The document discusses a workshop on analyzing extractive industry data from the Extractive Industries Transparency Initiative (EITI). It provides an overview of how EITI data can be used to evaluate natural resource governance policies using the Natural Resource Charter framework. A specific issue for analysis is presented on state-owned enterprises (SOEs). A three-step methodology is outlined for gathering information from EITI reports and other sources to answer relevant policy questions, evaluating the policies, and making recommendations. Recommendations focus on increasing transparency of SOE quasi-fiscal activities and decision making through public reporting, independent audits, and legislative oversight.

1. Eurasia Regional EITI Data
Analysis Workshop
22-24 June, 2015
Istanbul, Turkey

2. What is the importance of EITI data analysis?
•Creates neutral space for building trust and
facilitating discussion
Multi-Stakeholder Dialogue
(MSG, CSOs)
• Links EITI to broader national policy
priorities
Objective Setting
(Work plan)
• Useful in evaluating pressing policy
questions & challenges
Disclose Relevant Information
(Scoping, Reconciler TOR & EITI
Report)
• Enables informed public understanding &
policy debates
Analysis of Information
• Increases accountability & development
Links to Policymaking &
Institution building

3. Legal
framework &
fiscal regime
(§3.2 )
Exploration
activities
(§3.3)
Taxes &
Primary
Revenues
(§4.2(a))
SOE level of
beneficial
ownership
(§3.6(c))
Direct
payments/
receipts
(§4.2(d))
Employment
§3.4(d)
Revenues in &
not recorded
in budget
(§3.7)
License award/
transfer
process &
deviations(§3.
10)
Production
volumes &
values
(§3.5(a) &
§3.4(e))
In-kind
revenues
(§4.1(c))
Government
transfers by
SOEs
(§4.2(c))
Mandated
national/
subnational
transfers
(§4.2(e))
Social
payments
(§4.1(e))
Earmarked
revenues &
budget/audit
processes
(§3.8)
Register of
licenses
(§3.9)
Export
volumes &
values
(§3.5(b))
Infrastructure
/barter
provisions
(§4.1(d))
SOE quasi-
fiscal
expenditures
(§3.6(b))
Beneficial
ownership
(§3.11)
Economic
contribution
(§3.4(a)-(c))
Transport
Revenues
(§4.1(f)
Contract/
license
disclosure
(§3.12)
Allocation of
Rights Production
Data
Revenue
Collection
SOE
Revenue
Management
Sub-
National
Social
Impact
What is “EITI data”?

4. What questions to ask when analyzing?
EITI data, along with other information, can help answer
questions posed by the Natural Resource Charter framework
The Natural Resource Charter framework offers a series
of questions on natural resource governance as a way to
assess government policies along the decision chain.

5. Limitations of Analysis
However, it is important to note the
limitations of EITI report analysis. EITI reports
usually do not provide all the information
needed to fully analyze the costs and benefits
of extractive policies.
But, EITI disclosures can raise important questions about
natural resource revenue management and expose areas
where greater transparency is needed.

6. Step A. Information Gathering: What are the relevant NRC
framework questions and what information from EITI
reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI
information using the NRC framework questions indicate
about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve
policies and systems to better manage resource wealth?
Framework for Analysis
Three steps to using EITI information to analyze Natural
Resource Charter framework questions:

7. State-owned Enterprises
Issue for Analysis

8. Issue 2: State Owned Enterprises

9. Step A. Information Gathering: What are the relevant NRC
framework questions and what information from EITI
reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI
information using the NRC framework questions indicate
about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve
policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises

10. Step A. Information Gathering: Primary Questions
StateOwnedEnterprises
Primary Questions
6.1 SOE Role. Do the extractive sector
state-owned enterprises have clearly
defined roles?
6.2 SOE Funding and Financing. Does the
extractive sector state-owned enterprises
have appropriate funding and financing
models?
6.3 Political Interference. Is there limited
political interference in extractive sector
state-owned enterprises technical
decisions?
6.4 SOE Accountability. Is the extractive
sector state-owned enterprises
transparent and subject to oversight?
6.5 Long-term outlook. What is the long-term
outlook for governance of extractive state
owned enterprises and institutions governing
on extractive resources?
Secondary Questions
• Transparency?
• Audits?
• Oversight?
What are the relevant NRC
framework questions?

