Data on Payments by International Oil Companies to Indonesia's Government Expose Transparency Gaps and Poor Corporate Practice
[This is a joint press release with Publish What You Pay Indonesia]
JAKARTA, 18 December 2019— A new report reveals that transparency gaps and poor corporate practice surround payments by international oil and gas companies to the government of Indonesia.
The Natural Resource Governance Institute (NRGI) and Publish What You Pay (PWYP) Indonesia report found that some international oil companies are paying bonuses to the Directorate General of Oil and Gas within the Ministry of Energy and Natural Resources (ESDM), rather than to the state treasury, as is required by ESDM’s own regulation, No. 30/2017.
The purpose of disclosing payments made by oil companies to different government entities is to allow citizens to see where the money goes. If money that is intended for the state treasury is paid to a different ministry, this makes tracking the payments more difficult, undermining international standards on transparency.
Joseph Williams, advocacy manager for NRGI, said:
“While we understand that the government allows this practice, it creates a worrying transparency gap. The Directorate General of Oil and Gas should clarify why it has directed the Italian oil company Eni to deposit the signature bonus payment of $1.5 million for the East Ganal PSC into a Directorate General of Oil and Gas bank account, rather than to the state treasury. The government should also clarify how this revenue is managed and transferred to the state treasury.”
The authors of the report, Indonesia’s Oil and Gas Revenues: Using Payments to Governments Data for Accountability, studied payment information released under laws in the European Union, Canada and Norway, regarding “payments-to-governments” disclosures, designed to improve transparency in resource-rich countries.
Since 2014, 17 international oil and gas companies have disclosed over $15 billion in payments to Indonesian government entities. The report details how in 2018 alone ten oil and gas companies disclosed payments totaling $5.4 billion to Indonesian government entities.
NRGI and PWYP Indonesia also reveal how U.S.-listed company ExxonMobil has refused to publish 2017 and 2018 payment data for Indonesia. ConocoPhillips has also not published its payments so the true value of oil revenues in 2018 is likely to be much more. The public only currently have access to their 2016 payments.
Emanuel Bria, Indonesia country manager with NRGI, said:
“It is regrettable that Exxon Mobil and ConocoPhilips, who claim to support global transparency standards, are denying the citizens of Indonesia this information. They have a right to know how much has been paid in recent years and they should be able to track it.”
While no law obligates these two companies to disclose, they both officially support the Extractive Industries Transparency Initiative (EITI). ExxonMobil has occupied a seat on the EITI board as either a primary or alternate member since the initiative began. The EITI makes clear that companies should disclose all payments systematically to countries that implement the initiative, including Indonesia.
Joseph Williams, advocacy manager for NRGI, said:
“Companies want to have the public relations value of being inside the global transparency movement, but when it comes to action, some U.S. companies like ExxonMobil and ConocoPhillips are failing. Companies which support and sit on the EITI board should be leaders, not laggards, in transparency. They should disclose their recent payments.”
On 18 December, the United States Securities and Exchange Commission (SEC) is set to propose a new rule to compel U.S. oil, gas and mining companies to disclose their recent payments to all governments. The previous rule, which was struck down by Congress in early 2017, would have implemented the landmark section 1504 of the 2010 Dodd Frank Act.
“If companies like ExxonMobil and ConocoPhillips are not willing to disclose recent payments under their purported support for EITI, a strong SEC rule which forces them to do so is the only solution,” said Williams. “The SEC’s new rule should build upon and align with similar laws in Europe and Canada – this means requiring disclosure of timely payment information detailed for each company and each of their projects.”
The report and the U.S. SEC rulemaking come at a time when Indonesia’s oil and gas sector is undergoing a major transformation. In 2017, the Indonesian government announced it was moving away from the cost recovery production sharing contract (PSC) model that had been in place for over 50 years to a gross split PSC model, meaning the government’s share of production from a project will, in future agreements, derive from the project’s gross revenue, rather than profit generated. In 2018, the government also removed the upper limit of $250 million on the value of signature bonuses when awarding a new PSC.
Aryanto Nugroho, advocacy and program development manager, PWYP Indonesia, said:
“While uncapped bonuses represent a potentially significant upside for Indonesian citizens, they also mean that transparency and scrutiny of these large sums is even more important.”
The report details how these major changes in the sector increase the need for oversight over revenues, and how media, civil society organizations and others can best use this new data to hold the government to account.
For example, actors can use payment data to verify the size and recipient(s) of oil and gas project signature bonuses and estimate and verify the revenue that local and regional government entities should receive from a project. The report also details how to estimate and verify the government’s share of production from a project under the new gross split PSC model.
The report is available on NRGI’s website: www.resourcegovernance.org/analysis-tools/publications/indonesia-oil-gas-revenues-payments
Notes:
While ConocoPhillips has not published its 2017 or 2018 payments to the Indonesian government, NRGI is in an ongoing dialogue with the company to address the issue.
NRGI maintains a database of payments to governments reports submitted by companies under European and Canadian legislation, including all payment data cited in the new report. The information is converted into open data and is available at www.resourceprojects.org.
For more information, contact:
Fikri Muhammadi
Asia-Pacific Associate
Natural Resource Governance Institute (NRGI)
Jakarta
[email protected]
+62 8118708207
Aryanto Nugroho
Advocacy and Program Development Manager
Publish What You Pay Indonesia
Jakarta
[email protected]
+62 021 29069727
Lee Bailey
Communications Director
Natural Resource Governance Institute (NRGI)
London
[email protected]
+44 (0)7823 442 954
- Report reveals transparency challenges regarding bonuses paid by international companies
- ExxonMobil refuses to disclose recent payments, despite supporting transparency initiative
- Citizen groups in Indonesia can use information to hold government to account
JAKARTA, 18 December 2019— A new report reveals that transparency gaps and poor corporate practice surround payments by international oil and gas companies to the government of Indonesia.
