Extractive Industries Transparency Initiative

Transcription

1 Extractive Industries Transparency Initiative 1

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3 Extractive Industries Transparency Initiative Annual Report 2011 Extractive Industries Transparency Initiative 3

4 Contents Abbreviations and acronyms...3 Foreword....5 Azerbaijan and Extractive Industries Transparency Initiative...8 Analysis of macroeconomic situation of the Republic of Azerbaijan in Multi-stakeholder Group...28 Events...34 Analysis of EITI reports ( )...44 Members of Multi-stakeholder Group...56 Non-government Organizations and Companies participating in Azerbaijan EITI Work Plan for implementation of Extractive Industries Transparency Initiative in the Republic of Azerbaijan

5 Abbreviations and acronyms ANS AZN BTC CBAR CIS EITI GDP IAG IAO MEDRA MOU MSG NGO PSA SG SOFAZ SSCRA USD UN UN GA bln. mln. Azerbaijan News Service Azerbaijani manat Baku-Tibilisi-Ceyhan Central Bank of Azerbaijan Republic Commonwealth of Independent States Extractive Industries Transparency Initiative Gross Domestic Product International Advisory Group Independent Accountants Opinion Ministry of Economic Development of the Republic of Azerbaijan Memorandum of Understanding Multi-stakeholder Group Non-Governmental Organization Production Sharing Agreement Selection Group State Oil Fund of the Republic of Azerbaijan State Statistical Committee of the Republic of Azerbaijan Dollar of the United States of America United Nations United Nations General Assembly billion million Extractive Industries Transparency Initiative 5

6 Transparency will become one of the major grounds of our success. As you may know, Azerbaijan joined the International Transparency Initiative. It will bring about efficient management of the future oil revenues and allow every citizen of Azerbaijan to feel it in his or her daily life. Ilham AlIyev President of the Republic of Azerbaijan 6

7 Foreword Since ancient times Azerbaijan has been called The Land of Fire because of its rich oil and gas resources. This unique natural wealth played a significant role in the development of the country throughout its history. Nevertheless, upon the restoration of independence at the end of XX century, poor financial and technical resources prevented Azerbaijan from large-scale production of oil and gas reserves. Under such circumstances, involvement of foreign investment to the country was one of the priorities for the government of Azerbaijan. Owing to professional guidance of the national leader Heydar Aliyev after his return to power in 1993, the public and political stability was established. With the aim of mobilizing the country s internal facilities and effective utilization of rich oil reserves for further prosperity of Azerbaijani nation, National Oil Strategy was successfully implemented. As the first step within the National Oil Strategy, the leading foreign oil companies were invited to Azerbaijan. On September 20, worldknown oil companies from 7 countries signed Contract of the Century Production Sharing Agreement for exploration of Azeri-Chirag-Gunashli fields in the Caspian Sea. This Contract provoked increasing interest by the developed world states to Azerbaijan and processes taking place there, laid foundation for successful reforms in the country. At the next stage of the National Oil Strategy, it was extremely important to efficiently manage accumulated oil revenues generated from extraction of country s oil fields jointly with foreign companies and to direct these assets to the development of advanced areas and implementation of important socio-economic projects. To that end, State Oil Fund of the Republic of Azerbaijan (SOFAZ) was established in 1999 by Decree of Heydar Aliyev. Economic and social development strategy by the national leader Heydar Aliyev who stated that Oil is Azerbaijan s grand wealth, and belongs to nation: not only to present generation, but also to the forthcoming ones, continues effectively under auspices of President Ilham Aliyev. At the I International Conference on Extractive Industries Transparency Initiative (EITI) in London (2003) President declared about decision of the government of Azerbaijan to join the EITI and support the international efforts aimed at ensuring transparency in extractive industries. Actions performed within short period of time after EITI introduction in Azerbaijan were highly appreciated by the international community, and Azerbaijan became one of exemplary countries. Thus, the State Oil Fund leading the EITI implementation process was honoured with UN Public Service Award in June, 2007 for the implementation of the Initiative. Azerbaijan which successfully passed through Validation in 2009 became the first EITI compliant country and was awarded with EITI Award At the V Global EITI Conference in Paris (2011) the new rules on EITI were accepted. According to the rules, countries implementing the Initiative should publish annual reports on EITI implementation. Taking into account that such document is drawn up for the first time in Azerbaijan, along with information on actions performed in 2011 this report contains EITI philosophy, history of its implementation in Azerbaijan, overview of Multi-stakeholder Group activities, analysis of 15 released EITI reports and achievements. The report also reveals opinions of EITI stakeholders Committee on EITI, Coalition of Azerbaijan Non-Government Organizations for Improving Transparency in Extractive Industries and representatives from Group of Companies. We are confident that such reports to be issued annually will become an integrated part of useful information source necessary for further improving expertise in EITI sphere. Sh. Movsumov Executive Director of SOFAZ, Chairman of the Committee on EITI Extractive Industries Transparency Initiative 7

8 Republic of Azerbaijan Area: Population: Capital: Official language: Currency: 86,6 thousand sq. km 9235,1 thousand persons Baku Azerbaijani Manat National Flag of the Republic of Azerbaijan State Emblem of the Republic of Azerbaijan 8

9 Map of the Republic of Azerbaijan Extractive Industries Transparency Initiative 9

10 Azerbaijan and Extractive Industries Transparency Initiative

11 Establishment and principles of EITI EITI was launched at the World Summit for Sustainable Development in Johannesburg in September The I International EITI Conference held on June 17, 2003 in London, Lancaster House agreed the set of EITI Principles. These 12 principles are based on two fundamental conditions: 1. Publish what you pay for the foreign and local companies of extractive industies; 2. Publish what you receive for host governments of extractive industries. These principles acknowledged that all citizens should benefit from natural resources of a country. Extractive Industries Transparency Initiative 11

12 Azerbaijan and EITI At the I International EITI Conference held in London on June, 2003 the President of the Republic of Azerbaijan Mr.Ilham Aliyev declared the decision of the government of Azerbaijan to join EITI and support the international efforts aimed at ensuring transparency in extractive industries. Azerbaijan volunteered to become a pilot country in EITI implementation. Three following reporting forms were adopted at the conference: 1. report on payments received by government from foreign and local extractive industry companies; 2. report on payments of the foreign extractive industry companies to the host government; 3. report on payments of the local extractive industry companies to the government. After the declaration at the EITI Lancaster House Conference the decision of the government of Azerbaijan to join EITI and support the international efforts aimed at ensuring transparency in the extractive industries and becoming a pilot country, the President Ilham Aliyev instructed to establish an interagency committee on EITI to implement obligations taken at the conference. Cabinet of Ministers of Azerbaijan established Committee on EITI by its Ordinance No.224 dated November 13, The Committee is charged with the task of collecting information about receipts (including from foreign and local industry companies) of the governmental agencies, companies and other governmental institutions and preparation of the government s report. 12

