EITI and commodity trading transparency Explain objective and methodology of the stocktake: At the end of 2017, the IS undertook a stocktake of commodity trading reporting   The objective of this commodity trading stocktake was to map the progress of CT disclosures in EITI countries and opportunities for improving transparency. We included two types of countries in the scope: 1. the countries that are part of the targeted efforts and that have produced reports with commodity trading data (Albania, Ghana, Nigeria, Indonesia, Chad); and 2. countries that have undertaken validations and where the validations have found issues related to commodity trading (Cote D’Ivoire, Cameroon, Republic of Congo, Norway, Kazakhstan, Mongolia, Mozambique, Iraq, Tajiksitan). Altogether, the stocktake covered 14 countries. 2. Explain presentation - the presentation will highlight the key findings from the stocktake – three areas where we have seen progress and three areas where there is still room for improvement. OECD Paris, 26 June 2018

Transparency of the “first trade” in commodity trading is crucial for improving accountability

Timeline 2013: Adoption of the EITI Standard including requirement on sale of state’s share of production or in-kind revenues 2015: Creation of the EITI Commodity Trading Working Group 2016: Adoption of a refined Standard, development of reporting templates and Guidance Note 26. 2017: Targeted effort in commodity trading transparency in a select group of implementing countries. 2018: Evaluation of the targeted effort and consultation on the definition of key terms.

EITI Requirement 4.2 aims to ensure transparency in how governments are selling oil, gas and minerals: “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. The published data must be disaggregated by individual buying company” Disclosure of “the type of product, price, market and sale volume” encouraged Reconciliation of volumes sold and revenues with buying companies encouraged According to this requirement, an SOE or other government agency in charge of marketing the state’s oil, gas and minerals must fully disclose the revenues that it collects from sales of such resources. This includes exports sales as well as sales to domestic buyers and refineries, and any other actors. This typically means that SOEs will disclose the volumes of commodities sold and the revenues received, broken down by buyer. In some countries, like Iraq, the buyers of the oil from the government also disclose how much they pay to the government, allowing for reconciliation of these figures. 

EITI Standard template for reporting on ‘first trades’ of oil Out of 51 EITI countries, at least 17 collect oil and gas on behalf of the state.

Guidance for countries reporting on the sale of the state’s share of oil Has been developed by a multi-stakeholder commodity trading working group members including SOEs (GNPC, NNPC, SKK MigasStatoil, international oil and trading companies (BP, Mercuria, Shell, Trafigura and Vitol) and international experts/civil society (NRGI, Swissaid)

Results: More granular commodity trading data The first finding is that the commodity trading data is becoming more granular. 3 countries– Albania, Iraq and Mozambique – have disaggregated the sales data by month, with a further 4 countries - notably Cameroon, Chad, Indonesia and Mauritania – having provided sales data by each date of sale (Ghana and CDI have also collected data by sales, but not yet published). Not only is data more granular, but it is also more detailed and covers more information than that required under the EITI Standard. For example price information and price data. This development is clearly due to the reporting template provided by the working group. Source: 2015 EITI Report Cameroon, p.219

Buyer selection process more transparent Secondly, the buyer selection progress is becoming more transparent Albania, Chad, Indonesia, Iraq and Mauritania has provided at least some contextual information about the process for selecting the buyers. Nigeria experimenting with collecting beneficial ownership data from the traders that it appoints. Source: 2015 EITI Report Albania, p.136

Better overview of the oil revenues Source: EITI Albania 2013-2014 Reports, Deloitte, December 2015, page 37 http://www.albeiti.org/

Increased reporting on “unconventional” sales Thirdly – there is increased reporting on unconventional sales. Chad tracking down payments on oil-backed loans (could be relevant in several other countries including Kazkahstan and Nigeria) CDI – tracking provision of gas for energy/electricity Nigeria – disclosing the details of swap arrangements of crude oil for refined petroleum products. Congo B – allocation of crude oil for infrastructure products. Source: 2015 EITI Report Chad, p.165

