Bringing transparency to the “first trade”

Bringing transparency to the “first trade”

Governments of several resource-rich countries derive their largest revenue from their share of oil, gas, minerals and metals production received “in-kind” rather than as cash payments.

These “in-kind” revenues are often managed by state-owned enterprises (SOEs) that, in many cases, act simultaneously as commercial operators, holders of government equity stakes, regulators and providers of social goods like subsidised oil products.

Amidst growing calls for greater transparency and accountability in oil trading between SOEs and commodity trading companies, the EITI has emerged as a practical, flexible and cost effective response.

While the EITI does not comprehensively address commodity trading, SOEs, through EITI Reports, bring more openness to the “first trade”, the original transaction between a state- owned oil company and an oil trader.

In addition to SOEs reporting in Albania, Ghana, Indonesia, Iraq, Nigeria, Norway and the Republic of the Congo, major trading companies, including BP, Shell, Trafigura and Vitol recently agreed to establish a working group to consider ways to improve transparency in commodity trading.

EITI Reports in Iraq not only reconcile revenues between the SOE and its buyers, but between the Ministry of Finance and the distribution companies of oil products on the domestic market.

We believe we can make an important contribution to transparency as a whole by working with other companies and the EITI itself to develop a workable standard for trading companies’ disclosures within the existing, legitimate and multi- stakeholder structures.

Trafigura Responsibility Report 2015, p 17