EITI briefing held in Oslo 5 Oct 2009

Improving extractive industries governance:Updates from Oil for Developmentand the EITI International Secretariat
5 October 2009

Oil for Development’s work on a framework for assessing governance in the petroleum sectorPetter Nore, Director of Oil for Development
5 October 2009

Oil for Development’s work on a check-list for petroleum-related governance
By Petter Nore, Director

Side/Page
5
06.10.2009
Thedebateongoodgovernance
OfD is working towards improving petroleum sector governance in our cooperating countries
Civil society and media often have a narrow definition which mainly emphasizes transparency
OfD’s assistance reflects a broader perception of petroleum-related governance
Transparency is important, but so are other dimensions such as “enablement to carry out the role assigned”

Side/Page
6
06.10.2009
OfD’sfiveprinciples of goodgovernance:
Clarity of goals, roles and responsibilities
Sustainable development and risk management as overarching goals for the sector
Enablement to carry out the role assigned
Accountability of decision-making and performance
Transparency and accuracy of information

Side/Page
7
06.10.2009

Side/Page
8
06.10.2009
Howthegovernancecheck-listwill be used
To assess petroleum related governance needs in countries applying for broad based petroleum assistance
As a tool for providing input for revisions as part of larger program reviews
As a pool of indicators that can be further developed and used for assessing results

Side/Page
9
06.10.2009
Youcandownloadthechecklist from www.norad.no

EITI – on its way to become a global standard?”
Jonas Moberg, Head of the EITI Secretariat
5 October 2009

December 1999

Petrol is the best
vector of corruption

Africa's Oil DreamsTHURSDAY, MAY. 31, 2007 By ALEX PERRYPetrol sellers in Lagos, Nigeria.
www.eitransparency.org

Governance failure
Pressure/attention
Investigative reporting
Code/standard
Implementation
Facilitation
Quality assurance
Business case for action
Negotiation
www.eiti.org

There is hope
Oct 9th 2008
From The Economist print edition
Another promising new mechanism is the Extractive Industries Transparency Initiative, a voluntary code that a score of African countries have adopted, with governments and foreign firms accounting openly for their dealings..."

TRANSPARENCY

ACCOUNTABILITY

Companies Disclose Payments
Government Discloses Receipt of Payments
Government Spending
Independent Verification of Tax & Royalty Payments
Award of licenses
&
contracts
Regulation
&
monitoring of operations
Revenue
Distribution
& Management
Implementation of Sustainable Development olicies
How the EITI works
Oversight by aMulti-Stakeholder Group
The EITI provides a Forum for dialogue and a Platform for broader reforms

EITI in 2009
30 Implementing Countries across Africa, Asia, Latin America, Middle East and Central Asia
42 major international oil, gas, and mining companies
80 institutional investors with collective assets of over $16 trillion
100s of civil society groups and networks – e.g. Publish What You Pay, Open Society/Revenue Watch Institute, Transparency International
Supporting Countries, including Australia, Canada, France, Germany, the Netherlands, Norway, the UK and the US

Implementing Countries

EITI Other Publications
...and video.

Ellen Johnson SirleafPresident of Liberia
“The Liberia EITI is one of the institutional pillars of integrity anchoring and sustaining the reform agenda of Liberia.”
“By promoting better management and use of public resources and discouraging corruption, LEITI … is critical to poverty reduction and social development in Liberia.”
July 2009, when signing the new LEITI law

The EITI has been politically endorsed by many Governments and in many forums

The AU, EU, UN, G8, G20,..

Lessons/challenges
It can be a platform for long-term reform
From transparency to accountability
To fight corruption – maybe
To build trust and confidence - definetely
It takes time, although it doesnt have to

Lessons/challenges
The EITI is a start, only
Deepening, validation and beyond
Widening, Jakarta and beyond
www.eiti.org

More at:
...and video.
www.eiti.org
Jonas Moberg, Head of the EITI Secretariat
Jmoberg@eiti.org

Update about Norwegian EITI implementation
Gro Anundskås, Assistant Director General, Norwegian Ministry of Petroleum and Energy
5 October 2009

Update about Norwegian EITI implementation5.october 2009
Gro Anundskaas,
Assistant Director General, Norwegian Ministry of Petroleum and Energy

EITI - Norwegian implementation
First meeting with an interim MSG 22.10.08
Became a Candidate Country 15. February 2009
Regulation implemented 26.06.09
MSG appointed 26.06.09
Administrator/reconcillator – bidding process. Contract signed with DeLoitte 17.juli 2009. Draft report received today.
Draft report will be sent to MSG soon and discussed end October
Next step; bidding process to choose Validator

EITI – Norwegian implementation
Interim MSG;
OLF, The Norwegian Oil Industry Association
The Norwegian Confederation of Trade Unions (LO)
Ministry of Petroleum and Energy (lead)
Ministry of Finance
Independent lawyer
Independent economist
Center for corporate responsibility(Norwegian School of Management)
Det Norske Veritas (DNV) (Corporate Responsibility Division)
Transparency International (TI)
Publish What You Pay (PWYP)
Willy Olsen

MSG
Industry:
Oluf Bjørndal, OLF, The Norwegian Oil Industry Association
Frode Bøhm (deputy))
Håkon Nordang, StatoilHydro ASA,
Siv Helen Rygh Torstensen, StatoilHydro ASA, (deputy)
Aksel Luhr, ENI Norge AS
Karl B. Myhre, Norske Shell (deputy)
Jon Jerre, Det Norske Veritas
Goverment
Lars Erik Aamot, Ministry of Petroleum and Energy (internationalcoordinator)
Gro Anundskaas (deputy)
Beate Bentzen, Ministryof Finance
Stig Sollund (deputy)
Willy Olsen,
Civil Society
Gro Skaren-Fystro, Transparency International
Mona Thowsen, Publish What you Pay
Per Bondevik, Kirkens Nødhjelp (deputy)
Ola Mestad, UiO,
Atle Midttun, BI, Senter for samfunnsansvar (deputy)
Amalie Tofte, Industri Energi
Liv Undheim, (deputy)
Fanny Voldnes, (LO)
Camilla Houeland (deputy)