13 Signing of Memorandum of Understanding in 2004 acknowledged establishing constructive trilateral dialogue between civil society, government and private sector. In fact, despite difficulties and sometimes even impossibilities to reach a common denominator among these three parties, Transparency Initiative gathered them together and enabled us to achieve significant results. I think that this dialogue could be a positive source of experience for the other spheres as well. ShaHmar Movsumov Chairman of EITI MSG The Committee is chaired by the Executive Director of SOFAZ. The Executive Director of the State Oil Fund is also overseeing the work of the EITI Secretariat of Azerbaijan which is hosted by the Oil Fund. The Secretariat is responsible for the day-to-day running of EITI in Azerbaijan. The Secretariat established close contacts and extensively cooperates with the foreign and local extractive industry companies operating in the country, government and non-government organizations in order to implement EITI in Azerbaijan. Memorandum of Understanding An important step towards implementation of EITI in the Republic of Azerbaijan was taken on November 24, The Committee on EITI, local and foreign extractive industry companies and Coalition for Improving Transparency in Extractive Industries signed Memorandum of Understanding (MOU). It was the first document in the world of this kind. At present, more than 160 members of EITI NGO Coalition participate in EITI implementation process. Azerbaijan regularly discloses EITI reports On March 15, 2005 Committee on EITI released the first government reports examined by independent auditor Deloitte & Touche company. The document was the first published report of this kind in the world. EITI implementation in Azerbaijan is a sustainable process. The government of Azerbaijan on regular basis makes publication of all oil, gas and mining payments by companies to government and all revenues received by government from oil, gas and mining companies to a wide audience in a publicly accessible, comprehensive and comprehensible manner. Reconciliation of payments and revenues being done by a credible, independent auditor, applying international auditing standards and the auditor s opinion being published regarding that reconciliation (including any discrepancies if any). It should be noted that all companies operating in extractive industries, as well as state enterprises are involved in EITI implementation process. The government has also ensured active participation of the civil society in development, monitoring and evaluation of the EITI implementation process. Extractive Industries Transparency Initiative 13

14 EITI reporting mechanism The Multi-stakeholder group (MSG) comprising the representatives of all three parties to MOU selects the audit company to collate the EITI reports. The reports used to be submitted twice a year: annual and semi-annual. Beginning from 2011 reports are being submitted on an annual basis. A new audit company is selected for each reporting cycle. The auditor collates the reports submitted by the government with the figures submitted by the extractive sector companies and gives its opinion. Azerbaijan and management of EITI Azerbaijan has been actively involved in the management of the EITI process worldwide by participating at the various high level meetings and conferences and sharing its experience with the other resource rich countries. The II International EITI London Conference held in 2005 established an International Advisory Group (IAG) to guide the further work of the International EITI Secretariat on defining and refining proposals on the future of the EITI. Being pioneer of the EITI implementation process and having tremendous experience in the EITI implementa- 14

15 Taking into account that Azerbaijan has instituted a regular process of disclosing, reconciling and publishing company payments and government receipts; Azerbaijan is the first ever country to complete Validation, the EITI s quality assurance process which verifies compliance with EITI principles and criteria; and referring to Validator s report the EITI Board designated Azerbaijan as EITI Compliant country at the 4th EITI International Conference, held on February, 2009 in Doha, Qatar. Thereby Azerbaijan became the first EITI Compliant country. The promotion of Azerbaijan from Candidate to Compliant country status marks an important milestone for the EITI. tion the Executive Director of the State Oil Fund, Chairman of the EITI Committee was elected as IAG member to represent Azerbaijan. The III International EITI Conference held in 2006 in Oslo established the multi-stakeholder Board to manage EITI at the international level and to oversee the future implementations of EITI principles and criteria. Providing Azerbaijan s demonstrated leadership in the implementation of EITI it was not surprising that the country was unanimously elected to the Board of EITI at the Conference. Azerbaijan s membership in the International Board of EITI which is selected every two years proves the leading role of the country in the implementation of EITI. The Executive Director of SOFAZ, Chairman of the Committee on EITI represents the government of Azerbaijan in the EITI Board. In order to give a strong backing to EITI process and rise it s momentum at the international level the Government of Azerbaijan initiated and tabled United Nations General Assembly (UN GA) Resolution on EITI, which on 11 September, 2008 was adopted by consensus. Azerbaijan s strong belief that transparency is a crucial factor in sustainable development and active participation in EITI since the launch of the Initiative were grounds for it to initiate a UN GA Resolution in support of transparency. Extractive Industries Transparency Initiative 15

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17 We see the EITI process as the catalyst encouraging all of us government, companies and civil society to work jointly in partnership spirit. We believe that the Initiative will fully realize its potential as a result of this joint work. Araz Yusubov BP, Transparency and Public Reporting Team Leader, Azerbaijan-Georgia-Turkey region, EITI MSG Member Azerbaijan becomes the first EITI Compliant country EITI is recognised as an international brand of transparency in extractive industries and in order to safeguard this international brand the Validation process has been launched. Validation is an essential element of the EITI process, and central to the initiative s status as an international standard. The objective of Validation is to provide an independent assessment of the progress achieved by EITI Countries during the implementation of the Initiative and what measures they may need to take to make better and faster progress. At the III International EITI Board meeting held in Oslo September 2007, Azerbaijan obtained an EITI Candidate status as a result of fulfilment of initial EITI requirements. Based on the decision of the EITI International Board, Candidate countries willing to become an EITI Compliant country should pass throw Validation. Azerbaijan has officially started the Validation process on March, Coffey International Development in association with IPAN and PKF was selected to exercise this process in Azerbaijan. The validation process in Azerbaijan was completed a year earlier in 2009, though the deadline established for it by the International Board was March 9, Coffey International Development presented its final report with positive opinion according to the results of Validation in Azerbaijan to EITI International Board. Taking into account that Azerbaijan has instituted a regular process of disclosing, reconciling and publishing of extractive industry companies payments and government receipts from companies; Azerbaijan is the first ever country to complete Validation, the EITI s quality assurance process which verifies compliance with EITI principles and criteria; and referring to Validator s report the EITI Board designated Azerbaijan as EITI Compli-

18 ant country at the IV EITI International Conference, held on February, 2009 in Doha, Qatar. Thereby Azerbaijan became the first EITI Compliant country. The promotion of Azerbaijan from Candidate to Compliant country status marks an important milestone for the EITI. Awards In 2007, SOFAZ became a winner of the 2007 United Nations Public Service Award in the category of Improving Transparency, Accountability and Responsiveness in the Public Service for successful implementation of EITI. SOFAZ is the first governmental agency in the Eastern Europe and CIS countries winning the United Nations Service Award which is considered the most prestigious international recognition of excellence in Public Service. Azerbaijan was awarded with the EITI Award 2009 for its achievements in EITI implementation and for commitment to EITI principles and criteria. 18

19 Extractive Industries Transparency Initiative 19

20 Analysis of macroeconomic situation in the Republic of Azerbaijan in 2011

21 While non-stable conditions reigned in the financial and commodity markets of the world, several developed countries faced sovereign debt problems and capital inflows decreased, the economic growth was observed in all sectors of the national economy of Azerbaijan. It was a result of the economic policy connected with rapid modernization and diversification of the economy implemented in 2011 by the President of the Republic of Azerbaijan Ilham Aliyev. Increase of crude oil price in the world markets during the year has given its positive contribution to the growth of export potential and state revenues of the country. Furthermore, development of non-oil sector, increase of local and foreign investments and other factors positively affected the economic growth. Real sector. Due to the decrease of oil production in 2011, the real growth rate has decreased by 9.3% in the oil sector, an increase in nonoil sector, especially in agriculture, construction and service sectors was observed. The volume of GDP has been in the volume of 50,1 bln. manats increasing by 17.9 % in absolute terms compared to the last year % of it was formulated by non-oil GDP. Share of oil and non-oil sectors in GDP Source: Ministry of Economic Development 62.2 % 54.7 % 49.7 % 51.7 % 45.3 % 50.3 % 48.3 % 37.8 % Non-oil GDP (share in GDP) Oil GDP (share in GDP) Extractive Industries Transparency Initiative 21

