RDSB.L Regulatory News (RDSB)

ROYAL DUTCH SHELL PLC - RDS Report on Payments to Governments 2018

PR Newswire

London, April 1

This Report provides a consolidated overview of the payments to governments made by Royal Dutch Shell plc and its subsidiary undertakings (hereinafter refer to as “Shell”) for the year 2018 as required under the UK’s Report on Payments to Governments Regulations 2014 (as amended in December 2015). These UK Regulations enact domestic rules in line with Directive 2013/34/EU (the EU Accounting Directive (2013)) and apply to large UK incorporated companies like Shell that are involved in the exploration, prospection, discovery, development and extraction of minerals, oil, natural gas deposits or other materials. This Report is also filed with the National Storage Mechanism (http://www.morningstar.co.uk/uk/nsm) intended to satisfy the requirements of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in the United Kingdom

This Report is available for download from www.shell.com/payments

Basis for Preparation - Report on Payments to Governments for the year 2018

Legislation

This Report is prepared in accordance with The Reports on Payments to Governments Regulations 2014 as enacted in the UK in December 2014 and as amended in December 2015.

Reporting entities

This Report includes payments to governments made by Royal Dutch Shell plc and its subsidiary undertakings (Shell). Payments made by entities over which Shell has joint control are excluded from this Report.

Activities

Payments made by Shell to governments arising from activities involving the exploration, prospection, discovery, development and extraction of minerals, oil and natural gas deposits or other materials (extractive activities) are disclosed in this Report. It excludes payments related to refining, natural gas liquefaction or gas-to-liquids activities. For a fully integrated project, which does not have an interim contractual cut off point where a value can be attached or ascribed separately to the extractive activities and to other processing activities, payments to governments will not be artificially split but disclosed in full.

Government

Government includes any national, regional or local authority of a country, and includes a department, agency or entity that is a subsidiary of a government, which includes a national oil company. 

Project

Payments are reported at project level except that payments that are not attributable to a specific project are reported at entity level. Project is defined as operational activities which are governed by a single contract, licence, lease, concession or similar legal agreement, and form the basis for payment liabilitieswith a government. If such agreements are substantially interconnected, those agreements are to be treated as a single project.

“Substantially interconnected” means forming a set of operationally and geographically integrated contracts, licences, leases or concessions or related agreements with substantially similar terms that are signed with a government giving rise to payment liabilities. Such agreements can be governed by a singlecontract, joint venture, production sharing agreement, or other overarching legal agreement. Indicators of integration include, but are not limited to, geographic proximity, the use of shared infrastructure and common operational management.

Payment

The information is reported under the following payment types.

Production entitlements

These are the host government’s share of production in the reporting period derived from projects operated by Shell. This includes the government’s share as a sovereign entity or through its participation as an equity or interest holder in projects within its sovereign jurisdiction (home country). Production entitlements arising from activities or interests outside of its home country are excluded.

In certain contractual arrangement, typically a production sharing contract, a government through its participation interest may contribute funding of capital and operating expenditure to projects, from which it derives production entitlement to cover such funding (cost recovery). Such cost recovery production entitlementis included.

In situations where a government settles Shell’s income tax obligation on behalf of Shell by utilising its share of production entitlements (typically under a tax-paid concession), such amount will be deducted from the reported production entitlement.

Taxes

These are taxes paid by Shell on its income, profits or production (which include resource severance tax, and petroleum resource rent tax), including those settled by a government on behalf of Shell under a tax-paid concession. Payments are reported net of refunds. Consumption taxes, personal income taxes, sales taxes, property and environmental taxes are excluded.

Royalties

These are payments for the rights to extract oil and gas resources, typically at set percentage of revenue less any deductions that may be taken.

Dividends

These are dividend payments other than dividends paid to a government as an ordinary shareholder of an entity unless paid in lieu of production entitlements or royalties. For the year ended December 31, 2018, there were no reportable dividend payments to a government.

Bonuses

These are payments for Bonuses. These are usually paid upon signing an agreement or a contract, or when a commercial discovery is declared, or production has commenced or reached a milestone.

License fees, rental fees, entry fees and other considerations for licenses and/or concessions

These are fees and other sums paid as consideration for acquiring a licence for gaining access to an area where extractive activities are performed. Administrative government fees that are not specifically related to the extractive sector, or to access to extractive resources, are excluded. Also excluded are payments made in return for services provided by a government.

