Download Slide 1

EITI Report Analysis
Baku, Azerbaijan
15-17 June 2012
Welcome and introduction
• Welcome!
Motives for this workshop
We need reliable data and strong understandings of
the extractives sector in order to do good oversight.
EITI can service this purpose, if:
• Reports are high quality
• Reports are actively used
Objectives
1. Better understanding what makes a good EITI report
2. Readiness to analyze the EITI report and use its data to
learn about oil and mining sector operations.
3. Better prepared to push for the improvement of EITI
reports.
4. Have concrete ideas about how to use EITI reports in
future advocacy work
Program
Analyzing Report Data- Answering 5 key questions
using EITI reports
Analyzing Report DataAnswering key questions using EITI
reports
Using EITI data
Questions that EITI reports can help to answer
IMPORTANT to remember:
– EITI data quality is weak; limited comparability
– Findings are suggestive only, especially about whether
government gets a good deal
– They identify important further questions (not many
answers)
Using EITI Data
• Gathering complementary information
– PRICE data
• EITI reports
• Country specific prices
• Global prices (oil, gold, copper; less so with gas)
– PRODUCTION and EXPORT data
• Quite easy to find
– ECONOMIC data
• GDP, total government revenues, financial flows
• Internal and external sources
Checking EITI Data: Where to look?
•
•
•
•
•
•
•
•
•
•
•
•
National budget reports
EITI country websites thru EITI Secretariat
IMF country reports for Article IV consultations
Publish What You Pay coalition country websites
World Bank EITI MDTF country progress reports
State-owned companies (financial statements and audits where available)
Reports from the Supreme Audit Authority (e.g. Auditor General)
Multinational companies (financial statements as well as reports to society)
BP Statistical Reviews (for production quantities and prices in oil and gas sectors)
US Energy Information Administration (for prices in all sectors)
UNCTAD (for export data)
Platts and Argus for price and export data
5 questions to answer using EITI reports
For each:
• 5 minute introduction
• 30 minute groups
• 10 minute discussion
Q 1. Does Government get a good deal?
EITI numbers can give a very rough calculation of
government “take”
Total net EI revenues (earnings minus costs)
/
Total value of production (production x price)
Q 1. Does Government get a good deal?
Example. Ghana & Mali. Gold. 2006
Production Price per kg
Country (kg.)
(global ave)
Ghana
69,817
$21,376
Mali
51,957
$21,376
% of total
Total value of EITI gold
value of
production
revenues
production
$1,492,408,192
$64,400,768
4.30%
$1,110,632,832
$221,333,359
19.90%
Need to ask more questions!
•Does Mali’s EITI report cover more than Ghana’s?
•Are Ghana’s costs higher or mines at a different stage of
production?
•Do the contract terms differ?
Q 1. Does Government get a good deal?
Comparing Oil Producers (average of all EITI data years)
No
rw
Ti
ay
m
or
Le
st
e
Eq
Ni
ua
ge
to
r ia
ria
lG
ui
ne
a
Ye
m
en
Ca
m
er
oo
n
Co
ng
o
G
ab
on
Az
er
b
Ka aija
n
za
kh
st
an
M
au
r it
an
Iv
ia
or
y
Co
as
t
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Most differences can be explained.
Question 1. Does Government get a good deal?
Exercise
In groups (30 minutes)
– Review the worksheet for Question 1
– Discuss and answer questions
Q 2. Where do EI revenues come from?
• Use revenue stream data to determine:
• Which revenue streams are largest?
• If possible, which agencies collect these revenues?
• Findings
•
•
•
•
Understand the fiscal regime
Observe changes in fiscal regime over time
Observe differences in fiscal regime across contracts
Identify oversight priorities
Q 2. Where do EI revenues come from?
Use analysis to identify oversight priorities.
Q 2. Where do EI revenues come from?
• Need to scrutinize the associated transactions
• Often barely covered by EITI
Domestic
refineries
Export
PRICE?
$
Profit Oil
National Oil
Company
$
National Treasury
and/or
Oil Savings Fund
Group Exercise:
Question 2. Where do EI revenues come from?
• In groups (30 minutes)
– Review the worksheet for question 2
– Discuss and answer questions
Question 3. How do in-kind revenues become financial
revenues?
Some important questions to ask…..
How do governments end up with oil?
1. Profit oil. In production sharing contracts, governments and
companies agree to split the profit oil.
Profit Oil
Government
taxes,
royalties,
fees, etc
Cost Oil
Operating
Company
Question 3. How do in-kind revenues become financial
revenues?
2. Equity oil – oil that is owned and sold by the state
• JV share
–
E.g. Nigerian national oil company NNPC holds 55% share in producing joint venture,
receives 55% of production.
• Produced itself
–
E.g. Saudi Aramco owns and produces oil from most fields in Saudi Arabia.
• Service contracts
– E.g. Iraqi state owns the oil and hires companies to produce it. It then
receives all production.
3. Tax or royalty oil
Sometimes companies pay taxes or royalties with crude instead of
money.
Question 3. How do in-kind revenues become financial
revenues?
How do national oil companies sell their oil?
• Spot contracts. Sale of individual cargoes at prevailing market
price
or
• Term contracts. Identify a list of buyers over a set period of time
Who buys their oil?
• Traders. The middle-men of the oil world, usually used by NOCs
that lack a trading desk
or
• End-Users. Entities capable of refining the crude.
or
• Domestic users, often government owned refineries, etc.
Question 3. How do in-kind revenues become financial
revenues?
How is the price determined?
