In his article, Anton Oussov, Head of the KPMG Oil & Gas practice in Russia and the CIS, discusses how amendments to the Directive "On Transparency" that were introduced by EU oblige companies to implement necessary changes in accounting and reporting.
Currently, as part of transnational legislation, oil & gas companies are obliged to provide information on payments they make. In particular, the EU introduced an amendment to the Directive "On Transparency", which obliges companies (including Russian ones) with listings on European stock exchanges to disclose information on payments in an annual report in a free form to governments on the state territory of which the oil production is carried out.
Anton explains that such disclosures are to be performed both in the aggregated mode for each country and government and specifically for each oil & gas project; moreover, in this case the term "government" relates not only to different levels of national, regional, and local authorities but also to the organisations under the state control. He cites an example of a similar initiative issued by the SEC in the US, which obliged companies to disclosure payments, but resulted in companies declining to provide confidential information and these standards being challenged in court.
As for Russian oil & gas companies, Anton points out that above all it is essential to assess the risks related to the disclosure of the total amount of payments, as well as difficulties in obtaining and consolidating such information. All these works will undoubtedly require resources, time and professionals.
"In general, the phenomenon of global transparency requirements reinforcement for oil & gas companies is a positive trend; however, it does cause an additional significant administrative and financial burden and only a thoughtful approach and advanced preparation based on international experience and practice can smooth out the burdensome effect of the new legislative standards," Anton summed up. "After all, in today's economic conditions each dollar counts, and in oil & gas companies even a cent cannot be spared."
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