Iraq

There have been regular, public statements of support from the government and a senior individual has been appointed to lead on the implementation of the EITI since the inauguration of a new government in October 2018. Senior government officials are represented on the MSG and appear effectively engaged in all aspects of EITI implementation.

The industry constituency belatedly agreed and published its action plan in April 2019. The renewal of industry’s MSG representation in late 2018 brought about a significant improvement in the constituency’s coordination on EITI issues, including through the Iraq International Oil Companies Forum. Industry representatives regularly attend MSG meetings, submit data for EITI reporting and more frequently consult with the broader constituency. However, the industry constituency’s engagement in EITI implementation appears to remain primarily focused on the provision of data for EITI reporting. The industry constituency does not yet appear to be fully, actively and effectively engaged in all aspects of implementation, including on dissemination and outreach.

Despite the general constraints inherent in Iraq's security situation, civil society is able to engage in public debate related to the EITI proess and expresss opinions about the EITI process without restraint, coercion or reprisal. Civil society representatives are able to engage in the design, implementation, monitoring and evaluation of the EITI process.

The MSG has been formed and includes self-appointed representatives from each stakeholder group with no suggestion of interference or coercion, even if nominations procedures for industry were only belatedly codified. The mechanism for civil society nominations on the MSG was open to the public, and CSO members of the MSG are operationally and in policy terms independent. Information on nominations procedures is publicly available. The ToR for the MSG addresses the requirements of the EITI Standard, although there appear to be deviations in practice in terms of actual MSG membership for the different constituencies. Meetings are convened with sufficient advance warning and MSG members generally appear to have sufficient time to review documents ahead of meetings. Attendance of the large majority of MSG members is consistent. The MSG’s per diem policy was publicly codified.

The 2018-2019 IEITI work plan is publicly accessible, produced in a timely manner and updated annually, with objectives aligned with national priorities. However, the degree of consultations with the broader constituencies represented on the MSG is unclear. The work plan also includes specific activities to follow up on recommendations from Validation, but not from EITI reporting. While around half of the activities are costed, with sources of funding clearly indicated, the other half are not.

The 2016 EITI Report and its addendum clarify oil and gas license awards and transfers in 2016 and provides a description of the statutory process for awarding and transferring oil and gas licenses in Federal Iraq, including technical and financial criteria for bidding rounds and for transfers. The 2016 EITI Report and its addendum provide the identity of assignor and assignee for the one transfer in 2016 and quotes stakeholders’ views that there were no non-trivial deviations from statutory procedures. In mining, the report clearly states that no mining company was considered material in 2016. The report provides publicly-available information on license allocations and transfers in the Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

The 2016 EITI Report provides guidance to accessing all information listed under Requirement 2.3.b aside from dates of application for licenses covered by TSCs with IOCs. The 2016 addendum provides dates of application for all licenses under TSCs, as well as all relevant information on oilfields operated independently by NOCs, in line with Requirement 2.3.b. In mining, the report clearly states that no mining company was considered material in 2016.The report provides publicly-available information on license register(s) in Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

In April 2019, the Ministry of Oil published the government’s policy on contract disclosure in the extractives on its website. The 2016 EITI Report and its addendum provide links to model oil and gas contracts on the Ministry of Oil website and documents actual disclosure practice. The report provides publicly-available information on contract disclosure in Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

The 2016 EITI Report includes an overview of relevant laws, government entities, fiscal terms in the mining, oil and gas sector, the degree of fiscal devolution and brief commentary on current reforms.

Implementing countries are not yet required to address beneficial ownership and progress with this requirement does not yet have any implications for a country’s EITI status. The multi-stakeholder group published its roadmap by the deadline of 1 January 2017 as required, but it is not clear what beneficial ownership information will be disclosed in Iraq’s state-dominated oil and gas sector. The 2015 IEITI Report does not clarify the government’s policy on beneficial ownership disclosure and does not provide the legal ownership of companies operating under technical service contracts. It is furthermore not clear whether Iraq wishes to extend beneficial ownership disclosure to the mining sector, where it could perhaps be more relevant.

