Session 3.4 - BP Case Study - Khatira Iskender

8/14/2019 Session 3.4 - BP Case Study - Khatira Iskender

1/16

Business and Poverty LeadershipProgramme:BP Experience in EITI: Azerbaijan Case Study

Khatira Iskender, Corporate Responsibility Policy AdvisorUniversity of Cambridge

15 November, 2006


2/16

2

Outline of presentation

Role of Good Governance

Importance of Good Governance to BPbusiness

Relevance of Transparency

Dimensions of Transparency

EITI to date: Azerbaijan Case Study

Lessons learned and challenges

Looking ahead


3/16

3

Role of Good Governance

Over the lifetime of a typical major oil or gas project the share of revenuesthat goes to the government works out at around 80% of the total value of resources

When governance is good, these can generate large revenues to fostereconomic growth and reduce poverty. Good Governance has multiplefeatures:

Clear and stable laws and regulations Rule of Law High level of capacity and skills in government Fiscal monetary and budget discipline Open dialog between government and civil society Healthy business environment Transparency

When governance is weak, they may instead cause serious challenges andrisks. These challenges and risks are multi dimensional:

More poverty, corruption, and conflict the so called resource curse Inflation and currency overvaluation

Damage to competitive industries and employment To seize the opportunity, the government has to transform state-held oil and


4/16

4

Importance of Good Governance to BPbusiness:

Companies such as BP have a legitimate and genuine desire tosee these revenues managed well in a transparent manner,because:

Substantial and growing proportion of our activity is based incountries whose economies are heavily, and in some casesoverwhelmingly, dependent on oil and gas revenues;

In the absence of good revenue management and transparency theimpact of the resource curse imposes costs on our business;

Transparency and good governance reflect BPs values:

w the government manages resource revenues isrictly none of our business.

But it is in our interests that they seize the opportunities and avoid the risks.

BP is committed to the principle of transparency, in the belief that improving accountability in the societieswhere we operate strengthens governance and reduces corruption, conflict, and poverty. This is good for society, and good for business. It reflects responsible business.

BP believes that transparency of industry payments to government is only one part of promoting good governance, and should be viewed primarily as a means to ensure sound revenue management and consequent

poverty reduction. Revenue outflows are as important as revenue inflows, to achieve this purpose.

BP strongly supports individual company disclosure in those countries identified by the EITI, where revenuemanagement is a critical development issue and our presence has a major impact.

BP will work in partnership with our host governments, industry partners and civil society towards mutually acceptable mechanisms for reporting.


5/16

5

Relevance of transparency

Transparency is one of the fundamental building blocks of Good Governance

Transparency:

Increases accountability and reduces the risk of wasteand corruption

Fosters democratic debate

Improves macroeconomic management

Enhances access to finance


6/16

6

Dimensions of transparency

Transparency has many dimensions

Revenues

Expenditures

Policies Laws and regulations

Administration

Applies to all sectors

EITI focuses on EI resource revenue transparency as amanageable and meaningful starting point


7/16 7

EITI to date

Launched by PM Blair Johannesburg 2002

Escalating engagement of stakeholders

Emerging consensus on principles, objectives and criteria

Accelerating in-country uptake Global traction

Accelerating TA support (EITI Trust Fund)

Support of Norwegian and German governments for futuremanagement of EITI


8/16 8

Stakeholder engagement

Implementing governments: 20-plus in Africa, LatinAmerica, Asia

Donor governments: UK, Norway, Germany, Netherlands, US, France

Industry: BP, ExxonMobil, Chevron Texaco, Shell, Total,Statoil, Norsk Hydro OGP, API

NGOs: CRS, HRW, Publish What You Pay, Global Witness,Open Society, National NGOs

Lenders and Investors: F&C Management Group

IFIs: World Bank, IMF, EBRD


9/16 9

EITI: BP role and contribution

Early and active support of EITI and Secretariat

Focus point of contact to the government, oil companiesand NGOs for the negotiations and implementation of EITIin Azerbaijan

Capacity building support to civil society Putting transparency in larger governance context

Country programmes

Member of EITI International Advisory Group (IAG)

The group has been working throughout 2006 to makerecommendations on three main areas:

incentives for stakeholders to encourageimplementation

methods of validation and

the future governance of EITI Close coordination with a multi-stakeholder rou


10/16 10

BP operated activities in Azerbaijan

0 300 km200100

Caspian Sea

Turkey

Iran

IraqSyria

Russia

Georgia

Baku

Ceyhan

Erzurum

Kazakhsta n

Black Sea

Tbilisi

M e d .

