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ROYAL DUTCH SHELL PLC - Report on Payments to Governments for the year 2016

PR Newswire

London, June 13

Report on Payments to Governments for the year 2016

Introduction

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 2016 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 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 Government for the year 2016

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 liabilities with 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 single contract, 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 entitlement is 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, 2016, 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.

Licence fees, rental fees, entry fees and other considerations for licences 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 equivalent cash 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 Government 2016[1]

[A] Includes payment in kind of $ 770,153,020 for 28,356 KBOE valued at market price.

[B] Includes payment in kind of $ 1,288,940,990 for 44,937 KBOE valued at market price.

[C] Includes payment in kind of $ 2,059,094,010 for 73,293 KBOE valued at market price

[A] Includes payment in kind of $ 4,065,556 for 157 KBOE valued at government selling price and $ 2,005 for 62 BOE valued at market price.

[B] Includes payment in kind of $ 306,130 for 11 KBOE valued at government selling price.

[A] Includes payment in kind of $ 268,169,387 for 13,701 KBOE valued at market price.

[B] Includes payment in kind of $ 267,717,896 for 13,682 KBOE valued at market price.

[C] Includes payment in kind of $ 451,491 for 19 KBOE valued at market price.

[A] Includes payment in kind of $ 1,585,085,527 for 46,140 KBOE valued at market price.

[B] Includes payment in kind of $ 28,958,825 for 1,074 KBOE valued at market price.

[C] Includes payment in kind of $ 18,609,325 for 773 KBOE valued at market price.

[D] Includes payment in kind of $ 10,349,500 for 301 KBOE valued at market price.

[A] Includes payment in kind of $ 730,443,767 for 55,755 KBOE valued at fixed price and $ 409,727,053 for 9,353 KBOE valued at market price.

[B] Includes payment in kind of $ 194,872,121 for 14,935 KBOE valued at fixed price and $ 267,664,733 for 5,766 KBOE valued at market price.

[C] Includes payment in kind of $ 487,105,291 for 37,092 KBOE valued at fixed price and $ 526,253,139 for 11,305 KBOE valued at market price.

[A] Includes payment in kind of $ 620,367,389 for 12,923 KBOE valued at market price.

[B] Includes payment in kind of $ 217,942,482 for 4,552 KBOE valued at market price.

[C] Includes payment in kind of $ 1,217,549,058 for 92,847 KBOE valued at fixed price and $ 315,612,803 for 7,735 KBOE valued at market price.

[D] Includes payment in kind of $ 194,872,121 for 14,935 KBOE valued at fixed price and $ 49,722,251 for 1,214 KBOE valued at market price.

[A] Includes payment in kind of $ 21,797,920 for 628 KBOE valued at government selling price.

[A] Includes payment in kind of $ 148,337,898 for 3,549 KBOE valued at market price.

[B] Includes payment in kind of $ 92,842,854 for 2,243 KBOE valued at market price.

[C] Includes payment in kind of $ 55,205,834 for 1,298 KBOE valued at market price.

[D] Includes payment in kind of $ 289,209 for 7 KBOE valued at market price.

[A] Includes payment in kind of $ 2,172,116,090 for 92,844 KBOE valued at market price.

[B] Includes payment in kind of $ 32,501,960 for 735 KBOE valued at market price.

[C] Includes payment in kind of $ 366,991,070 for 7,873 KBOE valued at market price.

[A] Includes payment in kind of $ 270,658,660 for 6,267 KBOE valued at market price.

[B] Includes payment in kind of $ 111,157,140 for 2,977 KBOE valued at market price.

[C] Includes payment in kind of $ 1,055,193,770 for 67,300 KBOE valued at market price.

[D] Includes payment in kind of $ 735,106,520 for 16,299 KBOE valued at market price.

[E] Includes payment in kind of $ 347,306,670 for 7,512 KBOE valued at market price.

[F] Includes payment in kind of $ 32,501,960 for 735 KBOE valued at market price.

[G] Includes payment in kind of $ 19,684,400 for 360 KBOE valued at market price.

[A] Includes payment in kind of $ 5,001,526 for 451 KBOE valued at market price.

[B] Includes payment in kind of $ 3,203,111 for 407 KBOE valued at market price.

[C] Includes payment in kind of $ 1,798,415 for 44 KBOE valued at market price.

[A] Includes refund in kind of $ 44,309 for 54 BOE valued at government selling price.

[A] Includes refund in kind of $ 44,309 for 54 BOE valued at government selling price.