22 Oil and gas industry occupied main position in structure of GDP and made up 50.2% of the total figure. Breakdown of GDP per production spheres is as follows: Sector structure of GDP (2011) Source: Ministry of Economic Development 6.0 % 3.7 % 5.5 % Net taxes for products and imports Non-oil industry Production of services 26.3 % Agriculture, forestry and fishery Construction 8.3 % 50.2 % Oil and gas industry Rendering of public services Transport and stock Processing industry Public administration and protection; social security Construction Education 3.9% 4.2% 4.8% 6.4% 7.1% 8.0% Rendering of services in other areas 13.2% Trade, repair of vehicles 14.5% Agriculture, forestry and fishery 37.9% 22

23 In connection with the growth of competitiveness of agriculture, forestry and fishery in the foreign markets, this particular sector s share in export revenues has increased. Indicators of this sphere in GDP has reached 5.5 %. In comparison with the previous year, real growth was observed in agriculture, forestry and fishery (5.8%), construction sector (20.0%) and service sectors (6.5%). GDP per capita has exceeded USD Overall employment structure (2011) Source: Ministry of Economic Development Incomes of population. In 2011 population incomes increased by approximately 19.6 %, amounting to 30633,5 mln. manats, average nominal salary increased by 9.5 % amouting to 363 manats. As a result of actions aimed at reduction of poverty, its rate decreased to 7.6 %, unemployment rate decreased to 5.4 %, number of employed reached 4375,2 thousand persons compared to the previous year (increase by 1.1 %). According to UN estimation, Azerbaijan held 91st position in High human development group out of 187 countries. Extractive Industries Transparency Initiative 23

24 Inflation in CIS and Baltic states (2011) Source: Central banks of the countries Belarus Uzbekistan 11.6 % Russia Kazakhstan Azerbaijan Armenia Moldova Georgia Tajikistan Kyrgyzstan Estonia Ukraine Latvia Lithuania 8.4 % 8.4 % 7.9 % 7.8 % 7.6 % 6.5 % 6.5 % 5.7 % 5.1 % 4.6 % 3.4 % 3.2 % Financial sector: Stability in financial sector remained, inflation was kept at onefigure level (average 7.9% by the end of the year). Average annual inflation rate in Azerbaijan was lower than the one forecasted by International Monetary Fund for Alongside with it, rate of national currency remained stable against foreign currency. According to Central Bank of Azerbaijan, mainly external factors entailed price increases during the year. 24

25 52.3 % Strategic currency reserves increased by 38.1 % comparing to previous year and amounted to 40,3 bln. dollars, the most part of which formed from SOFAZ assets. Thus, for December 31, 2011 overall structure of strategic currency reserves comprised SOFAZ currency reserves for amount of USD 29,8 bln. and Central Bank currency reserves for amount of USD 10,5 bln. Strategic currency reserves (2011) Source: SOFAZ and Central Bank Currency reserves of SOFAZ Currency reserves of CBAR 26.1 % 73.9 % Extractive Industries Transparency Initiative 25

26 Fiscal sector. As prices for crude oil exceeded the budget indicators during the year (USD 80) and budget expenses were lower than the forecasted volume, state budget was accomplished with proficit, while the budget deficit in GDP equated to 0.6%. 58.5% of the budget expenses were financed by transfers from SOFAZ. Main indicators of State budget of the Republic of Azerbaijan, bln. AZN Source: SOFAZ and Ministry of Finance Budget revenues Budget expenses Budget deficit (-)/proficit (+) Oil Fund transfers Investments. In 2011 the volume of investments significantly increased compared to the previous year on account of foreign sources, as well as domestic investments. Total investments directed to the main capital increased by 27.3% and made up AZN 12776,4 mln., the major part of which was constituted by domestic investments. In 2011 the volume of domestic investments reached AZN 10260,4 mln. (real growth reached 35.0%), while the volume of foreign investments reached AZN 2516,0 mln. (real growth reached 3.2%). Domestic investments 80.3% 26

27 In addition, investments into non-oil sector significantly increased, exceeding growth rate in oil sector and reached 41.2 %. For oil sector this indicator was 0.2 %. Though non-state investments formed 40 % of overall investments, their volume scaled up comparing to state investments (35.6 % in comparison with the previous year) and made up AZN 5294,1 mln. Foreign trade. Due to increase of oil prices in the global market in 2011, share of oil export in foreign trade substantially increased. Nevertheless, growth was observed in non-oil sector export (particularly, fruit and vegetables, products of chemical industry). Foreign trade turnover exceeded USD 36 bln. and foreign trade balance accomplished with proficit at rate of USD 16,8 bln. (Source: SSCRA). Total investments into main capital (2011) Source: Ministry of Economic Development SOFAZ s revenues came to a total of AZN 15628,3 million (USD 19799,9 million) in They consisted of the proceeds from sales of the Republic of Azerbaijan s share of hydrocarbons, Republic of Azerbaijan s share in dividends from oil and gas projects, transit fees, bonus payments, acreage fees, revenues from management of the Fund s assets, revenues originating from price adjustments under the Phase I of the ShahDeniz project and other revenues % Foreign investments Extractive Industries Transparency Initiative 27

28 Sources of formation of SOFAZ revenues in 2011 (mln. US dollar) Source: SOFAZ Revenue from profit oil and gas sales ,5 (97.6%) Exchange rate for AZN in 2011 Source: Central Bank 1US dollar January February March April May June July August September October November December Average exchange rate for the year: 1 US dollar= 0,7897 AZN 28

29 Revenues from management of the Fund s assets 224,8 (1.1%) Price adjustment revenues under Shah Deniz Phase I 128,1 (0.7%) Dividends from BTC Project 84,5 (0.4%) Bonus payments 20,0 (0.1%) Transit fee revenues 9,5 (0.1%) Other revenues 1,8 (0.009%) Acreage fees 1,7 (0.008%) Extractive Industries Transparency Initiative 29

30 Multistakeholder Group

31 History. Considering that Azerbaijan is the first ever country to complete validation, the EITI s quality assurance process which verifies compliance with EITI principles and criteria; according to the Validation results, the EITI Board designated Azerbaijan as a EITI Compliant country. Afterwards, the Validator provided recommendations on further enhancement of the EITI process in Azerbaijan. Taking this into account, MSG comprised of the Memorandum Parties (Group of Companies, NGO Coalition and Committee) was established in 2010 with an intention to further improve the EITI process, permanently implemented in Azerbaijan within the framework of the Memorandum and to ensure stronger and more effective oversight and management on the EITI process. Agreement on establishment and activity of MSG was signed in connection with the EITI implementation in Azerbaijan. Structure. Each of the parties appoints 3 primary and 1 alternative members each having equal rights to the MSG (total 9 primary members + 3 alternative members). Chairman of the Committee becomes the member of MSG on behalf of Azerbaijan government and chairs these meetings. EITI reports are being disclosed at MSG meetings. BP was elected as a coordinator of the Group of Companies to the MSG by the Group of Companies. Meetings of the MSG are held at least four times a year. The group has held 11 meetings, 5 of them in Extractive Industries Transparency Initiative 31

