73037 www.ieiti.org.iq Iraqi Extractive Industries Transparency Initiative (IEITI) Reconciliation of 20 December 2011 cash inflows from the petroleum industry in Iraq in 2009 www.pwc.com/me Table of Contents ................................................................................................................................ Executive Summary................................ ...................................................... 3 ................................ ............................................. 5 Terms and Abbreviations ................................................................................................................................ ................................................................................................ Introduction................................................................ .................................................................. 8 ................................................................................................ Oil Sales Process ................................................................ ..........................................................13 ................................ ................................................18 Reconciliation Process ................................................................................................................................ ................................................................................................ Reconciliation of Reported Data................................ ................................................................ 23 ................................ ................................................ 34 Further Transparency ................................................................................................................................ ................................ ................................................................... 46 The Mining Industries in Iraq ................................................................................................ .................................................. 54 Lessons learned from this reconciliation ................................................................................................ ................................ ..................................................................57 Appendix 1 - Reporting entities ................................................................................................ .......................................................... 59 Appendix 2 - Instructions for completion of Templates ................................................................ ................................................................................................ Appendix 3 - Reporting Templates................................ ............................................................ 62 Iraqi Extractive Industries Transparency Initiative PwC Page 2 of 75 Executive Summary Iraqi Extractive Industries Transparency Initiative PwC Page 3 of 75 Executive Summary As part of the implementation of the Extractive Industries Transparency Initiative (EITI) in Iraq Iraq, a inflows involved in Iraq’s 2009 petroleum activities. This report reconciliation has been carried out on cash inflows summarizes the results of this reconciliation in addition to information related to the Oil and Gas Sector and Extractive Industry in Iraq. approximately 65 % of Iraq’s This report covers Iraq’s crude oil export sales as reported by SOMO which formed approximate federal budget and 95% of foreign exchange earnings for 2009. The report covers all payments made and revenues received with respect to crude oil exports during the financial year 2009 amounted to USD 41.3 billion buyers resulted from crude oil sales to 34 international crude oil buyers. The reporting discrepancies disclosed in this reconciliation have been explained by timing differences, or as c being the result of items initially omitted in certain parties’ reporting. The IEITI stakeholders’ council, together with representatives of the Iraqi civil society, have met several times and they have reviewed, and provided a commentary on, on the reporting templates. On 16 November 2011, represatatives of Civil Society Organizations (CSOs) held a meeting during which the draft report was presented to them and discussed, , and approved this report in its meeting held on 23November 2011. The Council has reviewed, discussed, G Despite some delays, all concerned Government entities and State Owned Companies s have fully participated in the process. Significant delays have been encountered in receiving information from some crude oil buyers. consist of the following parts: In summary, the reconciliation process consisted a. A reconciliation of data on crude oil quantities received by SOMO from North Oil Company and South Oil Company; b. A reconciliation of data on the amounts received from the buyers of the crude oil sales revenues as c reported by SOMO and the buyers of crude oil. 1, The table below shows a discrepancy of USD 1,090 billion between the data reported by SOMO and the buyers. Descpencaies have been explained through the reconciliation process. Amount report by Amounts reported by Explained Without reporting SOMO Buyers discrepancies from counterparty USD USD USD USD 41,249,682,456.5 40,159,269,633.4 (1,090,412,823.1) 0.0 This reconciliation exercise was the first of its kind to be undertaken in Iraq, although monitoring of oil exports has been carried under the auspices of the International Advisory and Monitoring Board (I (IAMB) since 2006. ial planning carried out in its preparation stage, a first reconciliation (using Irrespective of the extent of initial information reported by various entities) is likely to lead to unexpected challenges. In Iraq thethese challenges have mainly been related to:  Clarity on which entities are to be included in the reconciliation  e of information to be reported, Type reported, including production, exports and revenues paid and received,  Difficulties in interpreting and clarifying confidential information We expect that reporting will be more efficient in the future, as a result of the lessons learned during the 2009 process. Recommendations in this regard falls in the categories of planning, publicity of the initiative in terms of its roles and reporting guidelines and implementation of lessons learned from one other. one exercise to the other Iraqi Extractive Industries Transparency Initiative PwC Page 4 of 75 Terms and Abbreviations Iraqi Extractive Industries Transparency Initiative PwC Page 5 of 75 Terms and Abbreviations API The American Petroleum Institute gravity measure which indicates the density of oil. Barrel A quantity consisting of forty two (42) United States gallons under a pressure of one (1) atmosphere and a temperature of sixty (60) degrees Fahrenheit. BSA Board of Supreme Audit. Calendar Month or Month In respect of any month in a Calendar Year, a period commencing on the first day of that month and ending on the last day of the same month. Calendar Year or Year A period of twelve (12) consecutive months commencing with the first day of January and ending with the last day of December, according to the Gregorian calendar. Crude Oil All hydrocarbons regardless of gravity which are produced and saved from the Contract Area in the liquid state at an absolute pressure of fourteen decimal six nine six (14.696) pounds per square inch and a including asphalt, tar and temperature of sixty (60) degrees Fahrenheit, includin the liquid hydrocarbons known as distillates or condensates obtained from Natural Gas at facilities within the Field other than a gas plant. CBI Central Bank of Iraq Destination The place to which oil is shipped or directed. DFI Development Fund for Iraq Dinar or Iraqi Dinar or IQ The currency of the Republic of Iraq. Dollar or USD Dollar of the United States of America. Due date The date on which an obligation must be repaid. Export Oil A standard blend of crude oil of nearest quality to the Crude Oil stream produced from the Field, out of which a Contractor may lift at the Delivery Point for the value of its due Service Fees under the Contract. Export Oil Price The price per barrel of Export Oil that is Free on Board (FOB) at the Delivery Point. FRBNY Federal Reserve Bank of New York Government or GoI The Government of the Republic of Iraq. IEITI Iraq Extractive Industry Transparency Initiative IAMB International Advisory Monitoring Board. Internal consumption Oil used for domestic purposes. IOCs International Oil Companies LC Letter of credit. Loading Date The date of flanges of the relevant offshore loading terminal(s) in Iraqi and Turkish seaports where a Contractor may lift Export Oil for the value of its due and payable. LPG Liquid Petroleum Gas MoF Ministry of Finance of The Republic Of Iraq. Iraqi Extractive Industries Transparency Initiative PwC Page 6 of 75 Terms and Abbreviations MoO Ministry of Oil of The Republic Of Iraq. MIM Ministry of Industry and Minerals NOC North Oil Company of The Republic of Iraq. Production Measurement Point or The point within the Field as agreed by the Parties, where the volume and PMP quality of Crude Oil produced and saved from the Field is measured. Signature Bonus government, upon signing a The payment of a fee by an IOC to a host government cession license agreement with a national oil company or local oil concession company. SOC South Oil Company of The Republic of Iraq. TCF Trillion Cubic Feet SOMO Iraq Oil Marketing Company. An Iraqi entity established under and governed by the laws of Iraq. having Monopoly on oil exports Tax Year The period of twelve (12) consecutive months according to the Gregorian calendar for which tax returns or reports are required according to any applicable tax laws and regulations in Iraq. Iraqi Extractive Industries Transparency Initiative PwC Page 7 of 75 Introduction Iraqi Extractive Industries Transparency Initiative PwC Page 8 of 75 1. Introduction 1.1 Background: the EITI and Iraq The Extractive Industries Transparency Initiative (EITI) sets a global standard for transparency in the oil, gas and mining industries. EITI’s objective is to achieve, by the application of its principles and criteria within ard for review, analysis and publication of revenue flows between extractive implementing countries, a standard industry companies, and governments. In this way, EITI aims to promote transparency in order to prevent corruption and to provide citizens with a basis for demanding a fair use of revenue. Transparency is also I expected to attract and enhance Foreign Direct Investment(FDIs). The EITI in Iraq EITI. In May 2008, the government of Iraq formally committed itself to implementing the EITI EITI launch event in Baghdad, Prime Minister Norri Al Maliki declare In January 2010, IEITI declared Iraq's commitment he EITI International Board announced that Iraq had become an EITI Candidate country, after its to EITI. The meeting in Oslo in February of that year. reserv and 125 Tcf of gas reserves in 2010, making it the Iraq had about 143 billion barrels of proven oil reserves ( country with the third largest reserves in the world (10% , and the country with the of the world’s total reserves), largest oil reserves to implement the EITI to date. he EITI, the government of Iraq has committed itself to publishing all the As part of its implementation of the revenue from its export sales in the oil sector. International companies buying oil from Iraq will also have to multi publish what they have paid to the government. A multi-stakeholder council), made group (IEITI stakeholders’ council) society, will up of representatives from the Iraqi government, extractive industry companies and Iraqi civil society review the reported information, which will then be reconciled and published in an EITI report. flows, will be completed in 2011. The first EITI reconciliation, in relation to 2009 cash inflows, 1.2 The Iraqi Government’s petroleum revenue in 2009 owned. The EITI in Iraq will focus first on disclosing Oil and gas sector and industry in Iraq are fully state-owned. 