Key findings More detailed information on commodity trading by SOEs is being published often for the first time The buyer selection process is becoming more transparent Countries are making significant progress in disclosing the value of “unconventional sales” such as e.g. swaps or oil-backed loans for future purchases of crude oil

More granular commodity trading data The first finding is that there is More information on the oil sold, the selling price and the buyer 3 countries– Albania, Iraq and Mozambique – have disaggregated the sales data by month, with a further 4 countries - notably Cameroon, Chad, Indonesia and Mauritania – having provided sales data by each date of sale (Ghana and CDI have also collected data by sales, but not yet published). Not only is data more granular, but it is also more detailed and covers more information than that required under the EITI Standard. For example price information and price data. This development is clearly due to the reporting template provided by the working group. Based on the review of EITI Reports in 14 countries

Buyer selection process more transparent We also found more information on the process of selling the oil and the transfer of proceeds to the treasury 3 countries– Albania, Iraq and Mozambique – have disaggregated the sales data by month, with a further 4 countries - notably Cameroon, Chad, Indonesia and Mauritania – having provided sales data by each date of sale (Ghana and CDI have also collected data by sales, but not yet published). Not only is data more granular, but it is also more detailed and covers more information than that required under the EITI Standard. For example price information and price data. This development is clearly due to the reporting template provided by the working group. Based on the review of EITI Reports in 14 countries

Key findings The engagement of traders in the EITI reporting process remains low in implementing countries Equity oil remains a challenging area It is not always clear what is considered “first-trade” Commodity trading data exist, but is not always disclosed.

Chinguetti (Petronas, SMHPM (SOE) Ongoing consultation to clarify key terms - What is “first trade”? Indonesia, Mozambique - Who is the seller/buyer? Albania, Mauritania, Mozambique - What about sale of equity oil? Kazakhstan, Norway Chinguetti (Petronas, SMHPM (SOE) SMHPM Treasury AlbPetrol Crude to Vitol $ Crude to TPD $ to AlbPetrol $ Vitol (private company appointed through competitive bidding to market Chinguetti equity and profit oil) TPD (private company appointed through competitive bidding to market AlbPetrol equity and profit oil) The stocktake has also revealed other challenges: How do we define first trade? Cases where the SOE appoints a private company to market the oil (Mauritania, Albania) and cases where the government appoints either the SOE or the private contractors to market the oil (Indonesia). Who is the seller and buyer? Not always clear what should be disclosed in the cases where SOE appoints a private company to market the oil – see examples on Mauritania and Albania that deal with this differently How do we deal with equity oil? Several countries have disclosed sale of equity oil. What is it reasonable to ask an SOE to disclose when it comes to sales of its own oil? Crude to BP Crude to Saras Transactions btw TPD and Fier not disclosed Fier Refinery BP (buyer 1) Saras (buyer 2)

What guidance do we give to countries on the reporting challenges identified?   “First trade”? What about when there are intermediaries? Coverage of equity oil? How can we better support SOEs with making disclosures available at source (mainstreaming)?

What guidance do we give to countries on the reporting challenges identified?   Are there best practices or a “disclosure template” for publishing details on the process for selecting buyers? How to engage with traders at the national level to ensure disclosure of sales contracts, information on beneficial ownership, monitor “unconventional sales”?

Next step: Data is collated and available with SOE, but not always disclosed – mainstreaming? Finally, the stocktake has shown that SOEs collate and has much of the data available, but it is not always disclosed (e.g. Ghana, Cote d’Ivoire). Is mainstreaming a solution?

www.eiti.org @EITIorg Author: The EITI Secretariat Date: 26 June 2018 Email: secretariat@eiti.org - Telephone: +47 22 20 08 00 Address: EITI International Secretariat, Skippergata 22, 0151 Oslo, Norway