THE HAGUE, The Netherlands,
June 13, 2017 /PRNewswire/ --
Introduction
This Report provides a consolidated overview of the payments to
governments made by Royal Dutch
Shell plc (NYSE:RDS.A) (NYSE: RDS.B) 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
http://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.
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.
LEI number of Royal Dutch Shell
plc: 21380068P1DRHMJ8KU70
Classification: Payments to governments
Full Report on Payments to Governments for the year 2016:
http://multivu.prnewswire.com/prnehost/PIV865389ShellGovernmentPaymentsReport.pdf
SOURCE Royal Dutch Shell plc