Basis for Preparation – Report on Payments to Government for the year 2019This Report provides a consolidated overview of the payments to governments made by Royal Dutch Shell plc and its subsidiary undertakings (hereinafter referred to as “Shell”) for the year 2019 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.LegislationThis 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 entitiesThis Report includes payments to governments made by Royal Dutch Shell plc and its subsidiary undertakings (Shell). Payments made by entities where Shell has joint control are excluded from this Report.ActivitiesPayments 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 are disclosed in full.GovernmentGovernment includes any national, regional or local authority of a country, and includes a department, agency or entity that is a subsidiary of a government, including a national oil company. ProjectPayments 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.PaymentThe information is reported under the following payment types.Production entitlementsThese 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 arrangements, 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.TaxesThese 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.RoyaltiesThese are payments for the rights to extract oil and gas resources, typically at a set percentage of revenue less any deductions that may be taken. DividendsThese 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, 2019, there were no reportable dividend payments to a government.BonusesThese 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 production has reached a milestone.License fees, rental fees, entry fees and other considerations for licenses and/or concessionsThese 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 improvementsThese 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.OTHEROperatorshipWhen 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 paymentsPayments 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 LevelFor each payment type, total payments below £86,000 to a government are excluded from this Report.Exchange RatePayments 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
[A] Includes payment in kind of $1,169,083,686 for 29,562 KBOE valued at market price.[B] Includes payment in kind of $812,132,653 for 20,536 KBOE valued at market price.[C] Includes payment in kind of $1,981,216,339 for 50,098 KBOE valued at market price.
[A] Includes payment in kind of $13,348,514 for 433 KBOE valued at government selling price.[B] Includes payment in kind of $406,047 for 13 KBOE valued at government selling price.[C] Includes payment in kind of $13,348,514 for 433 KBOE valued at government selling price.[D] Includes payment in kind of $406,047 for 13 KBOE valued at government[A] Includes payment in kind of $208,342,808 for 4,668 KBOE valued at market price.[B] Includes payment in kind of $208,342,808 for 4,668 KBOE valued at market price.
[A] Includes payment in kind of $657,665,735 for 41,708 KBOE valued at fixed price and $907,395,259 for 13,349 KBOE valued at market price.[B] Includes payment in kind of $509,467,820 for 32,444 KBOE valued at fixed price and $795,982,066 for 11,513 KBOE valued at market price.[C] Includes payment in kind of $189,522,443 for 12,054 KBOE valued at fixed price and $424,090,514 for 6,114 KBOE valued at market price.[D] Includes payment in kind of $1,247,146,464 for 17,637 KBOE valued at market price.[E] Includes payment in kind of $356,415,948 for 5,040 KBOE valued at market price.[F] Includes payment in kind of $1,167,133,555 for 74,152 KBOE valued at fixed price and $456,230,861 for 7,226 KBOE valued at market price.[G] Includes payment in kind of $189,522,443 for 12,054 KBOE valued at fixed price and $67,674,566 for 1,073 KBOE valued at market price.
[A] Includes payment in kind of $3,983,413,143 for 113,613 KBOE valued at market price.[B] Includes payment in kind of $115,377,249 for 1,707 KBOE valued at market price.[C] Includes payment in kind of $670,479,249 for 10,219 KBOE valued at market price.[D] Includes payment in kind of $283,760,464 for 4,280 KBOE valued at market price.[E] Includes payment in kind of $717,045,638 for 10,845 KBOE valued at market price.[F] Includes payment in kind of $386,718,785 for 5,939 KBOE valued at market price.[G] Includes payment in kind of $115,377,249 for 1,707 KBOE valued at market price.[H] Includes payment in kind of $1,283,663,582 for 19,680 KBOE valued at market price.[I] Includes payment in kind of $1,982,703,922 for 83,089 KBOE valued at market price.
[A] Includes payment in kind of $85,711 for 2 KBOE valued at government selling price.[B] Includes payment in kind of $85,711 for 2 KBOE valued at government selling price.
[A] Includes payments in kind of $19,719,197 for 330 KBOE valued at Market price.
[B] Includes payments in kind of $19,719,197 for 330 KBOE valued at Market price.CAUTIONARY NOTEThe 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.
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