*As Total becomes 1st major oil company to support contract transparency
OpeOluwani Akintayo
05 March 2018, Sweetcrude, Lagos — The Natural Resource Governance Institute, NRGI, has called on U.S oil majors to eradicate lack of transparency in governance and revenue accountability.
In a briefing note on anticorruption, the institute said it found a need to urge U.S oil majors towards transparency, especially in the recent light of a campaign against the disclosure of oil companies’ payments to governments led by Chevron and ExxonMobil.
“In a recent debate over tax transparency in Australia, an ExxonMobil executive said that the company “strongly supports transparency initiatives that improve governance and revenue accountability.” These words ring particularly hollow in the light of a multi-year campaign led by ExxonMobil and Chevron against the disclosure of oil companies’ payments to governments”.
Armed with details of such payments, NRGI said citizens of “oil-rich but often quite poor countries”, can demand that their governments use revenues to promote national development priorities and ensure that oil money does not fall into corrupt hands.
“Investors in oil companies also value this payment transparency when seeking to manage risk”.
According to the report, in the United States, ExxonMobil and Chevron’s efforts to keep such payments in the dark have been successful, adding that President Trump’s administration appears to be giving them a free hand.
“But for almost a decade, these behemoths have fought against a ground-breaking U.S. transparency law, Section 1504 of the Dodd-Frank Act of 2010”.
Section 1504 of Dodd-Frank requires oil, gas and mining companies listed on U.S. stock exchanges to disclose their payments to governments around the world for the right to extract subsoil resources.
”They also precipitated the U.S. exit last year from the Extractive Industries Transparency Initiatives, (EITI). This last is especially disingenuous, as the two companies hold seats on the initiative’s board and claim to support its objectives”.
ExxonMobil had lobbied against the bipartisan law, with then-CEO Rex Tillerson (now U.S. Secretary of State) personally meeting senators to argue against the provision.
However, the law passed after Tillerson failed to garner the much-required voice.
But these companies, through their lobby, the American Petroleum Institute, then litigated to block the initial Securities and Exchange Commission (SEC) rule that would have implemented Section 1504.
Last year, they successfully pushed for congressional action to repeal the SEC’s latest formulation of the rule.
For years, ExxonMobil and Chevron have asserted that disclosing their payments to governments would harm their competitiveness.
In a memo written by ExxonMobil’s Vice President and Controller, Patrick T. Mulva to the Secretary, U.S Securities and Exchange Commission, Elizabeth Murphy on March 15, 2011, seen by SweetcrudeReports, ExxonMobil argued that the disclosure of such information was even prohibited in some countries, such as Qatar and Angola.
However, new evidence proves this claim to be false.
Both ExxonMobil and Chevron also operate in Nigeria where the public hardly has access to payments to the government by international oil companies.
“While no company has disclosed under the U.S. law (eight years after its passage), ExxonMobil and Chevron have been less successful in convincing governments in Canada and Europe to water down their own payments-to-governments laws”.
Compelled by these laws, hundreds of companies, including BP, Royal Dutch Shell, and Total, as well as state-owned Russian and Chinese enterprises, have now disclosed over USD 300 billion in payments to governments.
The laws in Canada and Europe have also forced disclosure by some ExxonMobil subsidiaries and associates.
For the period 2014-2016, ExxonMobil has published the details of USD 10 billion in transactions with the governments of 8 countries (including $467 million in net tax refunds received in the U.K.).
In December, an ExxonMobil holding company subject to Luxembourg law quietly disclosed over $2.2 billion in payments made in 2016 to the Angolan government for two prized oil assets – offshore blocks 15 and 17.
“These disclosures are crucial to improving governance in Angola, an oil-rich yet corruption-prone nation. The disclosures also demonstrate the fallacy of ExxonMobil’s arguments that it may be forced to cease doing business in the country; it still operates there unimpeded”.
“ExxonMobil and Chevron’s approach to U.S. implementation of the complementary EITI further demonstrates the hypocrisy of their claims to support transparency”.
Disclosure of taxes paid to governments by oil companies is a key requirement of EITI.