S e a

Azerbaijan

T ur kme ni stan

ACG OilProduction &Development

Alov Exploration

InamExploration

Shah DenizGas

Development

Block 3534

Exploration

Sangachal

TerminalSouthCaucasusPipeline Gas

WERPipeline

BTC Pipeline Oil

NERPipeline

Supsa

Grozny

Novorossiysk

1998 - 2022 Gross Production

050

100150200250300350400

1 99 8 2 002 20 06 2 01 0 20 14 2 01 8 20 22

m b d


0

200

400

600

800

1000

1200

1400

1998 2002 2006 2010 2014 2018 2022

m b d

0 300 km200100

Caspian Sea

Turkey

Iran

IraqSyria

Russia

Georgia

Baku

Ceyhan

Erzurum

Kazakhsta n

Black Sea

Tbilisi

M e d .

S e a

Azerbaijan

T ur kme ni stan

ACG OilProduction &Development

Alov Exploration

InamExploration

Shah DenizGas

Development

Block 3534

Exploration

Sangachal

TerminalSouthCaucasusPipeline Gas

WERPipeline

BTC Pipeline Oil

NERPipeline

Supsa

Grozny

Novorossiysk


050

100150200250300350400

1 99 8 2 002 20 06 2 01 0 20 14 2 01 8 20 22

m b d


0

200

400

600

800

1000

1200

1400

1998 2002 2006 2010 2014 2018 2022

m b d


11/16 11

Azerbaijan Oil and Gas Revenues

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

2 0 1 4

2 0 1 6

2 0 1 8

2 0 2 0

2 0 2 2

2 0 2 4

2 0 2 6

2 0 2 8

2 0 3 0

$ m

i l l i o n

$50/bbl$40/bbl

$30/bbl

AzerbaijanGDP 2004

Forecast State Revenues from ACG, BTC and SD Stage 1/SCP

~$106bn at $30/bbl ~$160bn at $40/bbl ~$210bn at $50/bbl.including profit oil, tax, bonuses


12/16 12

EITI in Azerbaijan: history and milestones

Commitment to EITI in early 2003 The Azerbaijan National Committee on EITI led by the State Oil Fund

established in November 2003 NGO Coalition for EITI established mid-2004 MoU signed between government, companies and NGO Coalition and

reporting process established in November 2004 International audit firm selected in December 2004 First EITI report published in March 2005 Launched EITI web site in 2005 Nominated member of IAG in 2005 Piloted the draft Validation process in February 2006 Hosted the forth IAG meeting in Baku in April 2006 NGO Coalition hosted the Baku International Conference on EITI in April

2006 Shared experience and lessons learned with Kazakhstan, Georgia and

others in 2006 Nominated member of EITI Board in 2006


13/16 13

Looking ahead

Preparations for preparations for fifth report havecommenced


14/16 14

EITI Azerbaijan

Incentives and drivers Financing for BTC and SCP projects

Effort by government to improve reputation on corruption

Championed at top level: President, Executive Director of State Oil Fund

Competent civil society institution

Outputs

MoU between all parties

Regular reports that compare aggregated figures for companies and government bypayment type, e.g. royalties, taxes, production share

Investigation and explanation of discrepancies by audit company

Increased public debate on use of oil revenues


15/16 15

EITI Azerbaijan: Lessons learned andChallenges

State oil company figures included but not audited Aggregated or disaggregated data?

Massive increase in oil revenues in 2005 and 2006. GDPgrowth 27% on 2005, but.

Managing public expectations will be difficult Need to increase public debate on revenues outside of

Baku


16/16

Thank you!!Comments? Questions?

Please see the websites: www.bp.com/caspian

for BP Azerbaijan sustainability reports

www.oilfund.az/search.php?get=EITIfor EITI Azerbaijan reports

www.eititransparency

for EITI country updates and forward plans

Khatira M Iskender, BP [email protected]

:
http://www.bp.com/caspianhttp://www.oilfund.az/search.php?get=EITIhttp://www.eititransparency/http://www.eititransparency/http://www.oilfund.az/search.php?get=EITIhttp://www.bp.com/caspian

Session 3.4 - BP Case Study - Khatira Iskender

Documents

Transcript of Session 3.4 - BP Case Study - Khatira Iskender