State participation and state-owned enterprises

State-owned enterprises (SOEs) play a key role in exploiting natural resources and managing the extractive sector. While some operate commercially – selling crude oil or minerals, managing state equity or participating directly in extractive operations – others fulfil regulatory, administrative or developmental functions. 

An SOE is a company that is owned in whole or in part by the government. In the natural resource sector, SOEs are often responsible for both commercial and non-commercial activities. They can be described as business-oriented, majority government owned institutions that sell goods or/and services or manage state equity and keep their own balance sheets. ¹

SOEs can generate significant state revenue, provide governments with greater oversight of the sector, support local skills and technology development, manage exposure to energy transition risks, and address market gaps by providing services not offered by the private sector. In many countries, state equity is also used to secure additional government revenues from extractive projects, beyond taxes. 

The governance of state participation and SOEs has major implications for public finances and the wider economy. While some SOEs contribute significantly to development and revenue generation, others face challenges such as weak oversight and corruption. EITI reporting and Validation have shown improved transparency of SOE financial transactions, but there is a continuing need to strengthen standards for SOE governance.

Requirement 2.6 of the EITI Standard requires implementing countries to disclose: 

• The prevailing rules and practices governing the financial relationship between the government and SOEs; and
• The level of government and SOE ownership in mining, oil and gas companies, including interests held through SOE subsidiaries and joint ventures. 

The objective is to ensure transparency and accountability in SOEs’ operations and broader state participation. Disclosing this information enables public oversight of whether SOEs operate in line with the legal framework and contribute to national development goals. It also allows stakeholders to assess the alignment of SOE investment decisions with long-term public interests.

This guidance note supports multi-stakeholder groups (MSGs) in implementing Requirement 2.6. It outlines a step-by-step approach to reporting state participation in the extractive industries and strengthening the dissemination and use of related data. 

This guidance outlines a step-by-step approach to help MSGs report on state participation in the extractive industries, in line with Requirement 2.6. MSGs are encouraged to document the results of each step, such as through meeting minutes, scoping studies, EITI reporting or other disclosures.

EITI implementing countries are expected to systematically disclose data required by the EITI Standard. As such, the MSG should work with SOEs and relevant government entities to ensure that information required under Requirement 2.6 is published by the responsible entities. The EITI reporting process should review existing public information, identify and address any gaps, and analyse the data to support improved transparency and oversight of state participation in the extractive sector. 

To begin, the MSG should review Requirement 2.6 and consider the objectives for disclosures in this area. The MSG should determine whether to include encouraged provisions in reporting based on their relevance to established objectives and the national policy context.

As a second step, the MSG is encouraged to agree and document a definition of SOEs that is in line with Requirement 2.6 and reflects domestic legislation and government structures. Requirement 2.6.a.i. of the EITI Standard defines an SOE for EITI purposes as “a wholly or majority government-owned company that is engaged in extractive activities on behalf of the government.” The MSG should also consider including companies that: 

• Hold extractives licenses or equity in extractives companies
• Function as holding or asset management entities
• Are structured as sovereign wealth funds
• Market commodities purchased from or on behalf of those engaged in artisanal or small-scale mining

The MSG may also refer to the OECD’s definition of enterprises under state control, which includes companies where the state is the ultimate beneficial owner of the majority of voting shares or exercises an equivalent degree of control. ²

The MSG should identify relevant actors to engage to support disclosure of data and public debate around state participation and SOEs. This could include ministries overseeing transfers between the government and SOEs and the role of SOEs in the extractive sector; SOEs and extractive companies in which the government holds an interest; and oversight institutions and civil society organisations who could support data analysis.

As a second step, the MSG should identify available data sources for reporting on Requirement 2.6. This could include the websites of government agencies and SOEs; relevant laws, regulations and company statutes; as well as companies’ annual reports, stock exchange filings and financial statements.

The table below provides suggestions for where data relevant to reporting on Requirement 2.6 may be available.

