Transcript Attached is the PowerPoint presentation

IEITI Future Reports:
Expectations and Challenges
Presentation delivered before
EITI Compliance & 2nd IEITI Report Conference
Al-Rasheed Hotel & Oil Cultural Centre
Baghdad
Iraq
3-4 April 2013
By
Ahmed Mousa Jiyad,
Iraq/ Development Consultancy and Research,
Norway.
Email: [email protected] Phone: (+47) 56595699
Key Message
Future IEITI reports, compared with 2009 and 2010 reports, are
expected to be more thorough, comprehensive and challenging.
This is due to:
The Revised EITI Standard reflecting increasing importance of
and pressure for real, effective, comprehensive and
participatory transparency measures.
The complexity and diversity of the fiscal and financial
frameworks of the contracting modalities in the Iraqi extractive
industry and the lessons learned so far.
Thus it is imperative to have functional IEITI structure and
reporting process.
International efforts for
effective Transparency
 Section 1504 of the Dodd-Frank Wall Street Reform Act of 2010 already requires
country-by-country reporting of payments to governments for all companies
operating in the oil, gas, and mining sectors that report to the U.S. Securities and
Exchange Commission.
 Section 111 of the Cut Unjustified Tax Loopholes Act, introduced by U.S. Senators Carl
Levin (D-MI) and Sheldon Whitehouse (D-RI) in February 2013 would require all
multinational companies to disclose their employees, revenues, and tax payments on
a country-by-country basis.
 The European Union is debating a law similar to that of the US.
 Many CSO called EITI for tougher disclosure rules and standards. They urged the UK
Government to seek EITI Board agreement (in its Oslo February 2013 meeting) on five
suggestions.
 Iraq-EU Partnership and Cooperation Agreement –May 2012 emphasises
transparency and the needs to enhance it in Iraq.
 MoU (17 March 2013) between MoO & USAID to improve the effectiveness and
transparency of MoO operations.
CSO: Enhancement of EITI national
reports
All EITI countries to disclose all contracts that govern oil, gas and
mining exploration and production
All payment and receipt data to be broken down by project
Require “in-kind” revenue data to be reported in sufficient
detail to evaluate the governance of production sales
Disclosure of beneficial ownership in the register of licences and
licence-holders
Make the validation system for assessing whether countries
meet EITI requirements independent, rigorous and consistent to
ensure the credibility of the standard.
Revised EITI Standrad: to improve the EITI, by providing better
EITI Reports, making implementation simpler, and the EITI a
stronger platform for wider reforms.
• The EITI has established a Strategy Working Group (SWG) to identify
options and present recommendations to the EITI Board.
• Over 2012, the Board and the SWG received numerous proposals from
EITI stakeholders for shaping the future of the EITI.
• 33 proposal were considered and 10 background papers were
prepared for the purpose of revising the Standard.
The Proposals
 P1: Contextual information .
 P2: Revenues distribution.
 P3: Earmarking for programmes or
regions.
 P4: Mainstreaming EITI data and
governments system.
 P5 & 6: Comprehensive data.
 P7: Subnational transfers.
 P8: Data quality.
 P9: Disaggregation of data.
 P 10,11 & 12: State-owned
enterprises (SOEs).
 P 13: Sale of in-kind revenues.
 P 14: Social expenditures.
 P 15: Transit fees.
 P 16 & 17: Licenses & ownership.
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P 18: Contracts.
P 19: Civil society participation.
P 20: Work-plan.
P 21 & 22: Use of EITI data.
P 23: Annual activity reports.
P 24: Annual review of EITI Reports.
P 25: Expert panel.
P 26 & 27: What and how to
validate.
P 28: When to validate.
P 29: Who validates.
P 30: Financing validation.
P 31: Condensing to seven
requirements.
P 32: Adapted implementation.
P 33: Policy notes.
Adopting and Enforcing the Revised Standard
After considering 33 Proposals &
10 Working papers
The revised EITI Standard will be adopted in EITI Global
Conference in Sydney- “Beyond Transparency”, May 2013.
EITI Secretariat develops transition arrangements
for consideration by the Board in Sydney;
The revised Standard comes
into force on 1 January 2014.
Revised EITI Standard along the
Value Chain:
Ensuring that natural resource wealth
transforms into citizen wellbeing
Deciding
to
Extract
License
&
Contracts
s
Getting a
Good Deal
Ensuring
Revenue
Transparency
Managing
Volatile
Resources
Investing for
Sustainable
Development
EITI
Report
Investment
Increase
production
Payments/
Revenues
Revenue
Sharing
Transparency Value Cycle
of the Iraqi LTSCs
IOCs
Investment
Payment to
IOCs
Oil
Production/
Revenues
Cash-flow/ Payment by IOCs
OTPs
Bid rounds
related payments
•
•
•
•
Process-fee
Attendance fee
Purchase of data package
Participation fee
Signature Bonus
• Alahdab $3 million; BR1?: $400 million
• BR2: $850 million; BR3: Null; BR4: $80 million
• Total: $1333 million
Investment:
AWP/AB/Invoices
• $100bn to develop upstream oil and gas fields;
• $40bn to develop the gas industry;
• $30bn to increase refinery capacity;
• $30bn to expand export facilities.
