1. Presentation delivered before EITI Compliance & 2 nd 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: mou-jiya@online.no Phone: (+47) 56595699mou-jiya@online.no IEITI Future Reports: Expectations and Challenges

2. 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.

3. 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.

4. 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.

5. 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.

6.  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.  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. The Proposals

7. 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.

8. Revised EITI Standard along the Value Chain: Ensuring that natural resource wealth transforms into citizen wellbeing Deciding to Extract Getting a Good Deal Ensuring Revenue Transparency Managing Volatile Resources Investing for Sustainable Development EITI Report License & Contracts s Increase production Payments/ Revenues Revenue Sharing Investment

9. Transparency Value Cycle of the Iraqi LTSCs IOCs Investment Oil Production/ Revenues Payment to IOCs

10. Cash-flow/ Payment by IOCs Process-fee Attendance fee Purchase of data package Participation fee Bid rounds related payments Alahdab $3 million; BR1?: $400 million BR2: $850 million; BR3: Null; BR4: $80 million Total: $1333 million Signature Bonus $100bn to develop upstream oil and gas fields; $40bn to develop the gas industry; $30bn to increase refinery capacity; $30bn to expand export facilities. Investment: AWP/AB/I nvoices CIT (IOCs) CIT (Sub-Contractors- D5 of MSD/SCC) RF for the SP Production related payments Alahdab $200,000 BR1 and BR2 $5 million each BR3 and BR4 $1 million each Annual allocation for TTSF is $62.2 million TTSF OTPs APs

11. Petroleum Flowcharts of Resource and…. IEA, WEO 2012. In kbd as on June 2012

12. Revenue Flow & Allocation PER $ PDR ID&$ MoF IOBs: LC-IB DFI UNCC:5% CBI FR SO Annual Budget IOCs $34b paid (25K) &18 to be paid to K GOIGOI

13. Payments to IOCs PC; SC; I; AOC. RF (b & boe). Categories of Payments- Caps on DRs CIT (IOCs) & [D5- 2011 by MSD] SP (Exp 4BR) 51.25:48.75 RF Formula Cash In-kind (Crude oil) Form of Payment

14. O il: Production, Domestic Consumption and Export

15. Gross & Net Remuneration Fee

16. * ”R” less than 2- 30%:70%. ”R” is 2 or more 15%:85% Testing!!

17. The Way Forward: IEITI Structural Model & Reporting Process Rec- oncil er SOMOSOMO I O Bs DFI Tax Authority MoO + KRG DM IOCs + SCs IEITI

18. 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”

19.  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. Third: Suggestions