The MSG should compile a comprehensive list of extractive companies and projects in which the government holds an interest. This should include direct or indirect state equity – whether held by government entities or by SOEs, including their subsidiaries or through joint ventures. The list should include companies incorporated both domestically and abroad. 

The assessment should be thorough, accounting for potentially complex ownership structures that may obscure the state’s actual participation. Information should be disclosed through government systems, such as the websites of relevant ministries or SOEs. Where this is not possible, the MSG should ensure the information is disclosed through EITI reporting. 

The MSG should also ensure that the terms associated with each equity are clearly described. This helps determine the financial obligations and entitlements attached to the state’s or SOE’s participation. These may include:

• Full (or “paid”) equity: The state or SOE pays its share of capital and operational expenditures in proportion to its ownership.
• Free equity: The state or SOE holds equity without financial obligation, typically receiving dividends without contributing to costs.
• Carried interest: The operator covers the state’s or SOE’s share of capital and operational expenditures during development, to be repaid from future revenues once the project becomes profitable. 

This information should cover all state equity interests in the extractive sector (including those held through SOE subsidiaries), not just those considered material for EITI reporting. It should clearly describe the terms attached to each equity interest, such as whether the state or SOE is required to fund its share of costs or whether it benefits from carried or free equity. For oil and gas projects, this should include production entitlements as defined by the fiscal terms. Where possible, this information should be disclosed through government or company systems, with EITI reporting used to fill any disclosure gaps.

The MSG should identify and disclose any changes in state or SOE ownership in extractives companies and projects during the year under review. This includes acquisitions, divestments or restructurings that alter the level or nature of state participation. 

Transparent disclosure of such changes helps the public understand how the state’s equity interests evolve, whether transactions were conducted on commercial terms, and whether state assets were transferred with or without compensation. 

For each change, EITI reporting should indicate the corresponding terms of the transaction, including valuation and revenues and any resulting change in control or influence. Where possible, this information should be disclosed through government or company systems. EITI reporting should be used to address any disclosure gaps.

The MSG should identify which SOEs are material for the purpose of EITI reporting. This involves setting a materiality threshold to determine which SOEs must disclose information. In doing so, the MSG is encouraged to consider both financial and non-financial factors, including the SOE’s commercial and non-commercial functions. 

Using the list of SOEs developed under Steps 1 and 3, the MSG should collect data from relevant ministries or SOEs on:

• Revenues collected from extractives companies
• Payments or transfers (in cash or in kind) to government entities

The MSG may rank SOEs by the size of their transactions and use this to set a threshold that ensures disclosures are both comprehensive and focused on the most relevant information. In addition to financial factors, the MSG can also consider governance risks, the strategic importance of the SOE, or its role in in-kind transfers. 

The outcome of this step should be a list of SOEs considered material for EITI reporting in the year under review. This list will inform further steps, including detailed reporting on financial relations with the state.

The MSG should work with relevant government entities and SOEs to describe the statutory rules and practices that govern the financial relations between the government and SOEs, as well as between SOEs and their subsidiaries or joint ventures. This information can be summarised through EITI reporting and can serve as the basis for reforms and sector oversight. 

The MSG should review relevant laws, regulations, company statutes and other legal instruments to describe the statutory rules related to: 

• Transfers to and from the state: For example, dividend payments, subsidies, taxes, royalties, customs duties and other fiscal transfers to the government, as well as the timing of transfers.
• Retained earnings: Whether SOEs may retain earnings from their operations or those conducted on behalf of the state (e.g. commodity sales).
• Reinvestments: Whether SOE boards decide on dividends and how retained earnings are used (e.g. operational or capital expenditures, or retention in the company’s accounts).
• Third-party financing: Whether SOEs are authorised to raise debt or equity from third parties, and under what rules.
• Other statutory transfers: Any additional rights or obligations not covered above. 

The MSG should also assess whether any SOEs benefit from exemptions or special arrangements, such as relaxed rules or preferential treatment, and ensure these are disclosed. 

