FINAL REPORT Scoping Study for the EITI in Kazakhstan August 16th 2012 Acronyms/Abbreviations ASI Adam Smith International CSOs Civil Society Organisations IOC International Oil Companies KZT Kazakhstan Tenge (currency) LCC/LKU Licence Contract Conditions MINT Ministry of Industry and New Technology MOG Ministry of Oil and Gas MOU Memorandum of Understanding MSG Multi-Stakeholder Group NGO Non Governmental Organisation NSC National Stakeholders Council PSA Production Sharing Agreements TOR Terms of Reference WB World Bank Table of Contents A.A.A. Executive Summary ................................................................................................................................................................................... ................................................................................................ ................................................................................................ ................................................................................................ ......................... 333 1. Materiality strategy ................................................................................................................................................................................................ 3 2. Materiality Threshold ............................................................................................................................................................................................ 3 3. Missing benefit streams ...................................................................................................................................................................................... 3 4. Recommended list of Reporting Entities ................................................................................................................................................ 3 5. International Accounting Standards ........................................................................................................................................................... 3 6. Other Recommendations ................................................................................................................................................................................... 4 B.B.B. Introduction ................................................................................................................................................................................... ................................................................................................ ................................................................................................ ................................................................................................ ................................................................................... ...... 555 1. Background .................................................................................................................................................................................................................. 5 2. Document Review .................................................................................................................................................................................................... 5 2.1. Guidance Notes ...............................................................................................................................................................................................5 2.1.1. Checklist for EITI Scoping & Feasibility Studies .............................................................................................................5 2.1.2. Guidance Note on Defining Materiality ..................................................................................................................................6 2.2. Validation Report ............................................................................................................................................................................................7 2.2.1. Relevant Recommendations of the Validation Report .................................................................................................8 2.3. Reconciliation Reports .................................................................................................................................................................................8 2.4. International Secretariat Review ...........................................................................................................................................................9 2.5. NSC Minutes .................................................................................................................................................................................................... 10 2.6. Implementing EITI: Early Lessons from the Field .................................................................................................................. 10 3. Additional Documents Reviewed ................................................................................................................................................................. 10 3.1. The Independent Report ......................................................................................................................................................................... 10 3.2. January 2012 Letter to EITI International Secretariat ...................................................................................................... 11 3.3. 2010 Subsoil Law ........................................................................................................................................................................................ 12 3.3.1. The EITI MOU in the Subsoil Law ......................................................................................................................................... 12 3.3.2. EITI Reporting in the Subsoil Law .......................................................................................................................................... 12 3.3.3. Summary of the Implications of the Subsoil Law on EITI in Kazakhstan ................................................. 12 3.4. 2011 Subsoil Bylaw- Resolution of the Government of the Republic of Kazakhstan A 117 dated February 10, 2011 ................................................................................................................................................................................................ 13 3.5. Reinvigorating Kazakhstan’s EITI Process ................................................................................................................................... 13 C.C.C. Extractive Sector Revenue Streams in Kazakhstan ................................................................................................................................................................................... ............................................................................................. ................ 141414 1. Introduction ............................................................................................................................................................................................................... 14 2. Revenue Flows to the National Fund ..................................................................................................................................................... 14 3. Revenue Flows to the National Budget ................................................................................................................................................ 15 4. Revenue Flows to Local Government ..................................................................................................................................................... 15 5. The Unreported Benefit Streams ............................................................................................................................................................... 15 5.1. Licence Contract Condition Reporting Requirements ......................................................................................................... 16 5.2. Social Investment Payments from Companies ........................................................................................................................ 17 D.D.D. Materiality Analysis ................................................................................................................................................................................... ................................................................................................ ................................................................................................ ................................................................................................ ..................... 181818 1. Introduction ............................................................................................................................................................................................................... 18 2. Analysis of Payments to Government .................................................................................................................................................... 18 2.1. 2010 Payments to Government ........................................................................................................................................................