2009, as this was the only source of oil and gas rev Iraq’s revenue from its crude oil export sales in 2009, revenues in 2009, and will reconcile these oil revenue figures with the figures that international oil buyers report to have d that in future years, paid for that oil. It is planned years the scope of the Initiative will increase to include signature bonuses and non-cash oil exports as well as revenues from the mining sector, to the extent that it contributes to export revenues. flows are included in the 1.3 What cash inflows the IEITI reconciliation for financial year 2009 and how has the process been governed? This report covers Iraq’s crude oil export sales, including all payments made and revenue received during financial year 2009. aggregate data from The report presents disaggregate fro all oil companies operating in Iraq and disaggregate data from all government agencies and the underlying data reported by companies and government. The reporting process, reference and reconciliation, have been governed by the reporting process terms of reference. Iraqi Extractive Industries Transparency Initiative PwC Page 9 of 75 1. Introduction 1.4 The discussion by the IEITI council of stakeholders on the materiality level used Initial discussion of the materiality level was discussed by the IEITI Council of Stakeholders on the 22 August 2011 meeting On its meeting held on 23 November 2011, the council has decided to adapt the following materiality level for 2009 reporting process: 1. All crude oil buying companies should be required to provide information on their purchases. total crude oil sales (as reported by SOMO) should be 2. All discrepancies that equal to or exceed 1% of total analyzed and reported. Based on the data received from oil buyers and all concerned government entities, the materiality level sought under this exercise, were not reached. 1.5 Content and objective of the report This report summarizes the results of the first year’s reconciliation of revenue flows. The reconciliation flows for the fiscal year that ended 31 December 2009. comprises cash inflows This report consists of seven chapters. Chapter 1 introduces the EITI and its objectives, Iraq’s implementation of the Initiative and the reconciliation logic and process presented in this report. Chapters 2 discuss the step- by-step process for the sale of oil. Chapter 3 presents the reporting, compilation and reconciliation processes used for implementing the EITI. Chapter 4 sets out the actual results of the reconciliation and chapter 5 issues Chapter 6 discuss the Iraq’s extraction mining industry. Finally, lessons addresses further transparency issues, learned from the first year’s reconciliation are summarized in chapter 7. The amounts in this report are stated in thousand US Dollars (USD), unless otherwise stated. responsibility of the reporting entities as listed in appendix 1. Procedures The information presented is the responsibility non numeric data, reconcile information received from carried out by the reconciler to collect numeric and non-numeric either an audit or a review made in different parties, and compile them in a form of a report, do not constitute either Engagements, and accordance with International Standards on Auditing or International Standards on Review Engagements hence we do not express any assurance on the reported payments. Neither the information presented in our report, nor the e information reported in the reporting process, has been subject to control or verification procedures unless otherwise stated in the report. By performing additional procedures, such as a limited or full audit in accordance with globally established auditing ting standards, other issues may have been detected and reported. We assume no responsibility whatsoever in respect of or arising out of or in connection with the contents of this report to parties other than the IEITI. Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law, PwC accepts no liability of any kind and disclaims all responsibility for the consequences of any person acting or refraining to act in reliance on the ts of this report or for any decisions made or not made which are based upon the contents of this report. contents If others choose to rely in any way on the contents of this report they do so entirely at their own risk. 1.6 The Oil and Gas Industry in Iraq Iraq is at the forefront of EITI implementation in the Middle East Region, in the footstep of Yemen, a much smaller oil producer and the only other country implementing EITI in the Region. In compliance with the UN sponsored Development Fund for Iraq (DFI), its oil oil and gas sector is already under public scrutiny and the Ministry of Oil regularly publishes on its web site and on the local media, all hydrocarbon production data and externally audited exports revenues. Iraq’s oil and gas sector contributes to about 65%65% of its GDP, over 90% of public revenues and most of its foreign exchange earnings. . It is therefore central to Iraq’s fiscal position and critical to the health of the Iraqi economy and the ongoing reconstruction effort of the country, particularly ding oil, gas and power infrastructure and development. regarding Iraqi Extractive Industries Transparency Initiative PwC Page 10 of 75 1. Introduction Although Iraq is blessed with approximately 10% of the world proven oil reserves (143 billion barrels) and world total), actual oil production during major natural gas reserves (at least 120 TCF, estimated to be 2% of the world nearly a decade has only been around 2.0 - 2.4 million barrels per day (compared to a peak of about 4 million especially during barrel per day in the 1970’s). In the aftermath of the conflicts affecting Iraq in the 1990’s and especiall this decade including the time of this report writing, oil production has slipped (although current high oil prices have allowed Iraq to somewhat maintain its fiscal position) and production, transport, storage and export infrastructure have greatly ly suffered over two decades, from the lack of proper and timely maintenance, from lack of capital for its development and of course from war-related damages and acts of sabotage. optimal performance of the oil and The Government of Iraq is fully focused on the sound management and the optimal gas sector, the most significant driver of the Iraqi economy. This includes prioritizing policy for oil and gas, adapting the legal framework to the global energy environment and sustaining efforts to rehabilitate the y’s oil production, transport, storage, and export infrastructure. Therefore, the Government considers country’s that only the full and optimal development of its oil and gas reserve will enable Iraq to fully benefit from its commensurate with its unrealized potential. In this respect, the recent large resource base, in a way that is commensurate efforts by Iraq to award service contracts to International Oil Companies (IOCs), through an innovative and highly publicized, transparent rounds of bidding held in Baghdad in June, and December 2009, will help the country develop new oil fields, reverse declining output and increase production from existing oil fields. This bidding round was a pioneering experience, a model of transparency for the Government and the participants and will very likely become the reference for future bidding rounds. hese resources which barely help the government meet its upkeep with its political, social and economic These enormous reconstruction agenda, also contribute to its security related spending, infrastructure repair and enorm projects, including in the critical electricity sector and water and sanitation services. Therefore, it needs to launch at the earliest the implementation of IETI within the agreed time window of two years from the date of Candidacy i.e.,, February 10, 2010 and complete the validation by August 10, 2012. Limited capacity to carry out such complex undertaking, with scarce human resources able and willing to undertake this work, is an post nflict mode, despite recent elections. (reference: The enormous challenge in a country still deeply in a post-conflict Integrated National Energy Strategy (INESTA) by World Bank) Institutional Framework for the Petroleum Sector in Iraq The Ministry of Oil is at the apex of the oil and gas sector in Iraq, handling all aspects of policy, regulation, exploration, production, exports and marketing of oil and gas, structured broadly along regional and functional lines. In addition to Ministry of Oil Headquarter, and Oil Marketing Company (SOMO), the key components of this structure include: • South Oil Company • North Oil Company • Missan Oil Company • Midland Oil Company Add to that other major components (including exploration and drilling, R&D, transport, pipeline companies, refinery companies, Storage and Export Terminals, etc,). The latter, though called “companies�, enjoy some degree of operational autonomy but are not as yet, generally independent corporate structures in the generally-accepted sense. Indeed, the Iraqi Government has plans for Public-Private major reforms including (i) the reorganization of the Ministry of Oil functions and structure, (ii) Public Partnerships with ‘Bona Fide’ International Operators and strategic alliances with international oil companies both upstream and downstream of the value chain. The 2010 bidding round is an initial step in that direction emerge from the March 5, 2010 general elections and the Iraqi Government which has emerged elections, will address these genda, if the strategic resources required during its tenure are to be realized. issues as a priority on its agenda, The current type of centralized structure, where the Government through the Ministry of Oil owns, produces, exported or used domestically, is a comparatively transports, sells and accounts for all the oil produced and exported Iraqi Extractive Industries Transparency Initiative PwC Page 11 of 75 1. Introduction Unique framework amongst the current EITI countries and has certain implications for how EITI is designed and implemented in Iraq, as discussed further below. • ional structure is dominated by the four NOCs’ and the Government is the Iraq’s oil and gas sector institutional major operator for now. Many IOCs are moving in by way of Service Contracts to improve hydrocarbon production from existing producing fields, and they will be soon followed by other I IOCs holding Production Service Contracts in promising Exploration & Production prospects, in already known highly prospective produced areas. plays in yet-to-be-produced • These activities will substantially increase the need to reconcile “payments and revenues� alo along the unique way EITI criteria have been tailored and adapted to reflect the evolving situation of upstream oil and gas exploitation in Iraq. This is also where metering at critical points of the value chain is of the essence. Moreover, Ministry of Oil will ll need to adhere to these rigorous criteria for downstream activities also tailored to fit the Iraqi current situation. These will eventually include oil and gas consumed locally for oil refineries, power generation or industrial and commercial usage. • sponsored Development Fund for Iraq (DFI) audit process of export revenues is currently The existing UN-sponsored managed by the Ministry of Finance and offers a good platform for EITI implementation. It is proposed to build and learn from its past experience and adapt it as required, to the IEITI reconciliation and validation process. (reference: The Integrated National Energy Strategy (INESTA) by World Bank). 