To ensure broad understanding, the MSG could summarise and explain these provisions in plain language. This helps contextualise the flow of funds and the accountability frameworks that govern SOEs. 

The MSG should work with SOEs to ensure that relevant regulatory texts are made publicly available on the SOEs’ website or other official platforms.

Third-party financing refers to funding that does not come from government or SOE retained earnings, but rather from a third source (e.g. a private company, or bank), either through debt or equity. 

• Debt involves borrowing from banks, bondholders or lenders. Debt has a maturity (length of time) and an interest rate (or coupon in the case of bonds).
• Equity is the SOE’s assets after liabilities have been deducted. It typically involves raising capital by issuing shares. 

The MSG should assess how financial relations between SOEs and the government are implemented in practice, based on the statutory rules reviewed in Step 6. This includes financial relations between SOEs and their subsidiaries and joint ventures. EITI reporting should serve as an annual diagnostic, highlighting any discrepancies between legal provisions and actual practices. Publicly available information should be referenced, and any disclosure gaps addressed.

As a starting point, the MSG should review the available information on each SOE’s financial activities, including their annual reports, financial statements, sustainability reports and stock exchange filings (if applicable). The MSG may consider the following financial indicators when reviewing disclosures:

• Dividends: Often listed as distribution of profits or shown as a use of cash under financing activities; sometimes visible in the statement of stockholders' equity as a subtraction from retained earnings.
• Budget transfers or subsidies: May be recorded as government grants, government assistance, or other income from the state.
• Retained earnings: Typically reported as net earnings after dividends or as a surplus.
• Reinvestment: May appear as investments financed from retained earnings or company resources.
• Third-party financing: Includes references to short-term or long-term loans, lines of credit, bonds, Eurobonds, equity, shareholding or share issues. 

For each material SOE, the MSG could apply a standardised approach to data collection. 

The MSG should identify any active loans or loan guarantees provided by the state or by SOEs to extractive companies or projects. These disclosures should include key terms of the financing, such as:

• Tenor (duration of the loan or guarantee)
• Repayment schedule and modalities
• Interest rates 

The MSG is encouraged to also examine loans or guarantees provided by SOEs to non-extractive sector companies or projects. The MSG may also wish to compare the terms of SOE or state loans and guarantees with market-based terms.

Disclosing this information supports public understanding of state financial support to the extractive sector, especially where public funds or state-backed institutions are involved. Such arrangements may pose governance risks, including preferential lending to politically exposed persons, off-budget loans not reflected in sovereign debt statistics, and subsidisation of private sector actors. 

Material SOEs are required to ensure that their audited financial statements are publicly accessible. These statements should include: 

• The auditor’s opinion
• A summary of key financials
• A full set of audited accounts (profit and loss statement, balance sheet and cash flow statement)
• Explanatory notes detailing accounting practices and key terms

If explanatory notes are not disclosed, the MSG should assess and document any legal, regulatory or practical barriers. 

The MSG should liaise with each material SOE to determine whether their financial statements are publicly available and, if not, identify obstacles to publication. Where legal or regulatory barriers exist, these should be publicly documented. If an SOE does not produce an audited financial report, the MSG should work with its management to ensure key financial items are disclosed (balance sheet, profit and loss statement and cash flow statement). 

The MSG is required to disclose additional information on how SOEs manage operating and capital expenditures, procurement, subcontracting and corporate governance. Corporate governance disclosures should include the composition and appointment of the Board of Directors and senior management, their mandate, and applicable codes of conduct. The MSG should also consider conflict of interest policies for the Board of Directors and management. 

The MSG could consider the following aspects in its review of SOE expenditures: ³

• Disaggregation by upstream, midstream and downstream operations
• Exploration, appraisal, development and production
• Infrastructure investments (e.g. processing, refining, transportation and distribution)
• Core versus non-core activities

Reviewing this information can help identify governance risks such as: 

• Use of operating expenditures for non-core spending
• Preferential procurement from companies owned by politically exposed persons
• Political interference in board appointments
• Lack of safeguards against conflicts of interest 

Such an analysis could also contribute to an audit of an SOE’s functioning in accordance with its mandate.  

