Commodity trading consultation
The International Secretariat is preparing a recommendation to the EITI Board, seeking to clarify the following:
1. Whether equity oil collected in-kind and sold by state-owned companies should be subject to disclosures under Requirement 4.2.
2. Who are considered “sellers” and “buyers” in accordance with Requirement 4.2.
In preparing this recommendation, the International Secretariat seeks input and views from the EITI working group on commodity trading transparency. Download the consultation paper here. Download the first draft paper here.
1. Commodity trading transparency stocktake
This paper is a stocktake of commodity trading transparency in select EITI implementing countries, aiming to shed light on the extent to which the level of transparency about the first sales have improved as a result of the EITI's increased focus on commodity trading transparency.
Dowload the paper here.
2. Notes from EITI working group of commodity trading transparency call, Thursday 24 May, 13:00-14:00 (CEST)
Participants: Alex Malden and Joe Williams (NRGI), Catherine Anderson, Lahra Liberti and Maylis Labusquirere (OECD), Dennis Baidoo and Linda Tamakloe (GNPC), Dominic Emergy (BP), James Nicholson (Trafigura), Jürg Vollenweider (SECO), Nahed Cherfa (Equinor), Nina Eggert (STSA), Odile Roy De Puyfontaine (Vitol), Oliver Haynes and Seth Pietras (Gunvor), Rhona Birchall (DFID), and Victoria Atwood (Mercuria).
- Consultation on reporting sales of equity oil and defining seller/buyer.
Should SOEs be required to disclose the volumes of equity oil sold, the name of the buyers and the revenues received from sale equity oil? Would disclosures be appropriate in all cases given that SOEs are public entities, or only in cases where “preferential treatment” is given to the SOE?
- It was clarified that the EITI Standard currently only requires disclosures of revenues that an SOE collects from the sale of oil on behalf of the state. Disclosure of revenues from sale of oil that an SOE receives as an equity holder has not been considered necessary to meet requirement 4.2, given that this is not revenue that the SOE collects on behalf of the state and transfers to treasury. It was also clarified that the requirement covers majority-owned SOEs.
- Joe stated that disclosures of sales of equity oil should be required by the EITI, as these are resources legitimately owned by the state. He referred to International Association of Oil & Gas Producers’ (IOGP) Report 535, and added that Shell and ENI among others include government equity interest (production entitlements) as part of their disclosures of payments to governments, while Trafigura also included such disclosures in their annual reports. In his view, the language in the EITI Standard also covered sale of equity oil.
- Dennis agreed that information on the volume and value of equity oil sales including name of buyers and the revenues received should be disclosed, and that publishing such data was key to the purpose of full disclosure.
- It was emphasised that users of the disclosed information should be able to follow and understand the revenue flows from the SOEs to the government and treasury. It was suggested that further attention should be given to the context in which the disclosures take place and the importance of providing sufficient context to understand the disclosures.
- Some working group members including Equinor noted that further comments would be shared on the paper in writing.
Should the EITI require reporting beyond “first trade” when the oil is sold to other government entities, i.e. where an SOE sells the oil to a state-owned domestic refinery which then sells the refined products?
- Odile noted the value in having disclosure down the line in cases where there was an intermediary agency marketing the oil. She noted the importance of disclosing more than only the fees paid to the marketing agency but also ensure disclosure on the values of oil sold to the external market.
- Joe added that marketing agencies were contracted to market the commodities on behalf of the government, and should therefore be considered as sellers for reporting purposes. He also suggested that multi-stakeholder groups should be encouraged to discuss the issue of marketing fees and whether these should be disclosed.
- It was further suggested that the level of detail of information to be disclosed (such as marketing fees) should be justified from a cost/benefit perspective.
- Update from the EITI on progress with targeted efforts.
- The countries that are part of the targeted efforts are making progress, and dedicated reports are currently being prepared in Albania, Ghana and Nigeria (expected to be finalised by June).
- An EITI workshop on commodity trading transparency for SOEs will be organised in Paris from 26-27 June, back to back with the OECD Policy Dialogue on Natural Resource-based Development. The objectives of the workshop are to share examples with commodity trading reporting amongst SOEs. While the target audience for this workshop is representatives from SOEs, the EITI Secretariats hope to organise some joint activities with those of you who will be attending the OECD meetings.
- Updates from working group members.
- NRGI has commissioned a paper on extent to which governments/SOEs are selling own share of minerals production. The initial findings, which will be presented at the OECD policy dialogue, suggest that the volumes and values are much lower than for oil/gas, but that there are some interesting examples worth looking into.
- The OECD Development Centre is organising the Thematic Dialogue on Commodity Trading on the morning of 26 June of the Policy Dialogue on Natural Resource-based Development (please see agenda attached). The OECD Development Assistance Committee is also undertaking a project on IFFs and oil trading flows, which will include a systematic review of responses to IFF risks related to trading based on country examples.