• Iraqi export price usually equals:
international benchmark
Europe: Dated Brent
US: WTI, now ASCI
Asia: Dubai/Oman
+
differential (difference in quality, market factors)
set monthly by government
• Term contract holders can usually alter their volumes to a
limited degree based on these changes.
• Domestic prices often much lower due to subsidies!
Question 3. How do in-kind revenues become financial
revenues?
Example
Iraqi oil sold to the Europe, Dated Brent + differential
June ‘11
July ‘11
Basrah Light
-2.10
-2.00
Kirkuk
+0.25
+0.00
---------------------------------------------------Dated Brent
$113.76
$116.46
So, selling price is:
June ‘11
Basrah Light
$111.66
Kirkuk
$114.01
July ‘11
$114.46
$116.46
Question 3. How do in-kind revenues become financial
revenues?
Where do sale revenues go?
National oil company finances are crucial!
How much money do they transfer to the state?
– Direct transfers (e.g. Iraq)
– Dividends
Transparency and reporting
– annual reports with full financial statements
– audit reports
Question 3. How do in-kind revenues become financial
revenues?
• Exercise
• In groups (30 minutes)
– Review the worksheet for question 3
– Discuss and answer questions
Question 4. How dependent is the country on oil?
• Calculate total revenues
• Be sure to include physical receipts
• Use reconciled figures
• Trace changes from year to year
• Can these be explained by price and production
changes?
• Assess resource dependency
• EI Revenues as % of total government budget
• EI revenues as % of GDP
Question 4. How dependent is the country on oil?
Cameroon oil receipts over time, 2002-2008.
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$2002
2003
2004
2005
2006
2007
2008
•Period of sharply rising prices, slowly declining production
•What explains the drop in 2006?
Question 4. How dependent is the country on oil?
EITI Report says 2008 oil revenues = $1.3 billion
How dependent is Cameroon on EI revenues?
1. EI revenues as a % of GDP
• $1.3 billion / $23 billion (IMF) = 5.6%
2. EI revenues as a % of total government revenues
• $1.3 billion / $4.9 billion (IMF) = 27%
3. EI revenues per capita
• $1.3 billion / 19 million = $68 per person
Cameroon- resource dependency
EI receipts as %
of govt revenues
20
08
20
07
20
06
20
05
20
04
EI receipts as %
of GDP
20
03
20
02
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
• Oil receipts growing, but declining as % of GDP…. so economy is
growing?
• 2006 – what happened? Oil revenues stay stead but total government
revenues skyrocket (IMF: $2.9 billion in 2005; $8.5 billion in 2006; $4b in
2007)…. Why?
• Oil provides big share of public revenues….what happens when oil runs
out?
Question 4. How dependent is the country on oil?
How does Cameroon
compare?
EITI receipts as % of total government
revenues, 2008
Ky han
rg a
ys
t
N an
o
C rw
am ay
er
M oo n
o
Ka ng
za o lia
k
Az hst
C erb an
on
g o ai ja
(B n
ra
z.
)
N
Ti
i
m ge r
or
-L ia
Eq es
. G te
ui
ne
a
G
C
AR
160%
140%
120%
100%
80%
60%
40%
20%
0%
Question 4. How dependent is the country on oil?
• Exercise
• In groups (30 minutes)
– Review the worksheet for question 1
– Discuss and answer questions
Q 5. Where do EI revenues go?
Once collected, do the revenues end up in the budget?
• Compare EITI revenue numbers with other revenue
numbers:
• Government budget documents
• Natural resource savings funds
• IMF and World Bank reports
• Relies on the availability of other information. EITI not
enough!
Q 5. Where do EI revenues go?
Company
Company
Company
Company
Company
Company
Company
Collecting Agencies
Collecting Agencies
Collecting
Agencies
Gov’t Collecting
Agencies
EITI
Services
Infrastructure
Public goods
Spending
Budget
Q 5. Where do EI revenues go?
Where might EI revenues go, other than the budget?
• Natural Resource Funds (e.g. Sovereign Wealth Fund)
• Retained by the State-Owned Company for their operations or
equity obligations
• Profit oil can be sold to national refineries at a discount, or
given for free
• Extra-budgetary accounts held by the executive or the SOC
• “Front-line” charges, such a fuel subsidy
• Stolen or misappropriated
ADVOCACY and OVERSIGHT PRIORITIES
Group Exercise:
Question 5. Where do EI revenues go?
• In groups (20 minutes)
– Review the worksheet for question 5
– Discuss and answer questions
Other questions to ask using EITI data
Discrepancies
• What is causing discrepancies?
• What’s done about them?
• Do they improve over time?
Volatility
• How volatile are EI revenues? How do changes in
global commodity prices affect government revenues?
• Does the fiscal regime increase or decrease the
country’s vulnerability to volatility?
Other questions to ask using EITI data
How much does each company pay?
• Which companies pay the most?
• Are the fiscal regimes the same?
• Do payment levels correspond with production
levels?
• Do the differences make sense?
Other questions to ask using EITI data
Mysteries….
• EITI reports contain confusing information, things that don’t
make sense
• Seek out explanations!
Examples:
• Cameroon royalties in 2006-08 were negative; government
paid royalties to the oil companies.
• Ghana’s and Sierra Leone’s mining revenues appear lower
than expected.
• Azerbaijan’s royalty receipts: $400 million in 2004; $52.6
million in 2005. Why the drop?
Final thoughts on analyzing EITI data
• Analyze with other relevant data, such as IMF
reports, national budgets, publicly-available
production data, etc.
• Use reports to identify questions for further
investigation and establish oversight priorities
• Vital importance of IMPROVING REPORT QUALITY!
• EITI data is not comparable across countries.
Should it be?
Evaluation
Thank you!