In line with Expectation 7 for EITI supporting companies, SOEs are expected to publish an anti-corruption policy that explains how the company manages corruption risks. This includes how the SOE collects and uses beneficial ownership information related to its joint venture partners, contractors and suppliers. SOEs are also expected to implement rigorous due diligence procedures. 

The MSG should engage with each material SOE to assess whether an anti-corruption policy exists and whether it is publicly available. Where policies are not accessible, the MSG should work with the SOE to identify whether there are legal, regulatory or practical barriers to publication. If no such barriers exist, the MSG should ensure that the SOE’s policy is published online. If barriers are identified, they should be publicly documented, along with a plan for future disclosure. 

The MSG should also engage with each material SOE to review their due diligence procedures and practices and determine whether these are publicly disclosed. If they are not, the MSG should seek a full understanding through direct consultation. The MSG should assess whether these practices are robust and appropriate, and may review any known irregularities or corruption cases involving the SOE to evaluate the effectiveness of its due diligence processes. 

The MSG is encouraged to consult the EITI guidance on addressing corruption risks through EITI implementation and the Expectations for EITI supporting companies when undertaking this work. 

Where applicable, SOEs are encouraged to disclose information on their investments in the extractive industries, including both assets and liabilities. They are also encouraged to publish information on how their investment decisions align with the country’s energy transition goals and climate risk considerations. The MSG should liaise with material SOEs to assess whether this information is publicly available. 

Where disclosures are limited, the MSG should work with SOEs to understand any objections to publication and identify interim solutions for improved transparency.

Through EITI reporting, the MSG can help identify whether SOE investments are consistent with long-term public policy goals. Such analysis may reveal: 

• Financial risks related to investment projects misaligned with energy transition plans
• The potential for stranded assets in the context of climate policy
• Opportunities to evaluate SOEs’ roles in achieving government transition objectives 

Where feasible, SOEs are encouraged to disclose the identity and beneficial ownership of their agents or intermediaries, suppliers and contractors involved in material transactions. 

The MSG should work with material SOEs to assess whether this information is publicly available. In line with EITI Requirement 2.5 on beneficial ownership, SOEs are encouraged to maintain an up-to-date list of these entities and disclose beneficial ownership details. This information can be collected through standard contracting or tender processes. 

Disclosure of beneficial ownership helps to prevent corruption and manage risks associated with politically exposed persons or opaque company structures. Past corruption cases in the extractive industries have involved the use of agents to channel bribes or illicit payments. According to a 2020 NRGI study, suppliers account for approximately 25% of gross petroleum project revenues and close to 50% in mining, highlighting their financial significance. 

In some contexts, companies with close political ties have been appointed as SOE agents, intermediaries, suppliers and contractors. Beneficial ownership reporting helps ensure that procurement and contracting align with national laws and principles of integrity.

MSGs are encouraged to promote the use of disclosures on state participation by identifying opportunities for dissemination and supporting stakeholders in using and analysing the data. Depending on the EITI work plan and national priorities, this could include publishing targeted briefings, holding discussions on reform opportunities, or linking findings to corporatisation efforts. 

Government stakeholders can use the data to assess whether SOE revenues align with performance and to inform policy reforms. Civil society and oversight actors can analyse disclosures to strengthen accountability and better understand how public revenues and assets are managed.

• World Bank (2014). Corporate Governance of State-Owned Enterprises: A Toolkit
• NRGI (2015). State Participation and State-Owned Enterprises: Roles, Benefits and Challenges
• NRGI (2018). Guide to Extractive Sector State-Owned Enterprise Disclosures
• IMF (2007). Fiscal Transparency Manual 2007
• IMF (2019). Fiscal Transparency Initiative: Integration of Natural Resource Management Issues
• NRGI (2022). Anticorruption Guidance for Partners of State-Owned Enterprises
• OECD (2013). Boards of Directors of State-Owned Enterprises: An Overview of National Practices