How do mandatory disclosures relate to EITI figures?

Originally Published on the OpenOil Blog: http://wp.me/p14Gk1-1jq

This year’s introduction of mandatory disclosures in France and the UK will bring about a considerable amount of reports listing extractive companies’ payments to governments.

The mandatory disclosures promise increased transparency, however, we are only at the beginning of a debate on how to best make use of the new data. One idea has already become apparent: comparing the mandatory disclosure data to EITI figures in order to find irregularities.

In the context of our involvement in Publish What You Pays “Data Extractors” programme, we have simulated how such a comparison could look like and formulated a few first thoughts, as detailed in this document. In this, we try to assess how these different sources referring to the same project relate to each other, in fact, how comparable they are after all. In the following, we would like to highlight a few aspects one has to take into account when comparing the two datasets.

Since the most actual EITI reports date from 2014, we needed to make sure the company reports were also covering that same year. This limited our comparison to the four companies in the Oil & Gas sector, that had both published payments to the government reports and that are operating in one of the few countries for which there already is a 2014 EITI report available. In total, we had six cases. The graph above represents the comparison between the EITI data (in blue) and the figures put forward by the companies (in red) on payments to government. In all cases, we found that the two reports had diverging figures. Deviations range from 0.84% (Mnazi Bay) up to almost 200% (Tullow in Rovuma Area 2&5). This begs the question as to why both reports fail to show the same results:

1.   Staggered Reporting Cycles The reporting cycles may diverge. We can see this, for instance, when we want to compare Wentworth operations with the matching EITI reports. These are Mozambique and Ghana. In Mozambique, both reports cover the same timeframe, January 1st, 2014 to december 31st. However, in Tanzania, the EITI report refers to a cycle from June 31, 2013 to June 31, 2014, whereas Wentworth covers January 1, 2014 to December 31, 2014.

2.   Project / Company Conflation Some reports relate to projects, other to companies. EITI reports often list payments by companies rather than by projects. However, there are companies that have only one project in the country, which they operate as part of a group. Statoil, for instance, is listed as a company in the EITI reports, and the figure for its payments in the Mozambique is higher than that in Statoil’s report. One reason being that Statoil has only 65% interest in the project. Without the other shareholding companies’ reports, we cannot have a full comparison with the EITI report.

3.   What is a ‘payment to government’? There are differences in what counts as ‘payments to government’. We went through the reports and looked at the items listed as payments. Tullow’s report in the Deepwater Tano project in Ghana for instance includes a range of items that are not included in Ghana’s EITI report, such as VAT, local payroll taxes, withholding taxes or infrastructure improvement. It seems that these items are at the discretion of each EITI member state.

This exercise has shown one methodology to analyse the data around EITI reports and the new incoming data from the EU mandatory disclosures. Although such a comparison proves to be challenging, it might help to prepare a thorough analysis that could lead to a more transparent and standardised reporting, as well as, in the best case scenario, helping to find the missing millions.