The Natural Resource Governance Institute (NRGI) and Publish What You Pay (PWYP) Indonesia report found that some international oil companies are paying bonuses to the Directorate General of Oil and Gas within the Ministry of Energy and Natural Resources (ESDM), rather than to the state treasury, as is required by ESDM’s own regulation, No. 30/2017.
The purpose of disclosing payments made by oil companies to different government entities is to allow citizens to see where the money goes. If money that is intended for the state treasury is paid to a different ministry, this makes tracking the payments more difficult, undermining international standards on transparency.
Joseph Williams, advocacy manager for NRGI, said:
“While we understand that the government allows this practice, it creates a worrying transparency gap. The Directorate General of Oil and Gas should clarify why it has directed the Italian oil company Eni to deposit the signature bonus payment of $1.5 million for the East Ganal PSC into a Directorate General of Oil and Gas bank account, rather than to the state treasury. The government should also clarify how this revenue is managed and transferred to the state treasury.”
The authors of the report, Indonesia’s Oil and Gas Revenues: Using Payments to Governments Data for Accountability, studied payment information released under laws in the European Union, Canada and Norway, regarding “payments-to-governments” disclosures, designed to improve transparency in resource-rich countries.
Since 2014, 17 international oil and gas companies have disclosed over $15 billion in payments to Indonesian government entities. The report details how in 2018 alone ten oil and gas companies disclosed payments totaling $5.4 billion to Indonesian government entities.
NRGI and PWYP Indonesia also reveal how U.S.-listed company ExxonMobil has refused to publish 2017 and 2018 payment data for Indonesia. ConocoPhillips has also not published its payments so the true value of oil revenues in 2018 is likely to be much more. The public only currently have access to their 2016 payments.
Emanuel Bria, Indonesia country manager with NRGI, said:
“It is regrettable that Exxon Mobil and ConocoPhilips, who claim to support global transparency standards, are denying the citizens of Indonesia this information. They have a right to know how much has been paid in recent years and they should be able to track it.”
While no law obligates these two companies to disclose, they both officially support the Extractive Industries Transparency Initiative (EITI). ExxonMobil has occupied a seat on the EITI board as either a primary or alternate member since the initiative began. The EITI makes clear that companies should disclose all payments systematically to countries that implement the initiative, including Indonesia.
Joseph Williams, advocacy manager for NRGI, said:
“Companies want to have the public relations value of being inside the global transparency movement, but when it comes to action, some U.S. companies like ExxonMobil and ConocoPhillips are failing. Companies which support and sit on the EITI board should be leaders, not laggards, in transparency. They should disclose their recent payments.”
On 18 December, the United States Securities and Exchange Commission (SEC) is set to propose a new rule to compel U.S. oil, gas and mining companies to disclose their recent payments to all governments. The previous rule, which was struck down by Congress in early 2017, would have implemented the landmark section 1504 of the 2010 Dodd Frank Act.
“If companies like ExxonMobil and ConocoPhillips are not willing to disclose recent payments under their purported support for EITI, a strong SEC rule which forces them to do so is the only solution,” said Williams. “The SEC’s new rule should build upon and align with similar laws in Europe and Canada – this means requiring disclosure of timely payment information detailed for each company and each of their projects.”
The report and the U.S. SEC rulemaking come at a time when Indonesia’s oil and gas sector is undergoing a major transformation. In 2017, the Indonesian government announced it was moving away from the cost recovery production sharing contract (PSC) model that had been in place for over 50 years to a gross split PSC model, meaning the government’s share of production from a project will, in future agreements, derive from the project’s gross revenue, rather than profit generated. In 2018, the government also removed the upper limit of $250 million on the value of signature bonuses when awarding a new PSC.
Aryanto Nugroho, advocacy and program development manager, PWYP Indonesia, said:
“While uncapped bonuses represent a potentially significant upside for Indonesian citizens, they also mean that transparency and scrutiny of these large sums is even more important.”
The report details how these major changes in the sector increase the need for oversight over revenues, and how media, civil society organizations and others can best use this new data to hold the government to account.
For example, actors can use payment data to verify the size and recipient(s) of oil and gas project signature bonuses and estimate and verify the revenue that local and regional government entities should receive from a project. The report also details how to estimate and verify the government’s share of production from a project under the new gross split PSC model.
The report is available on NRGI’s website: www.resourcegovernance.org/analysis-tools/publications/indonesia-oil-gas-revenues-payments
Notes:
While ConocoPhillips has not published its 2017 or 2018 payments to the Indonesian government, NRGI is in an ongoing dialogue with the company to address the issue.
NRGI maintains a database of payments to governments reports submitted by companies under European and Canadian legislation, including all payment data cited in the new report. The information is converted into open data and is available at www.resourceprojects.org.
For more information, contact:
Fikri Muhammadi
Asia-Pacific Associate
Natural Resource Governance Institute (NRGI)
Jakarta
[email protected]
+62 8118708207
Aryanto Nugroho
Advocacy and Program Development Manager
Publish What You Pay Indonesia
Jakarta
[email protected]
+62 021 29069727
Lee Bailey
Communications Director
Natural Resource Governance Institute (NRGI)
London
[email protected]
+44 (0)7823 442 954