Production related
payments
TTSF
• CIT (IOCs)
• CIT (Sub-Contractors- D5 of MSD/SCC)
• RF for the SP
•
•
•
•
Alahdab $200,000
BR1 and BR2 $5 million each
BR3 and BR4 $1 million each
Annual allocation for TTSF is $62.2 million
APs
Petroleum Flowcharts of
Resource and….
IEA, WEO 2012. In kbd as on June 2012
Revenue Flow & Allocation
$34b paid (25K)
&18 to be paid to K
PDR
ID&$
MoF
UNCC:5%
PER
$
IOBs:
LC-IB
DFI
G
O
I
CBI
FR
Annual Budget
SO
IOCs
Payments to IOCs
Categories of
PaymentsCaps on DRs
51.25:48.75
RF Formula
Form of
Payment
• PC; SC;
• I; AOC.
• RF (b & boe).
• CIT (IOCs) & [D5- 2011 by MSD]
• SP (Exp 4BR)
• Cash
• In-kind (Crude oil)
Oil: Production, Domestic Consumption and Export
10
9
8
Million BD
7
6
5
4
3
2
1
2012
2013
2014
2015
2016
2017
2018
Total
2019
2020
2021
DomCons
2022
2023
Export
2024
2025
2026
2027
2028
2029
Gross & Net Remuneration Fee
7
6
5
$
B
i
l
l
i
o
n
4
3
2
1
0
2012
2013
2014
2015
2016
2017
2018
GARF
2019
CIT
2020
2021
SP
2022
2023
IOCsNRF
2024
2025
2026
2027
2028
2029
Testing!!
* ”R” less than 2- 30%:70%. ”R” is 2 or more 15%:85%
The Way Forward:
IEITI Structural Model & Reporting Process
Tax Authority
IOCs
+
SCs
MoO
+
KRG
IEITI
S
O
M
O
DFI
DM
Reconcil
er
I
O
Bs
First: The Mission and Challenges
Future IEITI Reports to be more detailed, comprehensive and challenging due to:
1- The Revised EITI standard and requirements;
2- Increasing calls for real and effective transparency measures;
3- The Governing modalities and conditions in the Iraqi extractive industry.
 Three distinct contracting frameworks: [LTSC ; national efforts] & PSCs (KRG).
 Many major IOCs and many more Service Companies and Sub-Contractors
 IOCs with multi-projects involvement
 Payment: cash and in-kind (LTSC; KRG!!!!)
 Many IOBs (through SOMO) and KRG (?)
 Different legal obligations: IOCs vs. IOBs
 Increasing domestic consumption of petroleum products/refining sector ( domestic
revenues in ID, subsidies, accounting prices, etc)
Second: Corresponding Requirements
National Capacity Development and effective involvement in the IEITI reporting process:
IEITI Secretariat:
Institutional (structure, setup, etc.):
Systemic (rules, procedures, operational modalities, modus-operandi);
Human resources (professional and specialised staff: local content!)
Awareness & Outreach: Participation & public dialogue ( visibility, accessibility,
connectivity, credibility and continuity)
MSG (Gov+IOCs+CSO)
“Reconciler-Auditor” & “Validator”
Third: Suggestions
 Proper understanding of the LTSC contracts especially the provision pertaining to fiscal and
financial implications. The same applies for PSCs of KRG.
 Flows of Petroleum “ Oil & Gas” Resources and Revenues (Domestic & Export) require:
comprehensive “material balances” and “Integrated National Metering System”.
 Integrity of SOMO’s operations. Provide monthly data on quantity, quality (crude valuation),
price, date of shipment, market destination, and any other vital information for each IOB
 Meaningful coverage of “Other” Extractive activities of MIM.
 IEITI should have well structured “Website/ Database” covering all information required for
its annual reports, and accessible to the interested public.
 Consider IEITI annual report as “on-going process” that begins on day one after releasing
the previous Report and with full involvement of IEITI staff;
 IEITI annual report “Timeline” should be carefully planned to allow enough space for proper
review, debate and revision;
 Elaborated Terms of Reference for IEITI report: methodology, terminology, contents,
structure, coherence, “materiality threshold”, references, team composition etc.;
 Independent Expert Review of the “Reconciler” report before adoption by IEITI –MSG.
 Encourage the “Academia and Research entities” involvement in IEITI activities.
 IEITI report is a “Sovereign Obligation” to be prepared in accordance with EITI Standard,
and it is subject to international scrutiny!. De-politicise IEITI Reports
 Effective use of international cooperation opportunities (EU, USAID, …) for IEITI capacity
development.