“The companies’ refusal to disclose their tax payments to the American government was central to the initiative’s failure in the U.S. and the U.S. government’s subsequent withdrawal from the process in November”.
Given the companies’ actions in the U.S., some watchdog groups have called for the two companies to be removed from the initiative’s board.
“Indeed, a commitment to practicing real transparency ought to be a prerequisite for any company to occupy such a position”.
“If ExxonMobil and Chevron truly support transparency and wish to retain the reputational benefits of leadership in initiatives like EITI, they must end this deep hypocrisy”.
“They should … change course and support full implementation of Dodd-Frank 1504 in the U.S. (in line with laws in Europe and Canada) and disclose their tax payments in the U.S. and all other countries where they operate”.
“Other European oil companies like BP, Royal Dutch Shell, Statoil and Total (themselves on the EITI board) should remind ExxonMobil and Chevron that transparency doesn’t result in a loss in competitiveness, as ExxonMobil’s own Angola disclosure experience demonstrates”.
“As enlightened multinational companies and reformist governments around the world know too well, real transparency is essential to achieving sustainable growth, deterring corruption and benefitting citizens”.
Meanwhile, French oil giant Total is the latest company to make a policy statement in support of contract transparency in the extractive industries.
The policy statement was announced in Oslo on 13 February at the international board meeting of the Extractive Industries Transparency Initiative (EITI), a global standard for the good governance of oil, gas and mineral resources that are implemented by over 50 countries.
This is the first policy statement of its kind by one of the oil majors.
Oil, gas and mining contracts agreed between companies and governments set out the legal framework for extractive projects.
Publishing contracts allow citizens of resource-rich countries much-needed scrutiny of deals that can be worth billions of dollars.
The disclosure also provides important opportunities for governments and companies to build public trust in the extractive industries.
From an investor’s perspective, publication of contracts reduces the political risk that results when deals are kept secret.
The EITI Standard requires disclosures of information along the entire extractive industry value chain and recommends others that are keeping with the spirit of the standard.
Total’s move is part of a wider trend.
By coming out in favor of contract transparency, the company is joining ranks with mining giant Rio Tinto, as well as smaller oil companies Kosmos Energy and Tullow Oil, and lining up with a practice that is endorsed by the International Monetary Fund, the United Nations, and the International Bar Association, and required by the International Finance Corporation, the Multilateral Investment Guarantee Agency and the European Bank for Reconstruction and Development.
“It is encouraging to see an increasing number of companies proactively promoting contract transparency, and surely they will be joined by more in the future”, NRGI said in a statement.
What makes Total’s statement stand out is that the company does not simply express its support contract transparency, it goes one step further to advocate for host states to disclose their petroleum contracts and licenses.
“This is particularly noteworthy because many of countries in which Total works are still coming around to the practice of contract transparency”.
Of over 40 countries in which Total works, contracts are only publicly available in 12, including 15 EITI member countries of which only 7 currently disclose agreements.
NRGI advised that “as Total executives begin to translate policy into practice, they can start by releasing secret contracts in countries that otherwise have good records on contract transparency. One such example is Senegal, where recent official disclosures on a local EITI website do not include two contracts signed with Total in 2017. Total’s actions in these jurisdictions will quickly reveal how committed the company is to its new policy”.
Contract disclosure has been gathering steam among EITI implementing countries for some time. As NRGI documented last year, over half of them, a total of 29, have already officially disclosed contracts, and more countries are joining.
Just this month, Ghana launched a comprehensive petroleum register, while Malawi moved to publish petroleum contracts last year.
Even among the two newest EITI members, Guyana recently made the decision to publish contracts, while Mexico joined already having an exemplary contract disclosure portal for its oil and gas sector.
Nigeria is yet to toe the line of contract disclosure.
“Total’s embrace of transparency practices that are in line with the spirit of EITI stands in stark contrast to the actions of two other supermajors—ExxonMobil and Chevron. But the overall trend is toward disclosure of payments, contracts and other information critical for those in developing countries seeking to hold companies and governments to account”.