1.6.1 Iraq's projected oil production for 2012 In view of actioning the above plan, the following table demonstrate the projected Iraq's oil daily production for 2012: Quantities Company (Barrels) South Oil 2,390,000 North Oil 580,000 Kurdistan Oil 150,000 Midland Oil 130,000 Missan Oil 150,000 Total 3,400,000 Source: Iraq Ministry of Oil Plan 2012 The daily local consumption is estimated at 800,000 barrels per day leaving available for export quantity of 2,4 million barrel per day . Iraqi Extractive Industries Transparency Initiative PwC Page 12 of 75 Oil Sales Process Iraqi Extractive Industries Transparency Initiative PwC Page 13 of 75 . Oil Sales Process 2. xporter of Iraqi crude oils is Oil Marketing Company (SOMO). Iraq’s Oil Marketing The only and official exporter Company (SOMO), created in accordance with Public Companies Law No. 22 of 1997 and the rules of procedure approved by the Minister of Oil, aims to contribute to the support of the national economy through the marketing of crude oil, its derivatives and natural gas outside of Iraq and crude oil inside Iraq including consumption, in order to maximize Iraq’s economic resources importing LPG and other products for domestic consumption, and development. It is therefore geared towards the more stable, long term market tha than the volatile spot market. In order to achieve these goals, SOMO has adopted a set of clear and transparent standards, principles and mechanisms, which are detailed below: 2.1 Criteria for the allocation of the quantity of crude oil available for export to companies: end-consumers of oil, The main criteria for companies eligible to purchase Iraq’s crude oil is that they must be end such as refiners, and they are summarized as follows: • ational oil companies, vertically integrated medium sized oil companies (government Large international (government- rated international petroleum companies capable of refining and with owned or independent), top-rated distribution networks in many countries. • Refining companies specializing in the manufacture of petroleum products and petroleum products distribution. • National companies established to purchase crude oil for the benefit of national refineries accounts, for Japanese Indian, Italian and Chinese national companies. example in the case of Japanese, nies. .2 The basis for determining the allocation of quantities 2.2 of crude oil available for export to qualifying companies: SOMO bases its allocation of the quantity of crude oil that is to be sold to a qualifying company, on a set of similar principles applicable to all buyers and defined as follows: • All quantities of Iraqi exportable crude oil (after allocation for meeting the needs of the domestic refining and power market has been made) are to be sold in the global markets according to global price rmulas, in order to achieve a maximum return on Iraq’s resources formulas, • Priority in terms of allocation is to be given to qualifying companies that have large refining capacities, since these are able to withstand sudden price fluctuations and to maintain demand for Iraqi crude oil over the long term. • It is the intention of this policy to ensure the even distribution that distribution of Iraqi oil throughout the major world markets (American, European and Asian) under a sound and adjustable allocation system, which h enables exports to be increased at par with world demand. Iraqi Extractive Industries Transparency Initiative PwC Page 14 of 75 . Oil Sales Process 2. .3 Contracting mechanism and the method used to 2.3 implement crude oil export contracts: , annual or longer term contracts and are SOMO contracts with qualified companies are based on semi-annual, engineered to operate according to the following process: Contract Mechanism : 1. SOMO directly invites all oil companies who fulfill the criteria set out in section 2.1 (those who have valid contracts or recently identified through the selection process) to submit their projected needs of Iraqi oil. 2. SOMO only reviews companies’ projected needs that are provided via the official e e-mail of the respective company. SOMO does not deal with requests through brokers, agents, international organizations or diplomatic missions operating in Iraq or abroad, and final volume allocation to qualifying companies is made in accordance with oil selling criteria described above above. 3. SOMO also receives a number of requests (via e-mail)e throughout the year from companies, brokers, ( ther than those previously identified and directly invited) agents and international organizations (other indicating their interest in buying Iraqi crude oil. The following actions are performed by a technical constituted under administrative order) committee (constituted SOMO: order of specialists from SOMO  Study the activities ities of companies or institutions that have made a request to Iraq, to establish whether they conform to the principles and criteria applying to contracts for the purchase of Iraqi crude oil.  Companies that are excluded on this basis will be informed as to to why they are ineligible, and they will be listed in the schedule of companies that are not eligible. Companies that have proved their eligibility are to be listed within the allocation tables under the new companies paragraph.  These tables are presented to SOMO’s Ministerial Committee ’s Board of Directors and to the Minister which will review and approve the Technical Committee’s decisions. 4. After obtaining approval from the Minister of Oil in relation to the allocation, the eligible companies will be informed of the allocated quantity of crude oil. Upon approval of SOMO SOMO’s contractual terms, a list of qualified buyers of Iraqi crude contract is finalized and they are added to the list crude. Implementation of the contract: 1. The execution of the contract starts when the Shipping & Quantities Division and the Financial Commercial Division at SOMO are informed of the contract execution details. 2. SOMO sets the date on which shipments should be loaded and requests the purchasing company to manner. Such inform the carrier to make all necessary arrangements to load the shipment in a timely manner request should be copied by way of official notice to SOMO. SOMO must ust give approval of the carrier nominated by the purchasing company, which depends on the carrier’s technical specifications and the specifications of the loading port. 3. The purchasing company issues an irrevocable letter of credit through a recognized ba bank to the Central Bank of Iraq before the period from the date of acceptance of the carrier and not less than seven days of that date. The letter of credit should be for not less than the estimated amount of the shipment. SOMO ad the agreed carrier vessels accordingly, with an emphasis on the fact that then instructs the port to load the destination of the shipment cannot be amended once the letter of credit has been opened. 4. After completion of loading, the port issues sail documents including the quantity loa loaded, the degree of density (API Gravity) and the date of the bill of lading in addition to the final destination of crude oil and other documents related to the shipment and the carrier. 5. period specified in the contract, From the date of the bill of lading referred to above and after the period SOMO calculates and informs the purchasing company of the barrel final price in order for the company to settle the value of the shipment in 30 days from the date of the bill of lading. 6. Crude oil is not sold on the basis of a fixed price or a discount or a specific premium, but within a standard pricing mechanism for all buyers and for each market, obtained from international markets, price globally known as the official selling price. Source: Oil Marketing Company (SOMO). Iraqi Extractive Industries Transparency Initiative PwC Page 15 of 75 2. Oil Sales Process 2.4 Distribution of Oil Export Sales by SOMO in 2009 The following table provides a listing of sold quantities to Iraqi crude oil buyers as reported by SOMO: Far East USA Europe Company Name USD USD USD 1 REPSOL YPF TRADING Y TRANSPORT S.A. 191,315,313 1,211,503,926 2 SARAS S.P.A. - ITALY 239,062,332 3 IPLOM SPA ,REFFINERY IN BUSALLA - GENOA - ITALY 289,776,698 4 TOTAL INTERNATIONAL LIMITED - FRANCE 1,083,592,894 910,739,822 971,571,611 5 BP OIL INTERNATIONAL LIMITED - LONDON 1,371,686,765 487,937,834 441,047,370 6 APIOIL LIMITED 464,853,990 7 SOCIETE ANONYME MAROCAINE DE L'INDUSTRIE DU RAFFINAGE (SAMIR) 582,498,450 8 LUKOIL INTERNATIONAL TRADING AND SUPPLY COMPANY 335,587,059 9 COMPANIA ESPANOLA DE PETROLEOS, S.A. (CEPSA) 662,332,305 10 MOTOR OIL (HELLAS) 633,929,317 11 SHELL INTERNATIONAL EASTERN TRADING COMPANY LIMITED 450,003,772 571,783,901 754,060,505 12 ERG REFFINERIES MEDITERRANEE S.P.A. - GENOA / OTALY 431,827,678 13 TURKISH PETROLIUM REFINERIES CORP. (TUPRAS) - TURKEY 809,676,034 14 PETROGAL S.A. LISBON - PORTUGAL 176,425,620 15 ENI COMPANY 1,780,734,981 16 KOCH SUPPLY AND TRADING L.P 952,568,079 17 VALERO SUPPLY AND MARKETING COMPANY 1,860,376,363 Iraqi Extractive Industries Transparency Initiative PwC Page 16 of 75 2. Oil Sales Process 2.4 Distribution of Oil Export Sales by SOMO in 2009 Far East USA Europe Company Name USD USD USD 18 PETROLIO BRASILERIO S.A. - PETROBRAS 812,143,771 19 CHEVRON PRODUCTS COMPANY 1,810,303,161 1,615,095,221 20 CONCOPHILIPS INTERNATIONAL TRADING PTE. LTD. 660,512,961 1,794,974,810 282,316,239 21 EXXONMOBIL SALES AND SUPPLY LLC. U.S.A 364,676,460 2,033,219,026 779,395,841 22 TOYOTA TSUSHO CORPORATION 277,730,650 23 CHINA ZHENHUA OIL CO. LTD. 926,379,176 24 MITSUBISHI CORPORATION 714,224,287 25 JX NIPPON OIL & ENERGY CORPORATION 523,078,003 26 BHARAT PETROLEUM CORPORATION LTD. 119,912,746 27 HINDUSTAN PETROLEUM CORPORATION LTD. - INDIA 525,835,196 28 SK ENERGY EUROPE LIMITED 1,448,268,927 29 CHINA NATIONAL UNITED OIL CORPORATION 469,046,369 30 PETRONAS TRADING CORPORATION SDN BHD (PETCO) 300,835,328 31 SINOCHEM INTERNATIONAL OIL (LONDON) CO. LTD 2,392,402,310 32 UNIPEC ASIA CO. LTD. 606,305,113 33 PETROVIETNAM OIL CORPORATION (PV OIL) 432,557,987 34 INDIAN OIL CORPORATION LIMITED - INDIA 4,695,576,254 Total 19,172,928,359 11,230,154,140 10,846,599,957 Iraqi Extractive Industries Transparency Initiative PwC Page 17 of 75 Reconciliation Process Iraqi Extractive Industries Transparency Initiative PwC Page 18 of 75 . Reconciliation Process 3. In summary, the reconciliation process consists of the following steps: a. The Iraq Ministry of Oil (MoO) and SOMO are to provide data on what they received from North Oil Company and South Oil Company in terms of quantities of crude oil extracted; b. North Oil Company and South Oil Company are to provide data on what they delivered to SOMO in terms of quantities of crude oil extracted for export purposes while MoO consolidates data received from all entities; c. The SOMO is to provide data on the amounts received from the buyers of the crude oil sales revenues; d. The buyers are to provide data on the amounts paid to SOMO of the crude oil sales; e. To reconcile any differences in the figures between a and b, in addition to c and d, because any ld indicate leakage in revenue streams caused by reasons ranging from lack of proper differences could revenues. and timely accounting to a possible corrupt practice practices or misappropriation of revenues .1 Reporting templates 3.1 PwC has developed standard reporting templates (appendix 3) to facilitate reporting by the licensees, oil. These templates have been tailored to include the most relevant governmental agencies and buyers of crude oil. data to the reconciliation process and cash inflows. These templates aimed at disclosing all material payments, (including materiality definition and reporting templates) have been thoroughly reviewed by all concerned stakeholders, including Government entities, IOCs, NOCs and Civil Society Organizations, prior to their endorsement by the I-EITI Stakeholders Council for implementation. 