Presentation delivered before EITI Compliance & 2 nd IEITI Report Conference Al- Rasheed Hotel & Oil Cultur

1. 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: mou-jiya@online.noPhone: (+47) 56595699

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 paymentsto 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 Unionis debating a law similar to that of the US. • Many CSOcalled 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& USAIDto improve the effectiveness and transparency of MoO operations.

4. CSO: Enhancement of EITI national reports

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.

6. 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. • 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.

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 theValue Chain:Ensuring that natural resource wealth transforms into citizen wellbeing EITI Report License & Contractss Investment Increase production Revenue Sharing Payments/ Revenues

9. Transparency Value Cycle of the Iraqi LTSCs

10. Cash-flow/ Payment by IOCs OTPs APs

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

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

13. Payments to IOCs

14. Oil: Production, Domestic Consumption and Export

15. Gross & Net Remuneration Fee

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

17. The Way Forward: IEITI Structural Model & Reporting Process Tax Authority IEITI SOMO MoO + KRG IOCs + SCs DFI I OBs Rec-onciler DM

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. 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.

20. Thank You