11. Transparency. Does the SOE or Government publicly report key operational data
and does it have a legal obligation to do so?
Audits. Is the SOE subjected to independent financial audits by skilled
independent professionals, and are the results publicly disclosed?
Oversight. Is the SOE subject to an appropriate level of legislative oversight
without unduly constraining decision-making?
6.4 SOE Accountability. Is the extractive sector state-owned enterprises
transparent and subject to oversight?
Step A. Information Gathering: Secondary Questions

12. Transparency. Does the SOE or Government
publicly report key operational data and does it
have a legal obligation to do so?
Are SOE
production,
plans, revenues
and costs
disclosed?
Is revenue
flow between
NOC and the
state
disclosed?
Are results of
oil trading
publicly
available?
Step A. Information Gathering: Tertiary Questions
Is there full and
comprehensive
information
about SOE
quasi-fiscal
activities
disclosed?
Are the legal obligations to report?

13. Transparency. Does the SOE or Government
publicly report key operational data and does it
have a legal obligation to do so?
Are SOE
production,
plans, revenues
and costs
disclosed?
Is revenue
flow between
NOC and the
state
disclosed?
Are results of
oil trading
publicly
available?
Step A. Information Gathering: Tertiary Questions
Is full and
comprehensive
information
about SOE quasi-
fiscal activities
disclosed?
EITI report
RGI
EITI report
RGI
EITI report
RGI
EITI report
RGI
Official website (Government Ministry, National
Oil Company, Oil Fund etc.)
Are the legal obligations to report?

14. SOEs: EITI Standard §3.6
Where state participation in the extractive industries gives rise to material revenue
payments, the EITI Report must include:
b) Disclosures from SOE(s) on their quasi-fiscal expenditures
such as payments for social services, public infrastructure,
fuel subsidies and national debt servicing. The multi-
stakeholder group is required to develop a reporting process
with a view to achieving a level of transparency
commensurate with other payments and revenue streams,
and should include SOE subsidiaries and joint ventures.
If this
information is
published on
government
websites, the
EITI report
may simply
provide a link
EITI Report
Step A. Information Gathering: Sources
Is full and
comprehensive
information
about SOE quasi-
fiscal activities
disclosed?

15. Question
Is full and
comprehensive
information about SOE
quasi-fiscal activities
disclosed?
EITI Report
EITI Standard §3.6b
Disclosures from SOE(s) on
their quasi-fiscal
expenditures such as
payments for social
services, public
infrastructure, fuel
subsidies and national debt
servicing
Azerbaijan
SOCAR website
2013 EITI report,
page 30
2013
SOCAR financial
report, page 22
SOCAR website,
Social
Responsibility

16. Question
Is full and
comprehensive
information about
SOE quasi-fiscal
activities disclosed?
RGI: Azerbaijan

17. Step A. Information Gathering: What are the relevant NRC
framework questions and what information from EITI
reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI
information using the NRC framework questions indicate
about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve
policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises

18. Transparency. Does the SOE or Government publicly report key
operational data and does it have a legal obligation to do so?
Are SOE
production,
plans, revenues
and costs
disclosed?
Is revenue
flow between
NOC and the
state
disclosed?
Are results of
oil trading
publicly
available?
Step B. Policy Evaluation
Is there full and
comprehensive
information
about SOE quasi-
fiscal activities
disclosed?
Resource Governance Index
Natural Resource Charter
EITI report recommendations
Are the legal obligations to report?

19. The national company should maintain public accounts in accordance with
international standards and subject to independent audit, and clearly identify any
private ownership interests and related transactions.
A system of checks and balances helps address the inevitable
conflicts of interest
The national company should face at least the same standards of disclosure that private
companies do.
Step B: Policy Evaluation: Natural Resource
Charter
Question
What are the
safeguards that
ensure publishing of
information about
SOE quasi-fiscal
activities disclosed?

20. Natural Resource Charter Azerbaijan government policy
A system of checks and balances helps
address the inevitable conflicts of interest
Officials of the SOCAR are not required to
disclose information about their financial
interest in any extractive activities or
projects
The national company should face at least
the same standards of disclosure that private
companies do.
According to the Charter of SOCAR on
reporting, accounting and control in the
Company, the SOCAR keeps accounts
according to the law, and compiles a
statistical report which it submits to the
relevant state bodies.
The national company should maintain public
accounts in accordance with international
standards and subject to independent audit
SOCAR management is responsible for the
preparation of consolidated financial
statements in accordance with international
financial reporting standards, such as IASB
or GAAP accounting standards.
Step B: Policy Evaluation: Compare Azerbaijan’s
transparency practices to the Charter’s
recomendations

21. Step B: Policy Evaluation:
Question The 2013 Resource Governance Index (RGI) rates the
competitiveness of the licensing process:
3.3.1.049: Does the SOC publish information about the rules
governing decision making by the Board of Directors?
No publicly available rules of decision making
Azerbaijan’s full RGI questionnaire can be found at:
https://www.indabaplatform.com/ids/widgets/vcardDisplay4RWI.html?horseId=1953&showscore=false
Resource Governance
Index
Are there clearly
defined rules
governing decision-
making on quasi-fiscal
activities?
Azerbaijan
“The Company Board, which is an
advisory structure within SOCAR,
does not have an important role in
practice. SOCAR's president has
absolute powers in managing all
sides of activities.”