3.2 Data collection On August 22, 2011 the IEITI council of stakeholders issued instructions, including reporting templates and copies of the regulation and guidelines, requesting governmental entities and crude oil buyers (buyers) to report all required data in accordance with the IEITI regulation. The reporting templates were sent electronically via were also email. The entities and buyers were required to report directly to the reconciler, (PwC), to whom they w requested to direct any questions on the reporting templates. According to the IEITI stakeholders council resolution, 15 September 2011 was the deadline for reporting. in appendix 1. Reporting entities identified by the IEITI stakeholders’ council are listed in As of September 15, 2011, three governmental entities had reported their data. PwC notified the IEITI of the entities who had not yet reported. These entities were contacted and reminded of the reporting requirement. h Oil Company) reported on 10 October 2011. The last entity (the South SOMO provided the reconciler with contact details of the buyers on 26 September 2011. As a result, the requests e requests for information included reporting for information from buyers were not sent until that date. The templates and copies of the regulation and guidelines. The reporting templates were sent electronically via email and the companies were required to report directly to the reconciler, PwC, to whom they were also arding the reporting templates or reportable information. As a result of the requested to direct any questions regarding delays, 6 October 2011 was set as the new deadline for resending back with filled templates. ied the IEITI of the buyers that had As at 6 October 2011, 11 buyers out of 34 had reported their data. PwC notified not yet reported. The remaining entities were contacted and reminded several times of the reporting requirement. The list of buyers who met the first deadline is as follows: Iraqi Extractive Industries Transparency Initiative PwC Page 19 of 75 . Reconciliation Process 3. Companies Met Company the first deadline 1 REPSOL YPF TRADING Y TRANSPORT S.A. 2 SARAS S.P.A. – ITALY X 3 IPLOM SPA ,REFFINERY IN BUSALLA - GENOA – ITALY 4 TOTAL INTERNATIONAL LIMITED – FRANCE 5 BP OIL INTERNATIONAL LIMITED – LONDON 6 APIOIL LIMITED 7 SOCIETE ANONYME MAROCAINE DE L'INDUSTRIE DU RAFFINAGE (SAMIR) 8 LUKOIL INTERNATIONAL TRADING AND SUPPLY X COMPANY 9 COMPANIA ESPANOLA DE PETROLEOS, S.A. (CEPSA) 10 MOTOROIL (HELLAS) 11 SHELL INTERNATIONAL EASTERN TRADING COMPANY LIMITED 12 ERG REFFINERIES MEDITERRANEE S.P.A. - GENOA / OTALY 13 TURKISH PETROLIUM REFINERIES CORP. (TUPRAS) – TURKEY 14 PETROGAL S.A. LISBON – PORTUGAL 15 ENI COMPANY 16 KOCH SUPPLY AND TRADING L.P 17 VALERO SUPPLY AND MARKETING COMPANY X 18 PETROLIO BRASILERIO S.A. – PETROBRAS X 19 CHEVRON PRODUCTS COMPANY 20 CONCOPHILLIPS INTERNATIONAL TRADING PTE. LTD. Iraqi Extractive Industries Transparency Initiative PwC Page 20 of 75 3. Reconciliation Process Companies Met Company the first deadline 21 EXXONMOBIL SALES AND SUPPLY LLC. U.S.A 22 TOYOTA TSUSHO CORPORATION X 23 CHINA ZHENHUA OIL CO. LTD. X 24 MITSUBISHI CORPORATION X 25 JX NIPPON OIL & ENERGY CORPORATION X 26 BHARAT PETROLEUM CORPORATION LTD. 27 HINDUSTAN PETROLEUM CORPORATION LTD. – INDIA X 28 SK ENERGY EUROPE LIMITED X 29 CHINA NATIONAL UNITED OIL CORPORATION 30 PETRONAS TRADING CORPORATION SDN BHD (PETCO) 31 SINOCHEM INTERNATIONAL OIL (LONDON) CO. LTD X 32 UNIPEC ASIA CO. LTD. 33 PETROVIETNAM OIL CORPORATION (PV OIL) 34 INDIAN OIL CORPORATION LIMITED - INDIA As of 13 December 2011, PwC had received 34 responses out of 34 buyers whom purchased Iraqi Crude Oil for the year 2009. eporting of cash flows to the DFI accounts 3.3 Reporting Cash receipts are recorded when funds are deposited in the Development Fund for Iraq (DFI) bank accounts at the Federal Reserve Bank of New York (FRBNY ). United Nation Security Council Resolution (UNSCR) 1483 (2003), which was adopted by the Security Council creation of the DFI to administer proceeds from export sales of petroleum and on 22 May 2003, called for the creation petroleum products by Iraq. The DFI was placed under the control of the former Coalition Provisional Authority (CPA). Advisory Monitoring Board (IAMB) including UNSCR 1483 also called for the creation of an International Advisory representatives from several International Financial Institutions such as the World Bank and the IMF and many other UNSCR countries. The Iraqi Committee of Financial Experts (COFE) took over the task of IAMB in January 2011,, to promote transparency and financial accountability in relation to the DFI. The DFI consists of bank accounts held with the FRBNY managed by the Central Bank of Iraq (CBI) on behalf of the Iraqi Ministry of Finance (MoF). In accordance with UNSCR 148383 (2003), 95% of the proceeds from export sales of petroleum, petroleum products and natural gas from Iraq are to be deposited in the DFI accounts. Iraqi Extractive Industries Transparency Initiative PwC Page 21 of 75 . Reconciliation Process 3. Export sales of petroleum, petroleum products, and natural gas According to the UNSCR 1483, all export sales of petroleum, petroleum products, and natural gas from Iraq adopted shall be deposited into an Oil Proceed Receipt Account (OPRA) after the date that the resolution was adopted, required to be deposited in the DFI accounts at the held with the FRBNY and immediately thereafter, 95% is required FRBNY. The remaining 5% is required to be deposited in the United Nations' Compensation Fund as established by UNSCR 687 (1991) and subsequent relevant resolutions, and,and therefore,, will not be a part of the DFI's statement of cash receipts and payments. On 22 September 2011, the CBI requested the FRBNY to provide details related to cash receipts directly to the with the MoF. reconciler, PwC, in order to reconcile the received amounts from the sale of exported crude oil w ived at the date of this report. However no data had been received re-contacted officially, report FRBNY had therefore to be re to comply with this request. re contacted on 16 October 2 PwC notified the IEITI that the FRBNY had not yet reported. The FRBNY was re-contacted 2011 and reminded of the request, and the detailed statement of account requirement. The FRBNY had not provided required data which was not received until the date of this report. .4 Compilation of data and resolution of discrepancies 3.4 ing the reported data and resolving or justifying discrepancies was carried out between The process of compiling August and October 2011, not including the delayed data which was not received until the date of this report. PwC performed the following procedures: 1) Figures reported by government entities and buyers were compiled item by item against the government’s reported figures. Based on this compilation, any discrepancies have been specified item buyer by item in relation to each government entity and buyer. overnmental entities and buyers agreed with the data reported by the 2) Where data reported by governmental follow-up was government, the government’s figures were considered to be confirmed and no further follow undertaken. 3) The government entities and the buyers were asked to provide further details of the amounts (dates and figures). This has helped explain most of the discrepancies. Iraqi Extractive Industries Transparency Initiative PwC Page 22 of 75 Reconciliation of Reported Data Iraqi Extractive Industries Transparency Initiative PwC Page 23 of 75 . Reconciliation of Reported Data 4. 4.1 Extracted for export crude oil quantities (in barrels) reconciliation between Ministry of Oil, North Oil Company and SOMO Extracted for export crude Extracted for export Extracted for export crude oil Month oil quantities reported by crude oil quantities Variances quantities reported by NOC MoO reported by SOMO January 15,811,194.0 15,811,194.0 15,811,194.0 0.0 February 12,604,112.0 12,604,112.0 12,604,112.0 0.0 March 13,082,991.0 13,082,991.0 13,082,988.0 (3.0) April 12,251,378.0 12,251,378.0 12,251,378.0 0.0 May 16,158,812.0 16,158,812.0 16,158,812.0 0.0 June 15,833,631.0 15,833,631.0 15,833,631.0 0.0 July 16,894,756.0 16,894,756.0 16,894,756.0 0.0 August 16,131,663.0 16,131,663.0 16,131,663.0 0.0 September 14,908,872.0 14,908,872.0 14,908,872.0 0.0 October 11,951,374.0 11,951,374.0 11,951,374.0 0.0 November 12,122,342.0 12,122,342.0 12,122,342.4 0.4 December 13,735,818.0 13,735,818.0 13,735,818.3 0.3 Total 171,486,943.0 171,486,943.0 171,486,940.7 (2.3)* * This difference of 2.3 barrels is considered immaterial based on materiality level of this report Iraqi Extractive Industries Transparency Initiative PwC Page 24 of 75 . Reconciliation of Reported Data 4. 4.1 Extracted for export crude oil quantities (in barrels) reconciliation between Ministry of Oil, North Oil Company and SOMO Exported crude oil quantities 18,000,000.0 16,000,000.0 14,000,000.0 12,000,000.0 10,000,000.0 8,000,000.0 Exported crude oil quantities 6,000,000.0 4,000,000.0 2,000,000.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 25 of 75 . Reconciliation of Reported Data 4. 4.2 Extracted for export crude oil quantities (in barrels) reconciliation between Ministry of Oil, South Oil Company and SOMO Extracted for export crude Extracted for export Extracted for export crude oil Month oil quantities reported by crude oil quantities Variances quantities reported by SOC MoO reported by SOMO January 42,809,981.0 42,809,981.0 42,809,981.0 0.0 February 35,901,114.0 35,901,114.0 35,901,114.0 0.0 March 43,171,541.0 43,171,541.0 43,171,541.0 0.0 April 42,374,190.0 42,374,190.0 42,374,190.0 0.0 May 42,925,962.0 42,925,962.0 42,925,962.0 0.0 June 41,914,698.0 41,914,698.0 41,914,698.0 0.0 July 46,250,574.0 46,250,574.0 46,250,574.0 0.0 August 46,155,374.0 46,155,374.0 46,155,374.0 0.0 September 43,825,236.0 43,825,236.0 43,825,236.0 0.0 October 46,277,060.0 46,277,060.0 46,277,060.0 0.0 November 44,901,977.0 44,901,977.0 44,901,977.0 0.0 December 47,549,444.0 47,549,444.0 47,549,444.0 0.0 Total 524,057,151.0 524,057,151.0 524,057,151.0 0.0 Iraqi Extractive Industries Transparency Initiative PwC Page 26 of 75 4. Reconciliation of Reported Data 4.2 Extracted for export crude oil quantities (in barrels) reconciliation between Ministry of Oil, South Oil Company and SOMO Exported crude oil quantities 50,000,000.0 45,000,000.0 40,000,000.0 35,000,000.0 30,000,000.0 25,000,000.0 20,000,000.0 Exported crude oil quantities 15,000,000.0 10,000,000.0 5,000,000.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 27 of 75 . Reconciliation of Reported Data 4. 4.3 Exported Crude Oil reconciliation by shipments, invoices and payments, between SOMO and buyers in calendar year 2009 Company Name SOMO Buyer Variance Note 1 REPSOL YPF TRADING Y TRANSPORT S.A. 1,402,819,238.4 1,402,819,238.4 0.0 2 SARAS S.P.A. – ITALY 239,062,332.0 239,062,332.0 0.0 3 IPLOM SPA ,REFFINERY IN BUSALLA - 289,776,697.6 289,776,697.5 (0.1) GENOA – ITALY 4 TOTAL INTERNATIONAL LIMITED – FRANCE 2,965,904,326.8 2,817,337,282.7 (148,567,044.1) A 5 BP OIL INTERNATIONAL LIMITED – 2,300,671,968.8 2,300,671,968.8 0.0 LONDON 6 APIOIL LIMITED 464,853,990.5 464,853,990.5 0.0 7 SOCIETE ANONYME MAROCAINE DE 582,498,450.2 582,498,450.2 0.0 L'INDUSTRIE DU RAFFINAGE (SAMIR) 8 LUKOIL INTERNATIONAL TRADING AND 335,587,059.4 335,587,059.4 0.0 SUPPLY COMPANY 9 COMPANIA ESPANOLA DE PETROLEOS, S.A. 662,332,304.8 662,332,304.8 0.0 (CEPSA) 10 MOTOROIL (HELLAS) 633,929,317.2 633,929,317.2 0.0 11 SHELL INTERNATIONAL EASTERN TRADING 1,775,848,178.9 1,920,093,763.1 144,245,584.2 B COMPANY LIMITED 12 ERG REFFINERIES MEDITERRANEE S.P.A. - 431,827,678.0 407,768,337.0 (22,059,341.0) C GENOA / OTALY 13 TURKISH PETROLIUM REFINERIES CORP. 809,676,033.7 809,676,033.7 0.0 (TUPRAS) – TURKEY 14 PETROGAL S.A. LISBON – PORTUGAL 176,425,619.7 176,425,619.7 0.0 15 ENI COMPANY 1,780,734,981.3 1,780,734,981.3 0.0 Iraqi Extractive Industries Transparency Initiative PwC Page 28 of 75 . Reconciliation of Reported Data 4. 4.3 Exported Crude Oil reconciliation by shipments, invoices and payments, between SOMO and buyers in calendar year 20092009- Continued Company Name SOMO Buyer Variance Note 16 D KOCH SUPPLY AND TRADING L.P 952,568,078.8 1,027,146,001.4 74,577,922.6 17 VALERO SUPPLY AND MARKETING 1,860,376,363.5 1,915,077,037.6 54,700,674.1 E COMPANY 18 PETROLIO BRASILERIO S.A. – PETROBRAS 812,143,771.3 812,143,771.3 0.0 19 CHEVRON PRODUCTS COMPANY 3,425,398,381.8 3,047,447,462.4 (377,950,919.3) F 20 CONCOPHILLIPS INTERNATIONAL 2,737,804,010.9 2,740,504,520.0 2,700,509.1 TRADING PTE. LTD. 21 EXXONMOBIL SALES AND SUPPLY LLC. G 3,177,291,327.1 3,157,920,626.3 (19,370,700.8) U.S.A 22 TOYOTA TSUSHO CORPORATION 277,730,650.0 277,730,650.0 0.0 23 CHINA ZHENHUA OIL CO. LTD. 926,379,175.9 926,379,175.9 0.0 24 MITSUBISHI CORPORATION 714,224,287.2 574,119,368.5 (140,104,918.7) H 25 JX NIPPON OIL & ENERGY CORPORATION 523,078,002.8 375,129,375.7 (147,948,627.1) I 26 BHARAT PETROLEUM CORPORATION LTD. 119,912,745.6 119,912,745.6 0.0 27 HINDUSTAN PETROLEUM CORPORATION 525,835,196.4 538,947,116.9 13,111,920.5 J LTD. – INDIA 28 SK ENERGY EUROPE LIMITED 1,448,268,927.4 1,300,298,707.7 (147,970,219.7) K 29 CHINA NATIONAL UNITED OIL 469,046,369.3 504,679,861.8 35,633,492.5 L CORPORATION 30 PETRONAS TRADING CORPORATION SDN 300,835,327.9 300,835,327.9 0.0 BHD (PETCO) Iraqi Extractive Industries Transparency Initiative PwC Page 29 of 75 . Reconciliation of Reported Data 4. 