32 The functions of MultI-stakeholder group: prepares and approves Work Plans on EITI; improves and approves the reporting templates on EITI; prepares proposals on amendments and supplements to the MOU; selects and appoints the audit company for reconciliation (or checking) of EITI reports and the company (validator) for the validation of EITI implementation process in the country; initiates the proposals regarding the development and improvement of the initiative, communicates with the EITI parties, international institutions and develops the recommendations. The activities of Multi-stakeholder Group The first meeting of the Multi-stakeholder Group was held on February 04, The members of the group approved 2010 Work Plan of the MSG at the meeting. The EITI NGO Coalition presented its Opinion on the government`s EITI report covering the first six months of 2009 and Independent Accountants Opinion; At the meeting held on May 14, 2010 Committee on EITI disclosed the Government s report on total receipts from extractive industries for the year 2009 audited by Moore Stephens. The report also includes the Auditor s opinion based on analysis of individual reports of extractive industry companies; 32

33 In addition to the data from the companies operationg in oil and gas production in Azerbaijan, for the first time the report covering 2009 reflected data from the company operating in gold and silver production. Unlike previous reports, the mentioned report presented associated and natural gas separately, as well as the taxes on various types, that expanded the database submitted in the report. Work group In 2004, Memorandum of Understanding (including its 5 appendices) was signed among the parties of EITI. Since that period, improvements and changes took place in the field of EITI implementation in Azerbaijan. The reporting system was modified, the classification of the data disclosed in EITI reports developed, the number of the companies joining the Initiative increased, the company producing precise metals also joined the Initiative (information about gold and silver is also disclosed in reports along with the other data), annual Work Plans were drawn up and their implementation started, also MSG was established. Since all changes were not reflected in the Memorandum the document regulating the EITI implementation in Azerbaijan it was necessary to prepare a new edition. To that end, the Work Group consisting of the members of MSG (2 representatives from EITI NGO Coalition, 2 representatives from the Group of Companies and 1 representative from the Committee on EITI) was established. EITI Secretariat coordinates the activities of the Work Group. Numerous meetings of the Work Group have been held during The first draft version of the new Memorandum was prepared as a result of regular discussions. Works continue in this direction. Extractive Industries Transparency Initiative 33

34 At the meeting held on June 29, 2010 the EITI NGO Coalition presented its opinion on the government s EITI report for 2009 and Independent Accountants Opinion; At the meeting held on October 25, 2010 Committee on EITI disclosed the report on government s total receipts from extractive industries for the first 6 months of 2010 audited by Moore Stephens. The report also includes the Auditor s opinion Memorandum of UnderstandIng should be renewed. It Is connected with the necessity of the further deepening of EITI In AzerbaIjan. That Is, provision of the companies IndIvIdual disclosures, delegation of the certain powers specified In MOU to MSG IN CONNECTION WITH ITS ESTABLISHMENT (for Instance, the selection of audit companies), the actual and expected CHANGES In the report forms, TRANSITION from semi-annual reporting SYSTEM to the annual reporting SYSTEM and other Issues. In order to build confidence in EITI process at the initial stage of EITI implementation in Azerbaijan, two reports used to be published semi-annual and annual. Taking into consideration the achievements gained in the field of EITI implementation in Azerbaijan in the present conditions and disclosure of solely annual reports by other EITI implementing countries. MSG decided to disclose the EITI reports starting from 2011 on annual basis unlike the previous years. based on analysis of individual reports of extractive industry companies participating in the EITI process in Azerbaijan; At the meeting held on November 12, 2010 the EITI NGO Coalition presented its opinion on the EITI report of the government covering the first 6 months of 2010 and Independent Accountants Opinion. The members of the group have approved the Work Plan of the MSG for Work Group (1 representative from each party) was established for preparation to National Exhibition on EITI held within the framework of the V EITI Global Conference in Paris; SabIt BaghIrov Member of EITI CoalItIon and MSG 34

35 As a member of MultI- STAKEHOLDER Group we think that It plays an essential role In the ImplementatIon of EITI In AzerbaIjan. MsG enables NGOs to hold discussions concerning the certain matters that are significant for the ImplementatIon of EITI In AzerbaIjan AND ALLOW them TO EXPRESS THEIR OPINION to companies. JamIla HadIyeva Statoil, Senior Consultant on Government Relations and Public Affairs, alternative member of MSG. At the meeting held on May 20, 2011, after discussion of material payments in other fields of extractive industry of Azerbaijan it was concluded that all material payments are covered in Azerbaijan within the framework of EITI; At the meeting held on June 20, 2011 Committee on EITI disclosed the report on government s total receipts from extractive industries for 2010 audited by Moore Stephens. The report also includes the Auditor s opinion based on analysis of individual reports of extractive industry companies; At the meeting held on September 15, 2011 the EITI NGO Coalition presented its opinion on the government s EITI report covering 2010 and Independent Accountants Opinion; The last meeting of MSG for 2011 was held on November 18, Work Plan of MSG for 2012 was approved at the meeting. Extractive Industries Transparency Initiative 35

36 36 EVENTS

37 Global Conference in Paris On March 2-3, 2011 EITI V Global Conference was held in Paris, France. The delegation headed by Executive Director of SOFAZ, Chairman of the Committee on EITI, member of International Board on EITI Shahmar Movsumov attended the event. On the first day of the conference participants discussed various issues concerning EITI Board activity, which included re-election of Board, achievements gained in EITI sphere. Azerbaijan was re-elected to the Board and Shahmar Movsumov became the alternative member of EITI Board. National Exhibition on EITI was organized as well within the frame of the conference. Delega- Extractive Industries Transparency Initiative 37

38 INCREASE OF THE POPULATION S AWARENESS ABOUT EITI Is constantly carried out by THE State OIl Fund of AzerbaIjan through a number of means. In order to enlighten the public about the InItIatIve and Its activity local and InternatIonal conferences, seminars and meetings ARE ARRANGED, InformaTION booklets ARE DESIGNED AND distributed, articles and reports ARE published In the newspapers, InformatIon IS released ON the EITI website and pressconferences ARE HELD. DelIvery of InformatIon regarding the EITI IMPLEMENTATION Is one of our priority objectives and the OIl Fund along with the other participants will continue to realize these ACTIVITIES In the future. FarId FarzalIyev RepresentatIve of the EITI SecretarIat tion from Azerbaijan participated in the National Exhibition. Video and photo materials about Azerbaijan, a number of brochures and booklets on implementation of EITI in Azerbaijan, and souvenirs were presented to conference participants. 38

39 Extractive Industries Transparency Initiative 39

40 Seminar with the participation of Crown Prince of Norway Haakon held in Baku A seminar EITI: Transparency, Accountability and Good governance in Petroleum Revenue Management hosted by the State Oil Fund of the Republic of Azerbaijan and the Royal Norwegian Embassy was held on 7 June 2011 in Baku. 40