Infrastructure improvements

These are payments which relate to the construction of infrastructure (road, bridge or rail) not substantially dedicated for the use of extractive activities. Payments which are of a social investment in nature, for example building of a school or hospital, are excluded.

OTHER

Operatorship

When Shell makes a payment directly to a government arising from a project, regardless of whether Shell is the operator, the full amount paid is disclosed even where Shell as the operator is proportionally reimbursed by its non-operating venture partners through a partner billing process (cash-call). 

When a national oil company is the operator of a project to whom Shell makes a reportable payment, which is distinguishable in the cash-call, it is included in this Report.

Cash and in-kind payments

Payments are reported on cash basis. In-kind payments are converted to an equivalent cash value based on the most appropriate and relevant valuation method for each payment, which can be at cost or market value or such value as stated in the contract. In-kind payments are reported in both volumes and the equivalentcash value.

Materiality Level

For each payment type, total payments below £86,000 to a government are excluded from this Report.

Exchange Rate

Payments made in currencies other than US Dollars are translated for this Report based on the foreign exchange rate at the relevant quarterly average rate.

Report on Payments to Governments[1]

[A] Includes payment in kind of $1,964,580,025 for 39,866 KBOE valued at market price.

[B] Includes payment in kind of $1,201,194,710 for 25,410 KBOE valued at market price.

[C] Includes payment in kind of $3,165,774,735 for 65,276 KBOE valued at market price.

[A] Includes payment in kind of $1,256,628 for 41 KBOE valued at government selling price.

[B] Includes payment in kind of $1,256,628 for 41 KBOE valued at government selling price.

[A] Includes payment in kind of $257,121,118 for 5,423 KBOE valued at market price.

[B] Includes payment in kind of $257,121,118 for 5,423 KBOE valued at market price.

[A] Includes payment in kind of $2,214,541,672 for 34,127 KBOE valued at market price.

[B] Includes payment in kind of $2,214,541,672 for 34,127 KBOE valued at market price.

[A] Includes payment in kind of $738,807,066 for 43,624 KBOE valued at fixed price and $1,221,473,648 for 16,509 KBOE valued at market price.

[B] Includes payment in kind of $558,127,655 for 33,673 KBOE valued at fixed price and $1,007,469,698 for 13,379 KBOE valued at market price.

[C] Includes payment in kind of $216,851,316 for 13,089 KBOE valued at fixed price and $548,371,180 for 7,284 KBOE valued at market price. 

[D] Includes payment in kind of $1,775,615,976 for 23,253 KBOE valued at market price.

[E] Includes payment in kind of $478,052,374 for 6,258 KBOE valued at market price.

[F] Includes payment in kind of $1,296,934,721 for 77,297 KBOE valued at fixed price and $453,327,371 for 6,635 KBOE valued at market price.

[G] Includes payment in kind of $216,851,316 for 13,089 KBOE valued at fixed price and $70,318,806 for 1,026KBOE valued at market price.

[A] Includes payment in kind of $7,513,183 for 129 KBOE valued at government selling price.

[B] Includes payment in kind of $7,513,183 for 129 KBOE valued at government selling price.

[A] Includes payment in kind of $3,776,418,858 for 104,014 KBOE valued at market price.

[B] Includes payment in kind of $41,742,440 for 581 KBOE valued at market price.

[C] Includes payment in kind of $710,880,490 for 9,966 KBOE valued at market price.

[D] Includes payment in kind of $294,789,470 for 4,104KBOE valued at market price.

[E] Includes payment in kind of $759,199,810 for 10,419 KBOE valued at market price.

[F] Includes payment in kind of $416,091,020 for 5,862 KBOE valued at market price.

[G] Includes payment in kind of $41,742,440 for 581 KBOE valued at market price.

[H] Includes payment in kind of $1,809,700,722 for 76,662 KBOE valued at market price.

[I] Includes payment in kind of $368,559,074 for 5,260 KBOE valued at market price.

[J] Includes payment in kind of $838,959,252 for 11,673 KBOE valued at market price.

[A] Includes payment in kind of $539,343 for 8 KBOE valued at government selling price.

[B] Includes payment in kind of $539,343 for 8 KBOE valued at government selling price.

[A] Includes payments in kind of $19,546,098 for 287 KBOE valued at Market price.

[B] Includes payments in kind of $19,546,098 for 287 KBOE valued at Market price.

CAUTIONARY NOTE

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this Report “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. “Subsidiaries “, “Shell subsidiaries”, and “Shell companies” as used in this Report refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

1 This Report is not corrected for rounding.