The 2016 EITI Report provides a list of state-owned enterprises in the oil and gas sector in both Federal Iraq and Kurdistan, as well as a list of SOEs in the mining sector in Federal Iraq but not in Kurdistan. While the 2016 EITI Report states that none of the SOEs’ payments to government were considered material, the report nonetheless identifies six oil and gas companies owned by the Federal Government of Iraq as material for EITI reporting in 2016 based on their receipt of material transfers from the government. The report provides an overview of financial relations between these six SOEs and the government, both statutorily and, albeit only generally, in practice. The publication of all oil and gas SOEs’ 2016 financial statements in April 2019 provides additional information on the practice of financial relations between SOEs and the state in 2016. The terms associated with state equity in the six material SOEs and one majority government-owned gas company are described. However, the MSG did not fully described the actual practice of financial relations in 2016.

The 2015 IEITI Report provides an overview of the extractive sector, including information on significant exploration activities.

The 2016 EITI Report provides production volumes for oil, gas and mining in Federal Iraq, together with an approximate description of the location of production. The 2016 report addendum provides 2016 production values for crude oil, natural gas and three of the four minerals produced in Iraq in 2016. The gaps in production values for one of the four minerals produced in 2016 were of marginal importance given that the mining sector was not considered material in 2016. The report provides publicly-available information on production data in Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

The 2015 IEITI Report provides the volumes and values of crude oil exports. There is no evidence of any Iraqi exports of natural gas or minerals in 2015.

EITI Requirement 4.3 on barter and infrastructure transactions is not applicable to Iraq.

The 2016 EITI Report describes the MSG’s view that crude oil export revenue collected by the KRG was the only direct subnational payment stream considered material in 2016. While the lack of coverage of extractives companies’ direct payments to the KRG is a concern, the 2016 EITI Report and the IEITI website provide publicly available information on a few companies’ 2016 payments to the KRG and the KRG’s revenues in H1-2017 based on publicly-accessible data. The report provides publicly-available information on direct subnational payments in Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

The 2016 EITI Report presents reconciled financial data disaggregated by government entity, but not consistently by revenue stream and by company. A higher share of material revenues have been disaggregated by company, revenue stream and government entity than in the 2015 EITI Report reviewed in the first Validation however. The MSG approved the reporting period.

The MSG adopted ToR for the IA for the 2016 EITI Report consistent with the EITI Board-approved template, and the IA appears to have adhered to the terms of the ToR in practice. The IA undertook a review of auditing practices in 2016, and agreed quality assurance procedures with the MSG. However, companies were given the discretion to decide which specific quality assurances to provide. The 2016 report addendum names individual non-complying companies and assesses the materiality of their payments to government. While the report only includes a target reconciliation coverage, it is possible to calculate an aggregate net final reconciliation coverage in light of reporting omissions. The addendum includes the IA’s clear assessment of the comprehensiveness and reliability of data. The report includes recommendations and provide an overview of follow-up on corrective actions from Validation, while the addendum covered follow-up on recommendations of past EITI Reports. Summary data tables have been prepared for Iraq’s 2016 EITI Report.

The MSG has agreed materiality thresholds for selecting companies and revenue streams, effectively removing the mining sector from the scope of reconciliation. The 2016 EITI Report lists and describes all material companies and revenue streams, names the non-reporting companies but does not assess the materiality of non-reporting companies’ payments. While the value of aggregate net discrepancies appears to be below 5% of total reconciled revenues, significant discrepancies in the reconciliation of cost recovery and remuneration fees are a concern. Full government reporting of all material revenues is provided, per revenue stream.

Iraq EITI has made efforts to go beyond the minimum requirement through its cargo-by-cargo reconciliation of crude oil sales and additional information on the sales process. The 2015 IEITI Report provides the volumes of crude oil collected by the government, the volumes sold and the value of oil sales disaggregated by buyer.