41 Crown Prince Haakon of Norway: Azerbaijan and Norway have implemented the Extractive Industries Transparency Initiative, and share the vision of making the EITI a global norm. Improving transparency and accountability in the extractive industries is an important means of ensuring sound revenue management. EITI has created a platform for dialogue between governments, oil companies and civil society. The multi-stakeholder structure is a fundamental basis for the success of the initiative. Civil society has an equal role to play. Both countries have established national oil funds that play a key role in managing oil and gas revenues. We therefore have an excellent basis for sharing experience and lessons learned and discussing expanded cooperation in this field. Establishment of the State Oil Fund is worth to be praised. Norway sincerely wishes consistent dialogue with Azerbaijan in issues of regional security and sustainability, human rights, democracy for the sake of mutual benefit of our countries. I m pleased of cooperation between Azerbaijan and Norway in frames of Extracting Industries Transparency Initiative. Our countries apply joint efforts for providing transparency and good governance. We welcome Azerbaijan joining the initiative at the initial stage and being an exemplary country in this sphere. Extractive Industries Transparency Initiative 41

42 A delegation headed by His Royal Highness, Crown Prince Haakon of Norway, Executive Director of SOFAZ - Shahmar Movsumov, ambassadors of foreign countries, representatives of the government of the Republic of Azerbaijan, local and foreign extractive companies operating in Azerbaijan, and nongovernmental organizations attended the seminar. During the seminar participants delivered speeches on the importance of EITI, achievements and experience of Azerbaijan and Norway in this field. 42

43 Oil conference on the occasion of 20th anniversary of State Independence On November 2, 2011 SOFAZ hosted conference State Oil Fund in the National Oil Strategy dedicated to 20th anniversary of State independence of the Republic of Azerbaijan. The following subjects were discussed at the conference: State Oil Fund as an integral part of the National Oil Strategy, Investment policy of the State Oil Fund: principles, current trends and future priorities, Projects financed by the State Oil Fund: goals and outcomes and Implementation of Extractive Industries Transparency Initiative (EITI): achievements and perspectives. The event was attended by representatives Extractive Industries Transparency Initiative 43

44 of the government of Azerbaijan, ambassadors of foreign states, representatives of international organizations, foreign and local extractive companies, non-government organizations, as well as independent foreign experts. Exchange of experience Visit of Ghana delegation to Azerbaijan Over the last years Ghana, a country implementing EITI in the non-oil sector (gold, diamond, etc.), decided to include to the Initiative its oil sector after the discovery of oil fields. In this regard, the country needed to learn the experience of one of the EITI Compliant countries successfully implementing the Initiative. Success gained by Azerbaijan in the direction of the Transparency Initiative was the reason why Ghana s Multi-stakeholder Group and the representative of GIZ international organization visited our country on November 19-27, During their visit the members of the delegation held numerous meetings with the representatives of extractive industry companies in Azerbaijan, EITI NGO Coalition, SOFAZ management, the EITI Secretariat, Moore Stephens audit company which conducted analysis and reconciliation of EITI reports in Azerbaijan. Within the course of these meetings parties discussed in detail the present situation in the oil and gas sector of Azerbaijan, the national strategy, oil revenues management, EITI implementation mechanism in Azerbaijan and coordination structure, as well as the actual challenges and perspectives in this sphere, the significance of EITI for the country and other aspects. Towards the end of their stay, mem- 44

45 bers of delegation visited Sangachal terminal considered to be one of the largest integrated oil and gas processing terminals in the world. Located 55 km south of Baku, Sangachal terminal is one of the most essential objects in oil and gas industry of Azerbaijan. Sangachal terminal receives crude oil and gas extracted from the fields of Azerbaijan in Caspian Sea, provides its technological processing, preservation and export. EITI was the subject of discussion on Economical Forum program (ANS TV Channel) broadcasted on November 5, 2011 with the participation of Head of EITI International Secretariat J. Moberg, representative of Azerbaijan EITI Secretariat F. Farzaliyev and representative of EITI NGO Coalition S. Baghirov. Extractive Industries Transparency Initiative 45

46 Analysis of EITI reports ( ) 46

47 Reporting system on Extracting Industries Transparency Initiative in Azerbaijan and its establishment As per information for December 1, countries possessing rich mineral resources joined EITI. Among them, only 12 out of 26 countries accomplishing the Validation stage on EITI implementation succeeded to become EITI compliant 1. Azerbaijan is the first ever country which disclosed the EITI report, and the first country that went through Validation and became the Compliant country. Being the EITI compliant, Azerbaijan currently has the longest eight years experience in this field, as it joined the Initiative as a pilot country in Up to day Azerbaijan has disclosed 15 aggregated reports, 8 of which were annual 2. These reports cover periods from 2003 till The first report disclosed in 2005 was also the first in EITI history. Until 2011, reports used to be disclosed twice a year according to agreement between the parties 3. First reporting period covered the entire 2003 and 6 months of oil and gas companies operating in Azerbaijan joined reporting system for the first period 4. Afterwards, reports for 2005 were submitted by 22 companies. At the present time, 31 companies joined EITI implementation and operation sphere enhanced from oil-gas industry to mining industry 5. All compa- nies engaged in both sectors of economy (oil-gas and mining) have been involved to the Initiative. According to Memorandum signed between the parties in 2004 only internationally recognized audit company is entitled to reconcile EITI reports in Azerbaijan. Reconciliation of the first report was assigned to Deloitte & Touche company. The audit provided by the company has only a reconciliation character. Except for one disclosed report, all of them were examined by Deloitte & Touche and Moore Stephens companies 6. Reports for 2006, 2007, 2009 and 2010 were assigned to Moore Stephens company. 1. Refer to : www. eiti.org 2. The research to be accomplished on May 1, In 2010 by Multi-stakeholder Group s decision reports are disclosed not on semi-annual (6 months and annual), but only on annual basis. First such report was released in June, 2011 and covered companies haven t submitted reports for that period. 5. Company engaged in gold extraction (i.e. non-oil sector) in Azerbaijan signed Memorandum of Understanding on February 25, 2009, thus declaring joining EITI. 6. Mak Azerbaijan JV was involved for report reconciliation only in Extractive Industries Transparency Initiative 47

48 Payment for reconciliation services was made under the principle of rotation amongst government and companies. SOFAZ financed the first report s reconciliation on behalf of the government of Azerbaijan. In accordance with MOU, the Auditor s Selection Group (SG) has been formed with the representation of parties till 2010 in order to reconcile reports. According to requirements of MOU, SG members were announcing tender for the following reporting period and audit companies were invited for the competition. Group was sending notifications to internationally recognized and reputable audit companies. Afterwards, selection procedure among audit companies responding the tender request in set forth terms and deadlines launched. Experts conducting the events state that results are successful. People now are more Informed about the principles, criteria and requirements of EITI, they are aware of the transparency InItIatIve and participate In the events more actively. SevIl Yuzbasheva EITI CoalItIon s CouncIl CoordInator The activities of auditor and validator companies in Azerbaijan satisfy us. These are the companies having international reputation and distinguished for the quality of works. That s why normal relations of EITI NGO Coalition with those companies are observed in the process of EITI implementation. Gubad Ibadoglu Member of EITI NGO Coalition and MSG At present MSG conducts the aforementioned process. After the opening of bid package, each proposal is evaluated separately based on a number of criteria. Winner is determined after the overall evaluation. Upon delivery of the official note to the winning company, the auditor company receives reports from companies and the government in a specified period of time (annual reports shall be submitted till March, 15). Reports received from the companies are reconciled with the government s report after their aggregation. In case of discrepancies, audit company applies to parties for clarification and prepares comments on discrepancies on the basis of explanations given by the parties. In the end, Audit Company s opinion is disclosed on behalf of Independent Accountants. 48