EITI- Norwegian implementation
Focus on the petroleum sector
Disaggregated data/company level
Actual payments – (ref State Account tab 3.2);
- Ordinary Tax
- Special Tax
- Area Fee
- Environmental taxes (CO2 and NOX)
- Net cash flow SDFI

Corruption in the petroleum sector. Can the damage to development be reduced?
Farouk al-Kasim, President of Petroteam AS
5 October 2009

Petroteam a.s
REFLECTIONS ON GLOBAL EFFORTS TO ENSURE THAT OIL LEADS TO DEVELOPMENT
By
Farouk Al-Kasim

Petroteam a.s
ENERGY CHALLENES IN THE 21st CENTURY
Growth has been sustained by easy access to energy.
Negative growth means a troubled world.
Oil will continue to be important.
Before long, oil supplies will fall short of demand.
Development of alternative sources must be accelerated.
Environmental protection is a serious global challenge.
The remaining energy resources will have a higher cost.
In any case: Global Good Governance is a pre-requisite.
Access to energy is the No.1 geopolitical issue.
Will the oil business be strictly commercial? Or will it be more geopolitical?

Petroteam a.s
PETROLEUM AND THE DEVELOPING COUNTRIES
The gap between the “haves” and “have-nots” is widening.
Producing countries will be pressurized to accelerate exploration and development to meet rising demands.
For most developing countries petroleum is the LAST HOPE for eliminating poverty and securing a better future.
But development hinges upon the country’s ability to convert petroleum into lasting benefits to its citizens.
This means defeating corruption and the oil curse, i.e.
GOOD GOVERNANCE

Petroteam a.s
GOOD GOVERNANCE STANDS ON 3 LEGS
.
GOOD
GOVERNANCE
PUBLIC
MONITORING
LEGISLATION
INSTITUTIONS

Petroteam a.s
PRE-REQUISITES FOR GOOD GOVERNANCE IN THE PETROLEUM SECTOR: LEGISLATION
Aid programmes must fortify the pre-requisites for GOOD GOVERNANCE in the recipient countries. This may take time.
Efficient system of government.
Fair and reliable system of justice.
Consensus (at least broad agreement) on the fundamental aspects of a petroleum policy.
Adequate and timely legislation.
A Petroleum and Fiscal Laws.
Regulations, guidelines, instructions etc.
WHAT CAN AID PROGRAMMES
ACHIEVE IN THESE FIELDS??

Petroteam a.s
PRE-REQUISITES FOR GOOD GOVERNANCE IN THE PETROLEUM SECTOR: INSTITUTIONS
Clear contractual terms that are subordinate to the legislation. Model Contract(s).
Clearly documented processes for decision- making.
Government institutions with clearly defined delegation of powers and responsibilities.
Accountability throughout the government’s own administration.
Effective privateinstitutionswith social responsibility and full accountability.

Petroteam a.s
PRE-REQUISITES FOR GOOD GOVERNANCE IN THE PETROLEUM SECTOR:PUBLIC MONITORING
Effective public monitoring and supervision of petroleum activities.
Transparency.
Freedom of expression.
Active and responsible NGO organisations.
Active academia with research capabilities.
Active press and media.
Effective and timely flow of relevant data.

Petroteam a.s
THE NECESSARY BALANCE OF INTERESTS
COMPANY FOCUSGOVERNMENT FOCUS
HIGH EARLY PRODUCTION
HIGH RECOVERY
PROJECT
PROFITABILITY
REVENUE. COMPETENCE.
EMPLOYMENT. WELFARE
PROFIT TO
SHAREHOLDERS
LONG TERM BENEFIT
TO THE PEOPLE
OPENNESS
FAIRNESS
PROFESSIONALISM

Petroteam a.s
OPTIMISING RESERVES
HOST-COUNTRY PREFERENCE
FOCUS ON LONG TERM BENEFITS TO SOCIETY.
LOW DISCOUNT RATE ENCOURAGES HIGHER RECOVERY
OIL COMPANIES PREFERENCE
HIGH DISCOUNT RATE TENDS TO MAXIMISE UPFRONT PRODUCTION.
THIS LEADS IN MOST CASES TO LOWER RECOVERY.

Petroteam a.s
CORRUPTION IN THE VARIOUS PHASES OF OPERATIONS
PRE-
LICENSING
EXPLORATION
DEVELOPMENT
PRODUCTION
TAIL END
DECOM
MISSIONING
Gets rights
easily and
cheaply
Exaggerated
cost
Reduce Government’s
Share of Profit
Early
abandonment
Lower
investment
Minimise
cost
.
MOST VULNERABLE
PROJECT CASH FLOW
INCOME
+VE
GOVERNMENT
REVENUE
PDO and
Development
LICENSING
Time
COSTS
- VE
IOC’s GAIN
FROM
CORRUPTION

Petroteam a.s
CONCLUSION
OIL FOR DEVELOPMENT
IS DEPENDENT UPON
PROMOTING GOOD GOVERNANCE

Petroteam a.s
THANK YOU
FOR YOUR ATTENTION
Petroteam a.s

Comments by
Willy Olsen, Special Adviser INTSOK
5 October 2009

Discussion
5 October 2009

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EITI briefing held in Oslo 5 Oct 2009

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EITI briefing held in Oslo 5 Oct 2009 — Presentation Transcript