22. Step B. Policy Evaluation: Azerbaijan
SOCAR is wholly owned by the government of Azerbaijan and takes
part in all oil and gas activities. It publishes regular reports on
production volumes, the value of exports, estimates of investments in
exploration and development, production costs, the names of
companies operating in the country, production data by company,
quasi-fiscal activities, and the government’s portion of production-
sharing contracts. SOCAR’s annual financial reports are audited by an
independent external auditor and include the consolidated accounts
of all SOCAR’s subsidiaries, however data is incomplete. Moreover
there is no clear definition of rules governing non-commercial
activities, namely quasi-fiscal activities. Additionally information
about conducted quasi-fiscal activities is not fully available for public.
Rights Allocation Method. Does the government use
an appropriate allocation method to allocate rights?

23. Step A. Information Gathering: What are the relevant NRC
framework questions and what information from EITI
reports and other sources will help answer them?
Step B. Policy Evaluation: What does analysis of EITI
information using the NRC framework questions indicate
about the country’s natural resource policies and systems?
Step C. Recommendations: How can the government improve
policies and systems to better manage resource wealth?
Issue 2: State Owned Enterprises

24. “The national company should maintain public accounts in
accordance with international standards and subject to
independent audit, and clearly identify any private ownership
interests and related transactions… legislature or appropriate
oversight agency should conduct regular and systematic
oversight of the national company.”
NATURAL
RESOURCE
CHARTER
6.4.1.Transparency
Step C. Recommendations
How can government policies and systems be
improved to meet the goals expressed in the
Natural Resource Charter?
Transparency. Does the SOE or
Government publicly report key
operational data and does it have a
legal obligation to do so?

25. “When citizens, investors and even other
public institutions lack basic knowledge of
what these companies are doing and how
they are making decisions, the likelihood
of management in the long-term public
interest decreases significantly. ”
3. Recommendations
The most effective SOEs have carefully-defined commercial
and non-commercial roles.
NRGI:
9 Recommendations
for NOCs
Ensuring
Transparency and
Effective Oversight
Transparency. Does the SOE or
Government publicly report key
operational data and does it have a
legal obligation to do so?

26. “Public disclosure of key data on company finances
and activities in a consistent and timely fashion is
critical. Relevant information for publication includes
expenditures by the company on quasi-fiscal
activities”
3. Recommendations
The most effective SOEs have carefully-defined commercial
and non-commercial roles.
NRGI:
9 Recommendations
for NOCs
Ensuring
Transparency and
Effective Oversight
Transparency. Does the SOE or
Government publicly report key
operational data and does it have a
legal obligation to do so?
Recommendation 7.
Maximize public reporting of key data.

27. “As is regularly demonstrated in the private sector,
rigorous accounting standards that include
independent audits are one of the most powerful
tools creating incentives for strong performance
and corporate governance…”
3. Recommendations
The most effective SOEs have carefully-defined commercial
and non-commercial roles.
NRGI:
9 Recommendations
for NOCs
Ensuring
Transparency and
Effective Oversight
Transparency. Does the SOE or
Government publicly report key
operational data and does it have a
legal obligation to do so?
Recommendation 8.
Secure independent financial audits, and
publish them.

28. “Legislators should also take seriously their key role in
policy-making, including via legislation that
establishes major strategies for the petroleum sector,
defines the roles of the NOC and other institutional
actors, and sets reporting requirements. ”
3. Recommendations
The most effective SOEs have carefully-defined commercial
and non-commercial roles.
NRGI:
9 Recommendations
for NOCs
Ensuring
Transparency and
Effective Oversight
Transparency. Does the SOE or
Government publicly report key
operational data and does it have a
legal obligation to do so?
Recommendation 9.
Choose an effective level of legislative
oversight.

29. 3. Recommendations: Azerbaijan
Actions for Azerbaijan’s government:
• Establish clear rules for SOCAR quasi-fiscal
activities
• Require transparency in decision making on
SOCAR quasi-fiscal activities
• Full disclose financial information on SOCAR
quasi-fiscal activities

30. 30
INSTRUCTIONS FOR GROUP WORK
Based on the proposed methodology take 3 STEPS of ANALYSIS on
following issues:
Do the roles and responsibilities of KMG suit the national context (Ukraine)
Is there political interference in KMG technical decisions? (Kyrgyzstan)
Does KMG have an appropriate funding model? (Azerbaijan)
Is KMG transparent and subject to oversight? (Kazakhstan)
Does KMG have clearly defined roles? (Tadjikistan)