49 Independent Accountants Opinion prepared by Audit company has been subject to disclosure at the general meetings of MOU parties till the formation of MSG in Currently, IAO is presented at the meetings of MSG within the timeframe specified in Work Plan. After the approval of Opinion, parties jointly prepare and publish press-releases. Government s report and IAO are published on SOFAZ and EITI websites. Afterwards, Analytic Group formed within the EITI NGO Coalition analyzes IAO and reports, then prepares Alternative Opinion not later than within 1 month. Coalition primarily discuss the Opinion at its Council Meeting and after the adoption present it at the meeting of MSG on behalf of EITI NGO Coalition. During this presentation, attention is directed to the recommendations specified in the opinion of EITI NGO Coalition and representatives of Committee on EITI and Group of Companies express their viewpoints on each recommendation. After the comments and suggestions of the parties on the Opinion, certain proposals are prepared on its basis for the next reporting period, or Work Group is formed with the participation of the parties members for preparation and discussion of these proposals. Disclosures on payments during EITI implementation in Azerbaijan are of individual nature. Available reports are comprised of information on bonus, dividends, profit taxes, mining taxes, share from profit oil and gas sales. In connection with detalization of payments reflected in the report, a number of changes has happened. Hence, actions were taken on improving reports in separation of associated gas from natural gas, disclosure of other taxes by types, government s entitlement in gold and silver production and other indicators. Thus, the table characterizing situation on report submission in Azerbaijan is given below. (Table 1). General characteristic of Azerbaijan EITI Reporting System Table 1 EITI reporting period Reports are reconciled Deloitte/Moore Stephens/Mak Azerbaijan Responsible for payment Government/Companies 7 Disaggregated reporting by companies Disaggregation of payments Complete audit Reconciliation of indicators n/a Available n/a Available Number of reporting companies 31 Do all companies report on voluntary basis? Yes 7. Since 2011 auditor s expenses for reconciliation of reports are paid solely by SOFAZ. Extractive Industries Transparency Initiative 49

50 As follows from the table 1, all companies operating in oil-gas, gold and silver sector in Azerbaijan joined EITI. Currently, their number exceeds 30, although for the first time only 21 companies disclosed EITI reports after the joining of Azerbaijan to the Initiative. All companies that joined EITI continue reporting on voluntary basis. Though the auditing of reports in Azerbaijan practice is held by reputable international audit companies, EITI reports are only examined through reconciliation and if necessary (in case of discrepancies), relevant researches are held. Such actions are not of complete audit nature (finance, operational, etc). System of EITI reporting indicators, quality evaluation and quantitative analysis Indicators included into Azerbaijan EITI reports may be classified into 3 groups: Indicators characterizing Azerbaijan government s entitlement in oil-gas and gold-silver extraction; Main types of taxes (profit, royalty, land tax, etc) paid by local and foreign companies operating in extractive industries in Azerbaijan; Non-tax payments (bonuses, receipts from price difference, dividends, license and concession fees, etc). Usually, Azerbaijan government s report (Report no. C) reflects its share, profit from group of taxes, royalty and other taxes, and bonuses are included into non-tax payments section. Indicators reflected in EITI reports of Azerbaijan may be classified into 2 groups by measure units: in kind indicators related to Azerbaijan s entitlement in such extractive industries as oil, gas, gold and silver production; in cash indicators related to tax and non-tax payments. Before the quantity analysis of Azerbaijan EITI reports, it is necessary to become familiar with quality analysis on its indicators. To that end, we should draw up analytic table based on indicators on evaluation of EITI reports (Table 2): 50

51 Table 2 Indicators Result 1 Are reports disclosed on regular basis? Yes 2 Has the reporting period been specified? Yes 3 Do reports cover the most important indicators? Yes 4 Is auditor company reconciling reports internationally recognized? Yes 5 Does audit company gives explanation on discrepant information during reconciliation of indicators? Yes 6 Are reports publicly accessible? Yes 7 Are reports clear and comprehensible? Yes 8 Does civil society prepare alternative opinion for reports? Yes 9 Are companies' individual reports disclosed? No Evaluations of EITI reports in Azerbaijan based on these indicators proves that all indicators of EITI reporting, except disclosure of individual reports, are satisfactory in Azerbaijan. As for quantity analysis of reports, let s become familiar with its following information sources: Reports on total receipts of the government of Azerbaijan from extractive industry; Reports on payments of foreign extractive industry companies to the government of Azerbaijan; Reports on payments of local extractive industry companies to the government of Azerbaijan; Independent Accountants Opinion (Audit company); Statistic data of competent state bodies of the Republic of Azerbaijan on revenues, payments received from extractive industry. It should be noted that EITI reports of Azerbaijan reflect in kind indicators for 2 main types of products: oil-gas and gold-silver. Let s become familiar with dynamic of products received every year by government and shown in EITI reports for Calculations show that the government s profit oil entitlement in foreign companies production for is as follows: Extractive Industries Transparency Initiative 51

52 Government s profit oil entitlement in foreign companies production, mln. barrels 215, , ,228 6,600 6,700 14,300 19,036 30, As seen from EITI reports, revenues from oil for has positive trend. Oil extraction for the mentioned period increased from 6 mln 600 thousand barrels to 215 mln 390 thousand barrels per annum. Government s share in gas production within foreign companies production for the analyzed period is as follows: Government s entitlement in foreign companies gas production, thousand cubic meters

53 As it seen from diagram, government s entitlement in gas production by foreign companies has positive dynamic, as well. Though such growth dynamic broke in 2010, generally, significant increase was observed for that period. Gold production in Azerbaijan launched in In the relevant contract signed for the term of 30 years Azerbaijan government s participation share is 51%, while USA`s RV-Investment company is 49%. According to agreement, the com- Aghyurd, Shakardara, Kalaki), Soyudlu, Gizilbulag and Vejnali perspective gold ore fields (under PSA conditions). Indicators related to gold and silver extraction have been included into EITI reports since 2010 (report covering 2009). As a result, Azerbaijan International Mining Company declared its joining to EITI. Below mentioned diagrams are drawn based on EITI reports for 2009 and As seen, gold extraction exceeded silver extraction during the mentioned years. Government s entitlement in foreign companies gold and silver production, thousand ounces Gold Silver 8,389 5,528 1,439 0, pany obtained the right to explore and exploit Gadabay, Gosha, Ordubad group (Piyazbashi, Along with in kind indicators reflected in EITI reports, analysis of in cash indicators shows that Extractive Industries Transparency Initiative 53

54 different dynamics are observed in the analyzed period. Thus, the situation in the sphere of bonus payments to the government varied from year to year. Bonuses paid to the government by foreign companies, mln. USD 58,6 68,0 21,6 1,0 2,0 3,482 1,0 2, Profit taxes paid to the government by foreign companies increased since 2006 and this growth continued till Afterwards, decrease and then increase again was observed in these indicators. Let s have a look at the situation in this field. 1942, ,709 Profit taxes paid to the government by foreign companies, mln. AZN 972, , , Payments of local companies also occupy significant position in taxes received by the government. During analysis of EITI reports, dynamic of profit taxes, mining tax (royalty) and other taxes received from local companies varied. 54