4.3 Exported Crude Oil reconciliation by shipments, invoices and payments, between SOMO and buyers in calendar year 2009 - Continued Company Name SOMO Buyer Variance Note 31 SINOCHEM INTERNATIONAL OIL 2,392,402,310.3 2,175,822,577.2 (216,579,733.1) M (LONDON) CO. LTD 32 UNIPEC ASIA CO. LTD. 606,305,112.5 606,305,112.5 0.0 33 PETROVIETNAM OIL CORPORATION (PV 432,557,987.0 432,557,987.0 0.0 OIL) 34 INDIAN OIL CORPORATION LIMITED - 4,695,576,253.6 4,500,744,731.3 (194,831,522.3) N INDIA Totals 41,249,682,456.5 40,159,269,633.4 (1,090,412,823.1) Iraqi Extractive Industries Transparency Initiative PwC Page 30 of 75 4. Reconciliation of Reported Data Several discrepancies were identified based on the reconciliation work performed. The discrepancies have been explained without undue difficulty. The reporting entities have been very responsive and cooperative in contributing to the reconciliation 4.4 Discrepancies Discrepancies noticed during the reconciliation process were the result of the following: 1) Some e buyers reported shipments / price differentials that were not reported by SOMO as a result of a timing difference in relati on to the booking of these shipments (i.e. loading dates were during the year 2008 but SOMO’s invoice was issued early 2009) eported shipments that were not reported by the buyers as a result of shipments being made during 2010, whereas invoices were issued in 2) SOMO reported 2009. Shipments Shipments Reference reported by reported by (From SOMO and not the Buyer and Variance Description of difference reported by not reported Section USD 4.3) the Buyer by SOMO USD USD A Shipment No.BBL/3337, due date on 25/1/2010 under contract No. MB/9/33 (148,567,044.1) (148,567,044.1) B Shipment No.BBL5564, due date on 5/1/2010 under the contract No. MB/9/31 144,244,862.2 144,245,584.2 Price differencials 722.0 C Shipment No.CK/5573, loading date on 28/12/2008 under the contract No. MK/9/8 20,818,636.2 (22,059,341.0) Shipment No.CK/5788, due date on 19/1/2010 under the contract No. MK/9/30 (42,877,977.2) D Shipment No.BBL/5234, loading date on 23/12/2008 under the contract No. MB/8/38 74,577,922.6 74,577,922.6 E Shipment No.CK/5794, due date on 1/1/2010 under the contract No. MB/8/37 54,701,404.2 54,700,674.1 Differences in the barrels prices (730.1) F Shipment No.BBL/5540, due date on 6/1/2010 under contract No. MB/9/26 (142,627,229.2) (377,950,919.3) Shipment No.BBL/5544 (1), due date on 12/1/2010 under the contract No. MB/9/26 (74,059,000) Shipment No.BBL/5553, due date on 21/1/2010 under the contract No. MB/9/26 (154,354,038.6) Iraqi Extractive Industries Transparency Initiative PwC Page 31 of 75 4. Reconciliation of Reported Data Shipments Shipments Reference reported by reported by (From SOMO and not the Buyer and Variance Description of difference reported by not reported Section USD 4.3) the Buyer by SOMO USD USD Shipment No.BBL/5553, due date on 21/1/2010 under contract No. MB/9/26 (148,279,073.5) Shipment No.BBL/5229, loading date on 8/12/2008 under contract No. MB/8/36 63,220,892.2 Shipment No.BBL/5232, loading date on 11/12/2008 under contract No. MB/8/36 35,633,528.3 Shipment No.BBL/5239, loading date on 18/12/2008 under contract No. MB/8/36 42,514,001.5 G Shipment No.BBL/5542, due date on 10/1/2010 under the contract No. MB/9/25 (152,054,446.3) (19,370,700.8) Shipment No.CK/5789 (1), due date on 21/1/2010 under the contract No. MB/9/19 (17,917,680.0) Shipment No.CK/5789 (2), due date on 21/1/2010 under the contract No. MB/9/19 (33,905,252.6) Shipment No.BBL/5554, due date on 21/1/2010 under the contract No. MB/9/25 (154,278,798.9) Shipment No.BBL/3758, bill of lading date on 12/12/2009 under the contract No. 140,036,242.4 MB/9/61 Shipment No.BBL/5451, bill of lading date on 12/12/2009 under the contract No. 147,616,978.3 MB/9/61 Shipment No.BBL/6627, bill of lading date on 23/12/2009 under the contract No. 51,132,256.3 MB/9/62 H Shipment No.BBL/5548, due date on 15/1/2010 under contract No. MB/9/20 (140,104,918.7) (140,104,918.7) I Shipment No.BBL/5558, due date on 26/1/2010 under contract No. MB/9/44 (147,948,627.1) (147,948,627.1) Iraqi Extractive Industries Transparency Initiative PwC Page 32 of 75 4. Reconciliation of Reported Data Shipments Shipments Reference reported by reported by (From SOMO and not the Buyer and Variance Description of difference reported by not reported Section USD 4.3) the Buyer by SOMO USD USD J Shipment No.BBL/5552, due date on 18/1/2010 under contract No. MB/9/40 (51,696,200.2) 13,111,920.5 Shipment No.BBL/5245, loading date on 25/12/2008 under contract No. MB/8/26 14,567,809.5 Shipment No.BBL/5242, loading date on 21/12/2008 under contract No. MB/8/26 37,313,197.2 Shipment No.BBL/5249, loading date on 30/12/2008 under contract No. MB/8/26 12,927,114.0 K Shipment No.BBL/5561, due date on 29/1/2010 under contract No. MB/9/43 (147,970,219.7) (147,970,219.7) Shipment No.BBL/5232 (1), loading date on 11/12/2008 under the contract No. L 35,633,492.5 35,633,492.5 MB/8/30 M Shipment No.BBL/5555, due date on 23/1/2010 under contract No. MB/9/38 (131,755,330.4) (216,579,733.1) Shipment No.BBL/5560 (1), due date on 29/1/2010 under contract No. MB/9/38 (54,092,270.0) Shipment No.BBL/5560 (2), due date on 29/1/2010 under contract No. MB/9/38 (93,934,042.6) Shipment No.BBL/5248, loading date on 29/12/2008 under contract No. MB/8/28 63,201,910.0 N Shipment No.BBL/5539, due date on 5/1/2010 under contract No. MB/9/13 (147,539,870.8) (194,831,522.3) Shipment No.BBL/5543, due date on 11/1/2010 under contract No. MB/9/13 (146,919,119.2) Shipment No.BBL/5547, due date on 14/1/2010 under contract No. MB/9/13 (73,904,216.7) Shipment No.BBL/5550, due date on 17/1/2010 under contract No. MB/9/13 (73,375,256.7) Shipment No.BBL/5236, loading date on 15/12/2008 under contract No. MB/8/15 35,841,369.6 Shipment No.BBL/5237, loading date on 17/12/2008 under contract No. MB/8/15 69,290,586.0 Shipment No.BBL/5241, loading date on 20/12/2008 under contract No. MB/8/15 34,127,298.5 Shipment No.BBL/5244, loading date on 24/12/2008 under contract No. MB/8/15 71,073,244.2 Shipment No.BBL/5247, loading date on 27/12/2008 under contract No. MB/8/15 36,574,442.8 Iraqi Extractive Industries Transparency Initiative PwC Page 33 of 75 Draft Further Transparency Iraqi Extractive Industries Transparency Initiative PwC Page 34 of 75 5. Further Transparency Although the current reporting requirments are related to export oil sales, the GoI and for more transparency has provided data presented in the following pages. The North Oil Company (NOC) and South Oil Company (SOC) were the only licensed and registered companies involved in explorati on and production in the extractive sector who held active production licenses during calendar year 2009 uantities reconciliation between Ministry of Oil and North Oil 5.1 Extracted crude oil quantities Company (in barrels). Extracted crude Extracted crude Month oil quantities oil quantities Variances January reported by MoO 19,766,762 reported by NOC 19,699,049 (67,713) Extracted crude February 18,185,087 18,182,211 (2,876) oil quantities for March 20,665,656 20,666,164 508 the year 2009 April 19,736,696 19,732,533 (4,163) reported by NOC May 21,332,067 21,342,591 10,524 June 20,685,019 20,675,186 (9,833) is July August 21,445,606 20,758,327 21,468,032 20,765,570 22,426 7,243 245,025,833 September 20,459,012 20,463,353 4,341 barrels October 21,274,946 21,282,140 7,194 November 19,698,070 19,702,901 4,831 December 21,038,362 21,046,103 7,741 Total 245,045,610 245,025,833 (19,777)* *This difference of 19,777 barrels is considered immaterial based on materiality level of this report Iraqi Extractive Industries Transparency Initiative PwC Page 35 of 75 5. Further Transparency 5.1 Extracted crude oil quantities reconciliation between Ministry of Oil and North Oil Company (in barrels). Extracted crude oil quantities 22,000,000 21,000,000 20,000,000 19,000,000 Extracted crude oil quantities 18,000,000 17,000,000 16,000,000 Iraqi Extractive Industries Transparency Initiative PwC Page 36 of 75 5. Further Transparency 5.2 Extracted crude oil quantities reconciliation between Ministry of Oil and South Oil Company (in barrels) Extracted crude Extracted crude Month oil quantities oil quantities Variances reported by MoO reported by SOC Extracted crude January 47,858,538 47,858,538 - oil quantities for February 43,046,182 43,046,182 - the year 2009 March 51,510,139 51,510,139 - April 49,048,544 49,048,544 - reported by SOC May 50,316,864 50,316,864 - is June 51,534,424 51,534,424 - 607,659,818 July 53,321,328 53,321,328 - barrels August 53,331,968 53,331,968 - September 50,768,108 50,768,108 - October 52,634,992 52,634,992 - November 51,606,303 51,606,303 - December 52,682,428 52,682,428 - Total 607,659,818 607,659,818 - Iraqi Extractive Industries Transparency Initiative PwC Page 37 of 75 5. Further Transparency 5.2 Extracted crude oil quantities reconciliation between Ministry of Oil and South Oil Company (in barrels) Extracted crude oil quantities 60,000,000 50,000,000 40,000,000 30,000,000 Extracted crude oil quantities 20,000,000 10,000,000 - Iraqi Extractive Industries Transparency Initiative PwC Page 38 of 75 5. Further Transparency 5.3 Monthly export quantities and price average for exported crude oil in calendar year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Ceyhan Port & Seniya Depot by SOMO Quantity exported through Ceyhan Port & Seniya Depot Monthly export price average (USD) Month American European Asian Jordan* American European Asian Jordan ** Market Market Market Market Market Market January 6,248,774.0 9,255,732.0 0 306,688.0 32.5 39.0 - 25.6 February 2,031,739.0 10,292,403.0 0 279,970.0 33.6 39.1 - 25.1 March 2,043,130.0 10,730,058.0 0 309,800.0 48.0 45.4 - 28.5 April 949,526.0 11,005,460.0 0 296,392.0 59.1 49.7 - 32.3 May 2,043,899.0 13,805,057.0 0 309,856.0 62.1 56.7 - 39.5 June 2,620,592.0 12,913,185.0 0 299,854.0 60.6 66.6 - 50.6 July 2,628,295.0 13,956,579.0 0 309,882.0 64.3 63.3 - 46.6 August 6,715,703.0 9,106,094.0 0 309,866.0 66.5 69.9 - 54.8 September 1,903,500.0 12,705,524.0 0 299,848.0 71.7 65.6 - 49.4 October 954,247.0 10,687,151.0 0 309,976.0 76.6 73.3 - 54.8 November 1,411,539.0 10,426,755.0 0 284,048.4 73.6 75.8 - 58.7 December 3,071,629.0 10,354,322.0 0 309,867.3 71.6 73.0 - 56.3 Total by Market 32,622,573.0 135,238,320.0 0 3,626,047.7 Total 171,486,940.7 *Quantities exported to Jordan is via Petroluem Tanks not through Ceyhan Port and Senuya Depot *Jordan oil prices is included in this item, where there is an agreement between the GoI and Goverenment of Jordan to sell Oi l based on BRENT Prices less USD 18 **Jordan Iraqi Extractive Industries Transparency Initiative PwC Page 39 of 75 5. Further Transparency 5.3 Monthly export quantities and price average for exported crude oil in calendar year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Ceyhan Port & Seniya Depot by SOMO Quantity exported through Ceyhan Port & Seniya Depot 16,000,000.0 14,000,000.0 12,000,000.0 10,000,000.0 8,000,000.0 American Market 6,000,000.0 European Market 4,000,000.0 Jordan 2,000,000.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 40 of 75 5. Further Transparency 5.3 Monthly export quantities and price average for exported crude oil in calendar year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Ceyhan Port & Seniya Depot by SOMO Monthly export price average (USD) 90.0 80.0 70.0 60.0 50.0 American Market 40.0 European Market 30.0 Jordan 20.0 10.