EU-listed and large private oil, gas and mining companies will be forced to reveal more about their payments to governments under new EU rules agreed informally late Tuesday by EU negotiators.
Some big oil companies, including Shell, had lobbied Brussels hard to water down the proposed new rules, arguing that forcing EU companies to report payments to governments at project level would be costly and artificial without helping to promote good governance.
The EU said the new rules would improve knowledge in local communities about how their resources were being exploited.
“Local communities in resource-rich countries will finally be better informed about what their governments are being paid by multinationals for exploiting oil and gas fields, mineral deposits and forests,” EU internal market commissioner Michel Barnier said in a statement late Tuesday as he welcomed the deal.
Such payments include taxes on profits, royalties and licence fees, the EC said.
“The agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help fight tax evasion and corruption as well as create the framework so both companies and governments can be held to account on the use of revenues from natural resources,” Barnier added.
The EC included project level reporting in October 2011 proposals for extractive industries — oil, gas and mining — to publish what they pay governments in their annual accounts.
This approach is similar to the US Dodd-Frank Act adopted in 2010, which requires companies registered with the US Securities and Exchange Commission to report payments to governments by country and project.
The disclosure requirement is part of changes to the EU’s accounting and transparency directives.
The accounting directives define a large company as one meeting two or more of the following: turnover of more than Eur40 million, total assets of more than Eur20 million, and more than 250 employees.
“Large oil [and] gas companies…will be obliged to disclose full information about every single project whose payments to the governmental authorities exceed the threshold of Eur100,000 ($130,000),” the European Parliament’s center political group ALDE said late Tuesday.
The EU negotiators included representatives from the EP, the European Commission and the Irish EU presidency, representing the EU’s national governments in the EU Council. The informal agreement has to be formally approved by the full parliament and EU Council before it can become binding.
MIXED REACTION
Reaction to the agreement was mixed. Anti-poverty group ONE said the accord represented a major step forward in the fight against corruption.
“This law will shine a light on the often murky world of oil, gas and mining deals in Africa, helping ordinary people see where the money paid for their countries’ natural resources is really going and potentially lifting millions out of extreme poverty,” ONE’s Brussels director Eloise Todd said. “Many people in Brussels and across Europe have worked hard for over two years to make this breakthrough happen,” Todd said.
UK MP Jo Swinson said in a Twitter response to the accord: “Success! So delighted that EU has reached vital agreement on extractives transparency so big companies must publish what they pay to governments.”
Shell, which has argued that reporting payments at project level caused more problems than it solved, said it would continue to work closely with all stakeholders to manage the practical implementation of these rules.
“Shell has consistently supported a mandatory global reporting rule for all companies engaged in extractive activities,” a company spokesman told Platts Wednesday.
“It is in our interest to promote accountability and good governance wherever we operate. Shell has been involved in constructive engagement with relevant stakeholders,” he said.
Shell executive vice-president for tax Alan McLean said in April last year that the company supported reporting at a government rather than project level, arguing that in most countries tax is paid on a national corporate basis rather than for individual projects.
He added that the proposed rules would also apply to payments in the EU, which could see Shell having to report on every oil and gas field in the North Sea it is involved with.
Spource: platts.com