55 As seen, the highest payment of local companies on profit taxes falls on In 2010 the amount on this indicator received by the government from foreign companies made up 230 millions 822 thousand manats. Profit taxes paid to the government by local companies, mln. AZN 329, , ,822 98,222 44,26 66,74 9,38 29, Dynamic of mining tax (royalty) for is shown on table below: Receipts of government on royalty (mining tax), mln. AZN 392,2 114,8 169, , , , ,691 49, Extractive Industries Transparency Initiative 55

56 As follows from the diagram, highest payment on royalty was recorded in After the sharp decrease observed in 2005, period of constant payments started in Situation with other taxes, including price difference was as follows: Other taxes paid to the government by local companies including price difference, mln. AZN 437, ,96 164,06 246, ,91 298, ,852 80, In conclusion, let s have a look at the statistic of discrepancies between EITI reports and calculations based on IAO. Years Errors Local company Foreign company Government errors errors errors errors errors errors errors errors As it is seen from the table, most errors causing discrepancies in EITI reports are made by foreign companies. Government committed only 2 errors in In this year s report the government incorrectly indicated both the volume of associated and natural gas. During the analysis of errors it was found out that they occurred due to natural or technical causes. Natural errors originated from different measurement units applied for measuring the volume of natural gas (foreign companies reported the volume measured in Normal Cubic meters at 0 C, whereas the government reported the volume measured in Standard cubic meters at 20 C ) and transit fees paid to government by itself. Technical failures included difference between profit tax calculated for companies and actually paid ones, 56

57 PartIes ARE VERY ACTIVE In the working process. SInce there are specific peculiarities In the process, a number of questions AROSE at the INITIAL stage. At the moment, the parties take joint EF- FORTS to resolve these Issues. delayed tax payments, reporting of payments between companies as payments to government, etc. However, after confirmation of all errors, regardless of their nature, it was found out that no discrepancies between receipts of the government and payments by companies during in EITI reports was recorded. Zaur FatIzadeh Head of SpecIal Regime Tax ServIce Department under the MInIstry of Taxes, Member of Committee on EITI and MSG Extractive Industries Transparency Initiative 57

58 MSG members

59 Committee on EITI: Shahmar Movsumov Feyzulla Muradov Zaur Fatizadeh Gazi Hajikarimov Executive Director of State Oil Fund of the Republic of Azerbaijan, Chairman of the Committee on EITI, Chairman of MSG (January 2010 December 2011) Representative of the Ministry of Industry and Energy (January 2010 December 2011) Representative of the Ministry of Taxes (January 2010 December 2011) Representative of the Ministry of Ecology and Natural Resources (alternative) (January 2010 December 2011) Group of Companies: Bakhtiyar Akhundov Anvar Gasymov Timothy Martin Representative of Chevron (January 2010 December 2011) Representative of State Oil Company of Azerbaijan Republic (January 2010 December 2011) Representative of Exxon (January 2010 June 2010) Ayla Azizova Representative of BP (June 2010 June 2011) Araz Yusubov Representative of BP (June 2011 December 2011) Baiba Anda Rubesa Willy Egset Representative of Statoil (alternative) (January 2010 June 2011) Representative of Statoil (alternative) (June 2011 December 2011) EITI NGO Coalition: Sabit Bagirov Gubad Ibadoglu Fuat Rasulov Sahib Mammadov Alimammad Nuriyev Representative of EITI NGO Coalition (January 2010 December 2011) Representative of EITI NGO Coalition (January 2010 December 2011) Representative of EITICoalition (January 2010 February 2011) Representative of EITI NGO Coalition (February 2011 December 2011) Representative of EITI NGO Coalition (alternative) (January 2010 December 2011) Extractive Industries Transparency Initiative 59

60 Non-government Organizations and Companies Participating in Azerbaijan EITI

61 List of the foreign and local companies operating in the sphere of extractive industries of the Republic of Azerbaijan 1. BP 2. State Oil Company of Azerbaijan Republic 3. Total 4. ITOCHU Oil 5. Statoil 6. TPAO 7. Gobustan Oil & Gas 8. Exxon 9. ConocoPhillips 10. Hess 11. Devon Energy 12. Lukoil 13. Chevron 14. Petro-HongKong-Pirsaat Oil Limited 15. Salyan Oil 16. Karasu Operating Company 17. Shell 18. Middle East Petroleum 19. Ansad Petrol JV 20. Shirvan Oil JV 21. Azgerneft JV 22. Inpex 23. Binagadi Oil Company 24. Rafi Oil F.Z.E. 25. Naftiran Intertrade Co. (NICO) 26. Absheron Investments 27. GDF Suez Azerbaijan International Mining Company Neftchala Operating Company Shirvan Operating Company Bahar Energy 5 1. Joined EITI in , 3, 4. Joined EITI in Joined EITI in Extractive Industries Transparency Initiative 61

62 Members of Coalition for Increasing Transparency in Extractive Industries 1. Development of Society and Civil Relationships Social Union 2. Eco-Reneissance 3. Democratic Institutions and Human Rights Social Union 4. Eurasian Lawyers Association 5. Carpet World Association (Guba) 6. Azeri -Ellada Intellectual Centre 7. Women s Problems Research Centre 8. Caucasus International Centre for Strategic Researches 9. Social Initiatives and Human Rights Social Union 10. Centre for Economical and Political Researches 11. Economical and Social Development Centre 12. Support for Youth s Scientific Development Social Union 13. Human Rights and Enlightenment Social Union 14. Progressive Social Development Social Union 15. Economical and Ecologic Researches Centre 16. Support Centre for Democratic Election Social Union 17. Democratic Values Protection Fund 18. Social Financial Monitoring Centre 19. Scientific-Technological Progress and Education Fund 20. Social Economical Researches Social Union 21. Gender Equality Social Union 22. International Ecoenergy Academy 23. Progress Social Researches Centre Social Union (Imishli) 24. Journalists in Extreme Situations Social Union 25. Society for Democratic Reforms 26. Multimedia Informationand Technology Centre 27. Political Pluralism Institute 28. Region Ses newspaper 29. Humanitarian Researches Society 30. Democracy Monitoring 31. Mine Victims Society 32. Towards Healthy Life Social Union 33. Dalgha Youth Movement 34. Development of Refugee and Internally Displaced Women 35. Dalgha Ecology and Nature Preservation Social Union 36. Back to Native Land Social Union 62

63 37. Democracy and Women Initiatives Social Union 38. Democratic Development and Economical Cooperation 39. Social Strategy and Analytic Researches Social Union 40. Helping to Preservation of Ecological Environment Social Union 41. Modern Development and Legal Assistance Centre 42. Regional Development and Human Rights Social Union 43. Institute of Complex Problems in Transportation 44. Free Consumers Union 45. Azerbaijan Construction Association 46. Progress Social Union(Ganja) 47. Solidarity Between Women 48. Democratic Reformist Youth Social Union 49. The Greens Movement 50. Economical Researches Centre 51. Buta Humanitarian Children s Fund 52. Regional Education 53. Regional Human Rights and Social Researches Centre 54. Guzaran Social Researches Centre 55. Islam, Democracy and Human Rights Centre 56. Ekoleks organization 57. Earth s friends/azerbaijan 58. Umid Humanitarian and Social Support Centre 59. Karabakh Regional Agricultural Association Social Union 60. Young Lawyers Union 61. Youth Development Centre 62. Khilaskar Social Union 63. Finance Transparent Budget Social Union (Imishli) 64. Media Development Centre 65. Democratic Reforms Centre 66. Intellectual Economists Club 67. Echo International Journalist Researches Centre 68. Aran Ecologic Education Social Union 69. Civilization Monitoring and Researches Social Union 70. Political Culture Centre of Azerbaijani Women 71. Expert Economy Magazine 72. Bilik (Ganja) 73. Helping to Democracy Social Union 74. Citizen s Enlightenment Social Union 75. Young Generation s Enlightenment Social Union 76. Galajak Inam Care for People in Need Social Union 77. Citizen s Labour Rights Protection League 78. Women s Rights Protection League 79. Yevlakh Regional Development Centre Social Union (Yevlakh) Extractive Industries Transparency Initiative 63