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 41 of 75 nsparency 5. Further Transparency 5.4 Monthly export quantities and price average for exported crude oil in calendar year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Basrah and Khor Al Amaya ports by SOMO Al-Amaya Al-Amaya Quantity exported through Basrah & Khor Al Monthly export price average (USD) ports Month American European American European Asian Market Asian Market Market Market Market Market January 17,292,139.0 8,979,589.0 16,538,253.0 34.6 36.7 39.3 February 11,088,441.0 7,941,719.0 16,870,954.0 34.7 38.0 39.6 March 13,939,481.0 3,886,367.0 25,345,693.0 47.5 45.4 41.7 April 7,994,595.0 7,950,458.0 26,429,137.0 56.8 49.7 46.5 May 10,950,354.0 1,998,751.0 29,976,857.0 63.8 63.8 54.4 June 6,991,730.0 7,899,880.0 27,023,088.0 59.7 62.1 65.6 July 14,946,386.0 3,996,880.0 27,307,308.0 64.2 67.7 64.8 August 20,848,101.0 2,954,413.0 22,352,860.0 66.0 70.8 69.6 September 14,928,350.0 997,970.0 27,898,916.0 66.9 68.1 65.4 October 9,933,630.0 5,960,482.0 30,382,948.0 74.4 74.4 70.1 November 13,826,427.0 997,428.0 30,078,122.0 69.8 75.6 74.9 December 24,956,023.0 0 22,593,421.0 73.4 - 74.1 Total by Market 167,695,657.0 53,563,937.0 302,797,557.0 Total 524,057,151.0 Iraqi Extractive Industries Transparency Initiative PwC Page 42 of 75 5. Further Transparency 5.4 Monthly export quantities and price average for exported crude oil in calendar year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Basrah and Khor Al Amaya ports by SOMO Al-Amaya Al-Amaya Quantity exported through Basrah & Khor Al Amaya ports 35,000,000.0 30,000,000.0 25,000,000.0 20,000,000.0 American Market 15,000,000.0 European Market 10,000,000.0 Asian Market 5,000,000.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 43 of 75 5. Further Transparency ities and price average for exported crude oil in calendar 5.4 Monthly export quantities year 2009 in relation to the American, European and Asian Markets and the Quantity exported through Basrah and Khor Al Amaya ports by SOMO Al-Amaya Monthly export price average (USD) 80.0 70.0 60.0 50.0 40.0 American Market 30.0 European Market Asian Market 20.0 10.0 - Iraqi Extractive Industries Transparency Initiative PwC Page 44 of 75 5. Further Transparency through North Oil Company and South Oil Company to 5.5 Quantities exported throug World Oil Markets Quantities exported to oil markets North & South America Europe & North Africa Asia/Far East 29% 44% 27% Iraqi Extractive Industries Transparency Initiative PwC Page 45 of 75 The Mining Industries in Iraq Iraqi Extractive Industries Transparency Initiative PwC Page 46 of 75 . The Mining Industries in Iraq 6. 6.1 The Mining Industry in Iraq In addition to its oil and gas resources, Iraq also possesses substantial mineral resources, some of world class in terms of reserves, including sulfur and phosphate. Until recently, Iraqi Civil Society was not informed of, nor production, Iraq’s public was not able to set a could it participate to the debate regarding oil, gas and mineral production, production, exploitation and marketing policy in respect of Iraq’s mineral resources, since information on the knowledge and private participation to invest in such sectors was not open sector were not available to public knowledge, to Iraqi nationals. After 2003 it became important to develop such a policy, to regulate the exploitation of those resources in a way that guaranteed transparency and would therefore attract investment that could develop the industry by improving the image of Iraq as a reliable business partner and a safe destination for Foreign Direct Investments (FDIs). The following data was provided by the Ministry of Industry and Mining ( (MIM). .1 The future outlook for key minerals and commodities 6.1.1 uding proven probable and possible oil, gas and in Iraq including mineral reserves By taking into account the country's geographic distribution throughout its sedimentary basins, and by conducting several campaigns of exploration of its mineral reserves, it was possible to gain a clear view of the sources of mineral and industrial rock in Iraq, and to determine the quality and quantity of the recoverable reserves of those resources, for the purposes of developing them through industrial investment. The available he existence of huge quantities of phosphate (more than ten billion tons in Iraq’s Western Desert data shows the alone ) and huge stocks of free sulfur (more than six hundred million tons in parts of Nineveh and Salah al al-Din, globally) as well as vast reserves of silica sand, Kaolin and limestone, recognized as being the first of their kind globally) salt, and other minerals across various parts of Iraq. The Kurdistan Region shows encouraging evidence of the existence of mineral resources such as lead, zinc and copper. al wealth will be one of the main pillars of Iraq’s national economy in the coming years, providing Iraq’s mineral significant employment opportunities for Iraqis and contributing to the development of infrastructure and a provin sound industrial base in Iraq’s different provinces. .2 Iraq’s current infrastructure 6.1.2 The mining infrastructure which currently existing in Iraq can be summarized as follows: • Availability of a solid North/South network of oil and gas pipelines, including towards export marine terminal through the Gulf and Turkey. • Availability of a network of linking roads between Iraq’s major cities and governorates (Baghdad - Mosul – Basrah), and several between the different provinces. • A rail network linking most cities and towns with the mineral resources and raw materials locations. • Most provinces and major cities are linked to export terminals in Basra. • The presence of many civil airports (in Baghdad, Basra, Sulaymaniyah, Erbil and Najaf). • The presence of export ports in the Arabian Gulf such as port in Basra province, the ports of al al-Fao and Basra province. Khour al-Zubair in al-Basra • Availability of a mobile and landline telephone network linking all major cities and provinces in Iraq. • Availability of water resources by way of the Tigris and Euphrates rivers that cross the country, and access to the sea through the Arabian Gulf. • Availability of a national electrical power network throughout Iraq. Although this is currently not sufficient to meet current and expected demand growth. • projects to generate more electrical power in all provinces in the country, in The state intends to set up projects order to meet Iraq’s current and future needs. • Availability of geographical maps of all the sedimentary basins identified in Iraq during the last century and their possible usages. • vailability of local expertise and the capacity building infrastructure to go with its expected d Availability demand growth. Iraqi Extractive Industries Transparency Initiative PwC Page 47 of 75 . The Mining Industries in Iraq 6. infrastructure, The Iraqi government is currently formulating policies relating to the rehabilitation of Iraq’s infrastructure which are intended to attract investors and prepare Iraq for future development. These policies include institutional reform, capacity building, and the provision and upgrading of core services, including wide access ation and waste disposal. The government is seeking to improve the quality to water, electricity, housing, sanitation of life in both urban and rural areas by increasing the coverage of services and reducing environmental impact, in line with the UN’s Millennium Development Goals. inistry of Industry and Minerals (MIM)’s 6.1.3 The Iraqi Ministry strategy for growth in the mining and extractive industries Because of its dependence on oil revenues and its limited revenues from other activities, Iraq’s development one economy has frequently been depicted as one--sector . The Iraqi government has formulated a overly dependent. 2010), which sets out its development plans and investment programs. This strategy three-year strategy (2007-2010), represents an increased economic openness in Iraq’s relations with the rest of the woworld. The strategy is based on four pillars that are designed to underpin the country’s development activities, namely: • Strengthening and diversifying the foundations of economic growth. • Stimulating the private sector. • Improving quality of life. • Promoting good governance and establishing security. Iraq currently uses its natural gas and minerals in its petrochemical industry and in its fertilizer production industry . In addition, natural gas is also used in power stations to provide electricity and to replace of Liquid Petroleum Gas (LPG) imports wherever appropriate and possible. short term plan to restart, repair and The Ministry of Industry and Minerals (MIM), has recently established a short-term owned companies. The MIM has also developed a vision for a long transfer ownership of state-owned long-term plan that development of a national industry in this sector, utilizing Iraq’s abundant sets out a framework for the development resources, labor force and drawing on the investment possibilities of the private sector, both domestic and foreign. .4 The views of senior decision-makers 6.1.4 decision makers and government advisors on the future of the mining and other resources industries in Iraq The MIM has decided to expand Iraq’s mining industry in order to provide greater investment opportunities in among the provincial councils in the field of exploring and developing its mineral resources. Joint coordination among relation to the exploitation of these resources is currently taking place. This seeks to provide support to public physical companies that specialize in this industry, through the allocation of funds to help the rehabilitation the phys assets and capacity of those companies and in preparing them for public-privatepublic private partnership or for privatization, if and where more appropriate. Iraqi Extractive Industries Transparency Initiative PwC Page 48 of 75 . The Mining Industries in Iraq 6. Although Iraq has some of the largest stocks of strategic minerals, the mining sector has been neglected in the past and so development in this sector has been slow, in comparison with other countries. According to the “State Owned Companies (SOEs) Guide of 2006�, the strategy for strengthening these industries is as follows: • Short term: • Restarting and reforming viable manufacturing SOEs (this began in 2004 and was set to last for two years) • Medium-term: • Preparing to transfer manufacturing SOEs to the private sector (this began in 2005 and was set to last for five years) • Long-term: • Formulating a comprehensive policy framework for national industrial development, led by the private sector (this began in 2004 and will continue thereafter.) Rehabilitation of Existing SOEs rehabilitating plants that are SOEs as they need to be The MIM seeks to engage investors in the process of rehabilitating upgraded, developed and modernized. Investors who invest in this rehabilitation will be permitted to operate agreed period. and manage these plants, and will get a share in the profits of production, for a specified and a In order to introduce investors to these opportunities, the MIM has prepared “Investment Files� that provide information on the prevailing technical condition of each plant, rehabilitation requirements, granted privileges eral terms and conditions of the agreement in respect of each plant, and other information, and obligations, general to enable investors to submit Joint Ventures and Production proposals. .5 Iraq’s economic reforms and their implications for 6.1.5 the oil, gas and mining sectors After approving metal investment law No. 91 of 1998 (and its amendments), which has not been fully implemented, Council of Ministers Resolution No. 314 for the year 2010 established a roadmap for owned companies. This roadmap restructuring and reforming state-owned roadmap permits a high level of flexibility in relation to dealing with the obstacles facing the implementation of the restructuring process. In addition to the provision, the basis for selection of the members of the Restructuring Unit in coordination with th the Unit of Economic Reform (Public Companies Reform Team which one of its members is a representative of the MIM) that inform through this " single window", the public and private interested bidders, of the entry conditions such as: technical and financial capability, proposed rehabilitation or development requirements, explore their abilities and distribute or direct them over business development and investment activities. Iraqi Extractive Industries Transparency Initiative PwC Page 49 of 75 . The Mining Industries in Iraq 6. .6 Investment opportunities in the mining min 6.1.6 mineral industries in Iraq Due to the diversity of available raw materials in Iraq, and the availability of large proven reserves of quality and good specification minerals, the MIM has provided the following investment opportunities for investors in coordination with the State Company for Geological Surveys and Mining: Project Location A tile-production plant project Anbar Governorate A free sulfur extraction and mineralization Nineveh Governorate project A silica sand production project (producing silica sand for the glass industry, foundries, Anbar Governorate thermo stone and silicon industries) A project for the extraction and mining of Anbar Governorate phosphatic deposits in Wadi Swab re production plant project. A feldspar ore Ashraf' Governorate Al-Najaf AI -Ashraf' A project for constructing an alumina Anbar Governorate production plant A project for the extraction and mining of Anbar Governorate phosphatic deposits at Wadi Al – llirri A sodium sulphate production plant project Deen Governorate Salah Al -Deen Cement production plants. Multiple governorates A sodium carbonate production plant project. Anbar Governorate Iraqi Extractive Industries Transparency Initiative PwC Page 50 of 75 . The Mining Industries in Iraq 6. 