UK EITI Compliance subgroup meeting note, 10th April 2024

Mark Burnett                                   Mike Earp                      Martyn Gordon 

Leo Kellaway                                    Hedi Zaghouani            Ben Hemi Rhouma

Papa Alioune Badara Paye (EITI)      Nassim Bennani (EITI)    Gisela Granado (EITI)                     

Ahmed Zouari (EITI)                       Mike Nash (Chair)

Requirement 4.10:

• a) Implementing countries are required to disclose government policies and practices for monitoring oil, gas and mining project costs and managing revenue loss risks. This must include the disclosure of relevant laws, regulations and policies, as well as actions undertaken to monitor costs.
• b) Implementing countries are expected to disclose final cost and tax audit reports, or summaries of those reports, including costs deemed as non-recoverable and costs deemed non-deductible and any additional revenues to be collected as a result.
• c) Companies and implementing countries are encouraged to disclose declared costs disaggregated by project, and by costs related to operating and capital expenditures. Operating expenditures declared in the reporting year may include amortisation or depreciation of costs incurred in prior years. Companies and implementing countries are encouraged to disclose costs incurred since the commencement of the project.

EITI International Secretariat presentation/UK EITI Compliance Subgroup discussions

• This requirement is to increase public understanding about exploration and production costs and about government policies and practices to monitor companies’ costs.
• Implementing countries are required to disclose government policies and practices for monitoring oil, gas and mining project costs and managing revenue loss risks.
• This must include disclosure of relevant laws, regulations and policies as well as actions undertaken to monitor costs.
• Expected disclosures include final cost and tax audit reports or summaries, including non-recoverable and non-deductible costs and any additional revenues to be collected.
• Companies and implementing countries are encouraged to disclose declared costs disaggregated by project.
• Other countries have used their EITI reports to disclose project costs.
• The EITI International Secretariat are drafting further guidance for implementing countries that should be available shortly.
• Concerns were raised that this requirement is a mismatch with the UK fiscal regime. The only relevant tax for oil and gas is the Petroleum Revenue Tax (PRT) and it won’t work with mining and quarrying as Corporation Tax (CT) is a company-based tax.
• There were also concerns raised that this requirement just focuses on costs rather than income.
• Projects in the UK are mainly joint ventures, so companies are taxed and not projects. It would be a huge task to get cost data at project level as the UK would need to go back to all the joint venture participant companies.
• EITI International highlighted that the requirement looks to differentiate between production and exploration costs. There is also a need for transparency on these project costs and it is important that implementing countries gain an understanding of what these costs are and it provides companies with the opportunity of being transparent about these costs.
• The UK does not have specific sector level tax data and it is unlikely that companies will consent to this data being disclosed based on commercial sensitivity reasons.
• Any further questions or comments were welcomed by the EITI International Secretariat. (Action: Compliance subgroup to send comments or questions to UK Secretariat who will forward them to the EITI International Secretariat).