THE HAGUE, Netherlands, April 2, 2019 /PRNewswire/ -- 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 2018 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
BASIS FOR PREPARATION - REPORT ON PAYMENTS TO GOVERNMENTS FOR THE YEAR 2018
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, 2018, 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.
License fees, rental fees, entry fees and other considerations for licenses 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.
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SOURCE Royal Dutch Shell plc