EITI Requirement 4.4 on transport revenues is not applicable to Iraq.

The 2016 EITI Report clearly defines six SOEs as material. The report confirms the lack of financial payments by companies to material SOEs, and its addendum confirms that NOCs receive oil and gas produced by IOCs in line with the state’s ownership of resources. The report includes an assessment of SOE payments of dividends to government in 2016 and concludes that these were not material. The report comprehensively discloses and reconciles SOMO transfers of internal service payments to each of the five SOEs receiving such payments in 2016. Finally, the report includes unilateral disclosure of intra-SOE transfers of crude oil and natural gas in kind, but does not reconcile these.

Iraq now publishes EITI Reports within one year of the close of the fiscal period under review.

The 2016 EITI Report confirms that all extractives revenues, other than those collected by the KRG, are recorded in the Federal Iraq national budget. The report does not explain the allocation of extractives revenues collected by the KRG, nor provide links to relevant financial reports. However, the report provides publicly-available information on distribution of revenues in Iraqi Kurdistan in 2016 and clearly highlights the gaps in publicly-available information.

The 2016 EITI Report confirms the lack of effective subnational transfers to the Kurdistan Regional Government in 2016, but describes the general revenue-sharing formula. The report describes ‘petrodollar allocations’ effective in 2016, provides the general revenue-sharing formula and highlights discrepancies between the transfer amount calculated in accordance with the relevant revenue sharing formula and the actual amount transferred to each Governorate.

Reporting on revenue management and expenditures is encouraged but not required by the EITI Standard and progress with this requirement will not have any implications for a country’s EITI status. Iraq EITI has sought to include information on the budget-making process and certain budget assumptions and projections in the 2015 IEITI Report.

The 2016 EITI Report describes two types of mandatory social expenditures, while its addendum clarifies that IOCs’ expenditures on training courses are not a form of mandatory social expenditures. The report and its addendum provide companies’ unilateral disclosures of a large share of the information on mandatory social expenditures listed under Requirement 6.1.a, albeit not consistently for all mandatory social expenditures reported. The lack of reporting of social expenditures by several material companies is a concern.

This requirement is not applicable in Iraq.

The 2016 EITI Report provides, in absolute and relative terms, the contribution of the extractive industries to GDP, government revenues, exports and employment in Federal Iraq. Challenges in sourcing data from the Kurdistan Regional Government are clearly highlighted in the report and efforts were made to source publicly-accessible information where possible.

Requirement 7.2 encourages the countries to make EITI reports accessible to public in open data formats. Such efforts are encouraged but not required and are not assessed in determining compliance with the EITI Standard. Iraq’s EITI data is available in machine readable format through the EITI global website, drawing on summary data tables completed by the national secretariat. IEITI has also published summaries of past EITI Reports in local languages.

The MSG has reviewed progress and outcomes of implementation on a regular basis, including by publishing the 2018 APR that provided an overview of activities and progress against work plan objectives. While it appears that the 2018 APR was the product of consultations within each of the three constituencies, there is no evidence that the MSG has assessed the impact of EITI implementation to date, either through the annual progress report or other channels.

The Iraq EITI Reports are comprehensible and published in local languages and in open data format, although they appear far more actively promoted online than through print or active outreach. While the IEITI Secretariat has made efforts to disseminate EITI Reports, there is little evidence of MSG members contributing to outreach and dissemination in practice. While the EITI Reports themselves are publicly accessible on the IEITI website, there is little evidence of use of EITI data in practice. There have been limited attempts at active dissemination of visualisations of EITI information, including regular subnational outreach and dissemination.

The MSG and the government have taken steps to consider the recommendations for improvements from past EITI Reports and Iraq’s first Validation. A mechanism for the MSG to consistently follow up on recommendations from past EITI Reports was belatedly established at the MSG’s 8 April 2019 meeting. However, this mechanism needs to be implemented to demonstrate that Iraq has consistently followed up on EITI recommendations.