6.1.7 Summary of Iraq’s main mineral resources Mineral Products Location Proven Reserves Uses Free sulfur Meshraq / Ninawa Governorate About 600 m.t Phosphatic fertilizers and chemicals industries (extraction ability 60%) Phosphorite 20- Akashat /Anbar Governorate More than 100000 Phosphatic fertilizers industry 25% P,05 m.t Sodium chloride Ninawa, Muthana and Anbar More than 50 m.t Food, textile and leather industries (salt) Governorates Glass sand Western Desert / Anbar Govemorate More than 75 m.t Glass industry, ceramic, refractories and foundries Quartzite Western Desert / Anbar Governorate More than 16 m.t Silicon industries and furnace acid lining Feldspar bearing Al-Najaf Governorate More than 00 m.t Ceramic industries and filters sand Heavy minerals, Western Desert / Anbar Govemorate — Jewelry manufacture (rutile), production of titanium zircon, sand, zircon, rutile zirconium monazite, thorium and monazite Glaubente ore Shaiy Lake / Samarra Salah Al Al-Shaiy Al-Deen 22 m.t Sodium sulphate used for the production of detergents and Governorate in the glass industry Limestone Najaf and Al Ninawa, Anbar, Al-Najaf Al-Muthana More than 8000 m.t Cement, lime, glass, ceramic producton, construction Governorate industry, paint production and marble substituents Dolomite Muthana Governorates Anbar and Al-Muthana 330 m.t Production of magnesia, magnetite brick, glass, ceramics, iron, steel and in the construction industry Gypsum Deen, Anbar and Wasit Ninawa , Salah Al-Deen, More than 130 m.t Plaster for decoration and in the cement industry Governorates Sand and gravel Najaf Alashraf and Holy Kerbala, Al-Najaf Very big reserves For use in construction and for filters Deen, and Basrah Governorates Salah Al-Deen, Source: Iraq Ministry of Industry and Mineral Iraqi Extractive Industries Transparency Initiative PwC Page 51 of 75 . The Mining Industries in Iraq 6. .7 Summary of Iraq’s main mineral resources 6.1.7 Mineral Products location Proven Reserves Uses Recent clays Governorates located in the Mesopotamian 2858 m.t in brick Brick and cement production industry and 450 m.m3 for cement industry Old formation clays Nenava, Salah Addin, and Diyala Governorates Very big reserves Brick production Kaolin clays Western desert Anbar Governorate 1200 m.t Cement, refractories, white cement and historical bricks Clay Western desert Anbar Governorate 10 m.t White cement and refractories Bentonite clays Western desert Anbar Governorate 22 m.t Drilling mud for oil wells and concrete pillars, animal fodder preparation,vegetable oil bleaching, paraffin, foundry moldingng works Attapulgite Clays Western desert Anbar Governorate and Neneva 0.5 m.t Salty drilling mud, bleaching for wax and vegetable Governorate oils Celestite Najaf Alashraf and Holy Kerbala AL-Najaf 0.8 m.t Raw material for sugar extraction (Strontium Governorate sulphate) Porcellanite Western desert Anbar Governorate 1.8 m.t Vegetable oils purification, food industry, sulfur and Siliceous rocks of light concrete production low density less than 1 gm/cm3 Bauxite (Aluminum Western desert Anbar Governorate 1 m.t Refractory and alum production ore) Sedimentary iron Western desert Anbar Governorate 60 m.t Resistant cement Source: Iraq Ministry of Industry and Mineral Iraqi Extractive Industries Transparency Initiative PwC Page 52 of 75 . The Mining Industries in Iraq 6. .8 Programs for geological mapping and mineral 6.1.8 exploration in Iraq The Geological Survey and Mining Company has a plan to establish a digital database providing geographic information relating to Iraq. Databases that include information about Iraq’s mineral resources, their locations, their type, the recoverable reserves and its related infrastructure will be made available for investors, for use in further exploration. produce geological maps and to keep those Geological surveys are currently being conducted throughout Iraq to produce maps updated in line with the requirements of technological developments in the mining industry. Other programs include those related to exploration and exploitation of minerals in Iraq. The Geological Survey and Mining Company’s current activities include the following: • Exploration of limestone (suitable for cement production) in the Qara Choaq area, for the benefit of the Gar Company. • United Construction Detailed geological survey (1:25000) of the Qara Choaq area for the benefit of the Un Company. • Detailed geological survey (1:25000) of the Qara Choaq area for the benefit of the Shahee Zian Company. • Reconnaissance geological survey of territory in the Muthana Governorate. • Exploration of limestone (suitable for cement and lime production) at the Wadi Aubiyath locality for the benefit of the State Company of Southern Cement. .9 Industries/products related to mining minerals 6.1.9 Material Industry Phosphate Rocks Fertilizers, phosphoric acid Raw sulfur Free sulfur Silica sand Glass, standard sand White kaolin Ceramic, cement Dolomite Glass, refractories Bentonite Drilling mud Limestone Cement, building, glass Gypsum Piaster Feldspar Ceramic, glass Quaternary clay Brick Salt Food, industry Gravel and Sand Construction Sedimentary iron Cement Clay White cement Source: Iraq Ministry of Industry and Mineral Iraqi Extractive Industries Transparency Initiative PwC Page 53 of 75 Lessons learned from this reconciliation Iraqi Extractive Industries Transparency Initiative PwC Page 54 of 75 7. Lessons learned from this reconciliation Irrespective of how much planning has been carried out, an initial reconciliation in any new country is likely to give rise to issues that were never envisaged at the planning stage. Experiences from this initial implementation of the EITI in Iraq are summarized below: 7.1 Reporting templates Since this was the first year of reporting, questions have also been raised as to what to include in the reporting template. These questions have to a large extent been solved by referring to the detailed guidance providing the entities involved with the Arabic version of the reporting template only. Recommendation: The reporting template for next year should address all enquiries with a ‘frequently asked questions’, section to increase clarity in this regard. 7.2 Reporting deadlines The governmental entities did not receive detailed reporting instructions until September 2011. Despite the extended deadline of 6 October 2011, several companies were still unable to meet the deadline. The last entity reported on 20 October 2011. . Approximately two thirds of the entities reported within the original deadline. up was undertaken and missing data was received from governmental entities After the deadline expired, follow-up through follow up by H.E the Minster of Oil represented again an instructions to SOMO to follow up on data respond. requests, which was actioned by SOMO sending two consecutive letters to oil buyers who did not respond Significant delays have been encountered as only 11 buyers were able to provide required information on or fore the deadline. It required a extensive efforts from the reconciler and IEITI to reach 27 responses while it before required the intervention of H.E the Minister of Oil by sending a letter to the oil buyers who did not respond to reach the level of 34 companies. Follow up with different parties through coordination made by the IEITI National Secretariat in relation to data ( requested from Federal Reserve Bank of New York (FRBNY), , this included two reminders being sent to FRNBNY Y by the CBI and letters being sent to both the MoF and the CBI by H.E the Minister of Oil. follow up of discrepancies. Late reporting creates challenges in relation to the reconciliation work and the follow-up Recommendation: It is recommended that the importance of keeping to the reporting deadline be emphasized upfront when issuing next year’s reporting forms. A strict follow up mechanism should be put in place to limit any delays to a minimum. 7.3 Managing the sensitivity of reported information rting / reconciliation process, the IEITI made clarifications with respect to the disclosure of During the reporting confidential or sensitive information. Recommendation: In future years, earlier communication with focused emphasis and importance with the reporting entities in this regard would ensure better cooperation. Iraqi Extractive Industries Transparency Initiative PwC Page 55 of 75 7. Lessons learned from this reconciliation 7.4 Other payments Reporting entities must report all other payments made to the government or by the government for current or future service contracts, in order to disclose payments that are not necessarily required by law. In the current year, there were some questions raised by oil buyers concerning what to include under “Other payments� as there were no production by foreign extractive companies during the year. Recommendation: Additional guidelines should be articulated in relation to next year’s reporting, to limit any uncertainties. In this reconciliation, no company included other payments in their reporting that were not in line with this year’s guidelines. 7.5 Signatures Based on the guidelines, the reporting templates should be signed by the CFO/head of department. It had been noted that some of the templates were not signed at all. However, these were received through official emails of the related buyers. Recommendation: high Future guidelines need to emphasize the importance of high-level sign off on all of the reporting templates 7.6 Availability of Auditor’s report ed to attach an auditor’s report together with their reporting templates. Some of the Buyers were requested companies neglected to do this and some had to be reminded frequently of the need to include this information. structure of the oil and gas industry, the oil companies are Due to the current regulatory context in Iraq and the structure audited by the Iraqi Board of Supreme Audit (BSA) based on local Iraqi accounting standards. These Iraqi standards, when originally developed in the 1980’s, , were based on International Accounting StaStandards (IAS). A However, they were not updated for over 20 years. Accordingly they will create an understanding gap between practices reporting by the oil companies and industry practices. Recommendation: Oil buyers should be advised to provide their audited financial statements to SOMO on an annual basis. Moreover, national oil companies should be audited based on internationally accepted auditing and accounting standards, in order for all involved to be at the level of industry best practices. Iraqi Extractive Industries Transparency Initiative PwC Page 56 of 75 Appendix 1 - Reporting entities Iraqi Extractive Industries Transparency Initiative PwC Page 57 of 75 Reporting entities The following entities has been identified by the IEITI council of stakeholders as the reporting entities for the first IEITI report: International oil companies Oil Marketing Company (SOMO) Ministry of Oil North Oil Company South Oil Company Ministry of Finance Central Bank of Iraq Ministry of Industry and Minerals : Iraqi Extractive Industries Transparency Initiative PwC Page 58 of 75 Appendix 2 - Instructions for completion of Templates Iraqi Extractive Industries Transparency Initiative PwC Page 59 of 75 Instructions for completion of Templates 1. Timetable Reporting Templates must be completed and lodged with the IEITI Reconcilers by no later than 15 September 2011. 