civil society, host and home countries governments and state-owned enterprises, is essential.