Professional Documents
Culture Documents
Programme:
BP Experience in EITI: Azerbaijan Case Study
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Role of ‘Good Governance’
• Over the lifetime of a typical major oil or gas project the share of revenues
that 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 foster
economic growth and reduce poverty. Good Governance has multiple
features:
− 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 and
risks. 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 3
Importance of ‘Good Governance’ to BP
business:
• Companies such as BP have a legitimate and genuine desire to
see these revenues managed well in a transparent manner,
because:
− Substantial and growing proportion of our activity is based in
countries whose economies are heavily, and in some cases
overwhelmingly, dependent on oil and gas revenues;
− In the absence of good ‘revenue management’ and transparency the
impact of the ‘resource curse’ imposes costs on our business;
• − Transparency and good governance reflect BP’s values:
BP is committed to the principle of transparency, in the belief that improving accountability in the societies
where 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 revenue
management 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.
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Dimensions of transparency
6
EITI to date
7
Stakeholder engagement
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EITI: BP role and contribution
mbd
Pipeline Grozny 600
400
200
0
1998 2002 2006 2010 2014 2018 2022
Block WER
3534 Pipeline Georgia
Explorat Tbilisi
ion Caspian Sea
Supsa
Turkmenistan
Sangach
South al ACG Oil
BTC Pipeline Terminal Baku Production &
Oil Caucasus
Pipeline Gas Development
Azerbaijan
Shah Deniz
Gas
Erzurum Developmen
Turkey t
Inam
1998 - 2022 Gross Production Explorat
ion Alov
400
Exploration
350
300
250
mbd
200
Ceyhan 150
100
50
Iran
d.
Me ea 0
S 1998 2002 2006 2010 2014 2018 2022
Syria Iraq
0 100 200 300 km
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Azerbaijan Oil and Gas Revenues
18000
$50/bbl
16000
$40/bbl
14000
$30/bbl
12000
Azerbaijan
10000
$ million
GDP 2004
8000
6000
4000
2000
0
08
10
16
26
04
12
14
18
20
22
28
30
06
24
20
20
20
20
20
20
20
20
20
20
20
20
20
20
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
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EITI in Azerbaijan: history and milestones
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Looking ahead
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EITI Azerbaijan
Outputs
• MoU between all parties
• Regular reports that compare aggregated figures for companies and government by
payment type, e.g. royalties, taxes, production share
• Investigation and explanation of discrepancies by audit company
• Increased public debate on use of oil revenues
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EITI Azerbaijan: Lessons learned and
Challenges
• State oil company figures included but not audited
• Aggregated or disaggregated data?
• Massive increase in oil revenues in 2005 and 2006. GDP
growth 27% on 2005, but….
• Managing public expectations will be difficult
• Need to increase public debate on revenues outside of
Baku
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Thank you!!
Comments? Questions?
www.oilfund.az/search.php?get=EITI
for EITI Azerbaijan reports
www.eititransparency
for EITI country updates and forward plans
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