2. Lodgment company and Government Both hard and soft copies of the completed templates should be lodged by every compan Agency. Wherever possible, they should be accompanied by supporting schedules/information giving a li of the template. breakdown of the amounts/quantities declared on each line Hard copies should be mailed to: IEITI Reconcilers PricewaterhouseCoopers “Jordan� 3rd Circle, Jabal Amman - 14 Hazza' Al Majali Street P.O Box 5175, Amman 11183, Jordan AND National Secretariat For IEITI Ministry of Oil Complex, 3rd floor Zayounah, Baghdad-Iraq Soft copies should be emailed to: iraqeiti@jo.pwc.com AND iha22102@caa.columbia.edu 3. Templates A template needs to be completed by each Government Agency, SOMO and the buyers in respect of which any of the taxes listed have been paid/ received. At the top of the buyers template, there is a space to enter the name of the buyer (company). This must b be Article of Incorporation, as revised completed using the full and exact name of the company as it appears in its Articles by any official name change where appropriate. At the below of the buyers, SOMO and the governmental agencies templates, there is a space t to enter the name, authorized signature and the Stamp. This must be completed using the full and exact name of the person whom responsible for the correctness and reliability of the template data. 4. Queries and Guidance regarding completion of templates Should any queries arise whilst you are completing the Templates you can seek clarification from us by emailing details of the query to: iraqeiti@jo.pwc.com and iha22102@caa.columbia.edu clari Guidance note will be circulated to all participations parties clarifying the issue All inquiries should be either in English or Arabic languages. 5. Currency of payment / receipt Both the Government and company templates contain columns to indicate the currency of the transactions (i.e. USD or IQ). Please note that items recorded in IQ should be rounded to the nearest thousand (IQ 000’s). Please do not translate any payments/receipts into the other currency as this creates the risk of different conversion rates being applied to the same transaction. Iraqi Extractive Industries Transparency Initiative PwC Page 60 of 75 completion of Instructions for completion Templates 6. Basis of reporting 6.1 Amounts paid/received Unless otherwise required by the template, all figures included in the reporting templates must be calculated on a strict cash basis. Accordingly, any payment made prior to 1 January 2009 should be excluded. The same applies to any payment made after 31 December 2009. For clarification, the date of payment is the date recorded on the receipt voucher/ supporting document. 7. Supporting schedules Supporting schedules should be prepared for all figures shown in reporting templates. Although not compulsory, it would be appreciated greatly if these schedules are lodged at the same time as the templates as for a supporting schedule is they will help the Reconcilers to carry out the reconciliation. A suggested format for available to all buyers, SOMO and government agencies can use them as a tool for completing their respective templates. If supporting schedules are prepared in any other format, these are also welcomed. These might be in the form of computer print outs or typed lists. Government Agencies should prepare supporting schedules detailing how each figure shown in the templates was compiled. These schedules are to be submitted with the reporting templates. Copies of receipts may also bsequently be required to be submitted to the Reconciler, subsequently Reconciler if discrepancies between the company’s template and the Government Templates are identified. 8. Attestations This is to remind the person signing off the filled template, who should be able to sign on behalf of the Board of Directors (or similar body), that the figures inserted on the template must be checked. In relation to the Auditor’s Report, this can be provided by the buyers, SOMO and the Governmental Agencies external auditors (Board of Supreme Audit) or another “Bona Fide� registered auditor. The wording of the auditor’s report is provided and should not be altered. A record should be maintained detailing how items shown on the template reconcile with the line items shown statements as this information may be required by your auditors in order to in the company’s audited financial statements, make the required attestation. 9. Accounting records 9.1 Companies For companies, as noted above, amounts paid should be reported based on cash basis of accounting. If the company normally prepares its accounting records based on accruals basis, i.e. the payment is recognized at the time it is due rather than the time when it is paid, adjustments will have to be made to include amounts recorded in the accounting records up to 31 December 2009 but actually paid after this date in the template, and exclude amounts recorded up to 31 December 2008 which were paid after this date. In other words, the based accounts must be converted to the cash basis. accrual–based It is recommended that a review of the cashbooks should be carried out to identify any payments not picked up er accounts. A review could also be carried out to ensure that all regular payments are through the ledger accounted for. 9.2 Government Agencies taken to In respect of Government Agencies, receipts are to be reported based on cash basis. Care should be tak ensure that amounts shown on the template include all receipts during the financial year 2009, irrespective of whether the receipt was allocated in the Agencies records against amounts due in a previous or subsequent financial year, unless otherwise required by the template. Iraqi Extractive Industries Transparency Initiative PwC Page 61 of 75 Appendix 3 - Reporting Templates Iraqi Extractive Industries Transparency Initiative PwC Page 62 of 75 Templates Ministry of Oil/ Licensing Department Form Iraqi Extractive Industries Transparency Initiative PwC Page 63 of 75 Templates Ministry of Oil/ Technical Department Form Iraqi Extractive Industries Transparency Initiative PwC Page 64 of 75 Templates Ministry of Finance Form Iraqi Extractive Industries Transparency Initiative PwC Page 65 of 75 Templates North Oil Company Form Iraqi Extractive Industries Transparency Initiative PwC Page 66 of 75 Templates South Oil Company Form Iraqi Extractive Industries Transparency Initiative PwC Page 67 of 75 Templates SOMO FORM 1 Iraqi Extractive Industries Transparency Initiative PwC Page 68 of 75 Templates SOMO FORM 2 Iraqi Extractive Industries Transparency Initiative PwC Page 69 of 75 Templates SOMO FORM 3 Iraqi Extractive Industries Transparency Initiative PwC Page 70 of 75 Templates Buyers Iraqi Extractive Industries Transparency Initiative PwC Page 71 of 75 Templates Research on Iraqi Oil Markets (American, European, and Asian) by SOMO To: Oil Marketing Company (SOMO) Dear Sirs, At the request of the Iraqi Extractive Industries Transparency Initiative (IEITI), kindly send to PricewaterhouseCoopers "Jordan" directly at their address below, a Research on Iraqi Oil Markets that includes but not limited to the following:  What is SOMO strategy on marketing growth over Oil Markets (American, European, and Asian)?  Details of Spot crude oil prices (PLATTS Rates $/bbl) from 1 January 2009 to 31 December 2009.  Historic and forecast data relating to production, consumption, imports, exports and reserves on Iraqi Oil 2007 Markets (American, European, and Asian) for the period 2007-2015  Key information relating to Iraqi Oil Markets (American, European, and Asian) regulations.  Information on the top companies purchasing Iraqi crude oil based on their market location (American, European, and Asian) including business description, strategic analysis, and financial information  Facilitate market analysis and forecasting of future industry trends in Iraqi Oil Markets (American, European, and Asian).  Assess your competitor's major crude oil assets and their performance.  Any other Research on Iraqi Oil Markets (American, European, and Asian) that may provide. Hard copies should be sent to: PricewaterhouseCoopers "Jordan" P.O. Box 5175 Amman 11183, Fax 00962 6 4610880 Hashemite Kingdom of Jordan And/or Jaddriyah, District No. 925, Street No. 34, House No. 26, Baghdad – Iraq P.O. Box 2777 Jaddriyah, Tel 778 9282, 778 9135, 556 3074 Soft copies should be emailed to: iraqeiti@jo.pwc.com AND iha22102@caa.columbia.edu Very truly yours. Name: Signature: Iraqi Extractive Industries Transparency Initiative PwC Page 72 of 75 Templates Research on Mining Extractive Industry in Iraq by Ministry of Industry and minerals. To: Iraqi Ministry of Industry and Minerals Dear Sirs, At the request of the Iraqi Extractive Industries Transparency Initiative (IEITI), kindly send to PricewaterhouseCoopers "Jordan" at their address below, a Research on Mining Extractive Industry in Iraq that includes but not limited to the following:  The future outlook for key minerals and commodities in Iraq including confirmed and non confirmed reserves.  What are the infrastructure and logistics currently exist? - Is Iraq’s infrastructure ready for the investment?  What is the Iraqi Ministry of Industry and minerals strategy on mining extractive industry growth?  decision makers and government advisors on the future of the mining and wider What are the views of senior decision-makers resources industry in Iraq?  implication for the mining and resources sectors. Iraq’s economic reforms and their implication  A summary on the main mineral resources of Iraq  What are the investment opportunities in the mining, mineral industries in Iraq.  Is there any comprehensive systematic program of geological mapping and mineral exp exploration that covers all the Iraqi territory?  What are the industries related to mining, minerals in order to explore their suitability for revitalising the industries in Iraq. Hard copies should be sent to: PricewaterhouseCoopers "Jordan" mman 11183, Fax 00962 6 4610880 Hashemite Kingdom of Jordan P.O. Box 5175 Amman And/or Jaddriyah, District No. 925, Street No. 34, House No. 26, Baghdad – Iraq P.O. Box 2777 Jaddriyah, Tel 778 9282, 778 9135, 556 3074 Soft copies should be emailed to: iraqeiti@jo.pwc.com AND iha22102@caa.columbia.edu Very truly yours. Name: Signature: Iraqi Extractive Industries Transparency Initiative PwC Page 73 of 75 Templates Central Bank of Iraq Form to FRBNY To : Federal Reserve Bank of New York (FRBNY) ………………………… …………………….….. Dear Sirs, At the request of the Iraqi Extractive Industries Transparency Initiative (IEITI), kindly send certificates in respect of our positions listed below as at 31 December 2009 to PricewaterhouseCoopers "Jordan" directly at their address P.O. Box 5175 Amman 11183, Fax 00962 6 4610880 Hashemite Kingdom of Jordan Att.: Maher Al-Katout iraqeiti@jo.pwc.com  Detailed Bank statement of account for the year ended December 31, 2009 for the following accounts: Deposit Account Account Title Number 021086867 Central Bank of Iraq - Oil Proceeds Receipts Account 021086773 Central Bank of Iraq - Development Fund for Iraq 021080708 Central Bank of Iraq - Development Fund for Iraq Transition Account Very truly yours, Name: Authorized Signatory: Iraqi Extractive Industries Transparency Initiative PwC Page 74 of 75 © 2011 PwC. All rights reserved. 'PricewaterhouseCoopers' refers to PwC or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. Recipient also acknowledges that information shared here within is the intellectual property of PwC as recognized by the copyright and intellectual property regulations.