64 80. Free Teachers Union 81. Ruzgar Ecological Social Union 82. Legal Enlightenment of Youth in Regions Social Union 83. Helping Centre to Young Journalists Social Union 84. Civil Initiatives and Laws Improvement Centre Social Union 85. Human Rights-2003 Social Union 86. Democracyand NGO s Development Resource Centre (Nakhchivan) 87. Young National Democrats Union (Nakhchivan) 88. Economic and Legal Enlightenment Centre of Journalists 89. World of Women Social Union 90. Ganja Children s Fund 91. Constitution Fund 92. Care for Aged Intellectuals Social Union 93. Society for Democratic Reforms 94. XXI Century Education Centre Social Union 95. Caucasus Media Researches Centre 96. Free Person Human Rights Protection Centre 97. Economic Technologies Institute 98. Democratic Initiatives Support Centre 99. Committee for Protection of Oilmen s Rights 100. Centre for Helping to Democratic Election 101. Legal Initiatives Centre Social Union 102. Azerbaijan Football Development Centre Social Union 103. Democracy and Ecological Balance 104. Election Researches Centre Social Union 105. Agrarian Industry Engineers Social Union 106. Researches for International Relations 107. Merchants and Manufacturers Union 108. Education for Aged Association 109. Business Researches Centre attached to Khazar University 110. Oil Researches Centre 111. Karabakh Forced Migrants Union 112. Saniya Humanitarian Information Analytical Agency 113. Electronic Election Social Union 114. Economic Innovation Centre 115. Centre for Equal Opportunities 116. Inam Pluralism Centre 117. Centre of Helping to Civil Society Building (Agstafa) 118. HVA Regional Division (Ganja) 119. Azerbaijan Healthy Development Social Union 120. Training and Monitoring Centre on Social and Economic Rights 121. ELS Independent Researches Centre 122. Development View Research Centre Social Union 64

65 123. Care for Karabakh Disabled People Society 124. Eco-World Social Union 125. Human Rights XXI Century-Azerbaijan Fund 126. Youth Club Social Union 127. National Ecological Forecasting Centre 128. Aran Human Rights Resource Centre 129. Free Economic Centre 130. Human Rights andpropaganda of Laws Social Union 131. Ulduz Electronic Organization 132. Support to Young Poets Social Union 133. Civil Society Institute Social Union 134. Economic Journalism Centre 135. Agyol Education of Youth Social Union 136. Researches Against Torture Social Union 137. Our Common House 138. Young Entrepreneurs Club Social Union 139. Regional Women Initiatives Social Union 140. Regional Human Rights and Media Centre Social Union 141. Digital Development Social Union 142. Regional Gender Centre Social Union 143. Zangilan Social Union 144. Water Producers Social Union 145. Ecological Balance Social Union 146. Karabakh Warriors Association 147. Road Construction Monitoring Centre 148. Regional Human Rights and Enlightenment Centre 149. Civilization and Enlightenment Social Union 150. Enlightenment connected with gene engineering Social Union 151. Mugan Human Rights Protection Social Union 152. Human Rights, Election and Press Monitoring in Democratic Development Individual Members 1. Arzu Soltan 2. Shabnam Bakirzadeh 3. Dunya Sakit 4. Elmidar Aliyev 5. Hijran Hamidova 6. Fikrat Huseynli 7. Zaur Ibrahimov 8. Samir Isayev 9. Shamil Movsumov 10. Jeyhun Musayev 11. Sadagat Pashayeva 12. Afig Safarov 13. Suheyla Seyidova 14. Ruslan Khalilov Extractive Industries Transparency Initiative 65

66 2011 Work Plan for implementation of Extractive Industries Transparency Initiative in the Republic of Azerbaijan Agreed by Multi-stakeholder Group Purpose Actions Implementation Period Executor Expected Outcome 1. Preparation and disclosure of the 2010 annual EITI report 1.1. Placing a tender announcement in the official government newspapers and the website of the State Oil Fund, inviting internationally recognized auditor to participate in aggregation of the annual EITI reports January 28th EITI Secretariat Regular disclosure of reports in compliance with the EITI principles 1.2. Sending invitation letters to the internationally recognized auditors to participate in tender 1.3. Selection of auditor for aggregation and analysis of EITI reports 1.4. Sending reporting forms to local and foreign companies February 1st February 23rd February 25th Government Comission, EITI Secretariat MSG Government Comission, EITI Secretariat 1.5. Signing agreement with the Auditor March 15th Government Comission 1.6. Submission of Government s, local and foreign companies reports to the selected auditor 1.7. Disclosure of EITI report and the auditor s opinion, publication of the report in the official state newspapers and on the websites of the State Oil Fund, the EITI Secretariat of Azerbaijan Republic, NGO Coalition and International Secretariat of EITI 1.8. NGO Coalition s presentation of its opinion about the reports to the MSG members, discussion of the reports and taking appropriate decisions by MSG April 11th June 20th September 15th Government Comission, Companies Group MSG, Auditor EITI Secretariat, NGO Coalition MSG, NGO Coalition, Auditor 66

67 Purpose Actions Implementation Period Executor Expected Outcome 2. Development of the EITI in Azerbaijan 2.1. Discussion on material payments in other areas of extractive industries of Azerbaijan May 20th NGO Coalition Improvement of the EITI process in Azerbaijan 2.2. Discussion on Revenue Watch Index improvement oportunities for Azerbaijan September 15th NGO Coalition 2.3. Discussion on a necessity for a special law on EITI implementation designed by the Coalition May 20th NGO Coalition 2.4. Discussion of the proposals to the Memorandum prepared by the Working Group (disaggregation of reports and other issues) May 20th MSG 3. Outreach initiatives to increase awareness about EITI process in Azerbaijan and abroad 3.1. Preparations for the National Exhibition to be held during the 5th EITI Global Conference in Paris, 2-3 March Discussion on preparations for the EITI international conference in Azerbaijan February 23rd February 23rd, May 20th MSG, EITI Secretariat, NGO Coalition MSG, EITI Secretariat NGO Coalition Increased awareness about EITI process in local and international society, peer learning 3.3. Discussion of the EITI report outcomes on TV channel June 30th MSG 3.4. Participation at the EITI events taking place abroad (conferences, seminars, trainings, exhibitions, exchange programs and etc.) İn the course of year MSG, EITI Secretariat, NGO Coalition 3.5. Conduction of journalist competition November 15th MSG, EITI Secretariat, NGO Coalition Note: All the suggestions should be communicated to all the MSG members not later than 10 days prior to the corresponding discussion. Extractive Industries Transparency Initiative 67

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71 Extractive Industries Transparency Initiative 71