Iraq EITI Report Oil, Gas & Minerals 2017 The 2017 report of the Iraqi Extractive Industries Transparency Initiative (IEITI) is issued in accordance with Requirement 4.8 of EITI standards. The Multi-Stakeholder Group (MSG) has exerted great efforts in overseeing and supervising the preparation process of the report and determining the standards that apply to the extractive sector in Iraq, primarily determining the types of revenues and payments to be included. Despite the great efforts exerted by the Independent Administrator, the National Secretariat and the Ministry of Oil, the process of preparing the report has encountered many challenges, mainly in the process of collecting information from the reporting entities, whether they were governmental or private sector entities. As many of such entities were unable to provide the required information to prepare the report, the project’s schedule was affected. However, these efforts resulted in obtaining a very high participation rate from the reporting entities, which enhanced the quality and comprehensiveness of the report and, consequently, its sobriety in meeting IEITI's requirements. The challenge of obtaining information from Kurdistan Regional Government (KRG) and companies operating therein was another factor affected the project’s schedule. As the significant efforts exerted by the MSG, the Independent Administrator and relevant authorities in the federal government to achieve the participation of the KRG in the IEITI were to no avail. This forced us to submit a request of modified implementation to the EITI, who in turn approved on such request on March 19, 2019. One of the most important features of this report that distinguish it from previous ones is the way information is presented, its accessibility, identification of its sources, and the inclusion of links for easy referencing. Moreover, the MSG worked with the government to identify State Owned Companies (SOCs) based on Law No. 22 of 1997 (amended), as wholly Government Owned Companies (GOCs). The MSG also participated in discussions with government entities to determine the state's policy regarding contracts disclosure. As for the contracts in the oil and gas sectors, the Ministry of Oil has published on its website its policy regarding petroleum contracts disclosure. Furthermore, this report presents data for the production and export of crude oil for the year 2017 divided into the production of licensing rounds, the production of the national effort, and the total cumulative amounts that were paid to licensing round companies from 2011 until the reporting year. The report also outlines the total gas production, the quantities invested, and the percentage of flared gas, which is considered an indication of the gas industry's development and the reduction of its environmental impact, and this subsequently became the basis of the new standards issued in June 2019. It also shows that extractive industries constitute the majority of Iraq's exports and are the largest contributor to the gross domestic product and government revenues. In addition, there were adequate details on the tax amounts collected from the oil extractive sector, with a focus on the differences that amounted to more than 31 million USD. The report shows the total amounts allocated and actually disbursed for petrodollars and the development of the regions as well as the reasons for non-disbursement. The report also publishes, for the first time, the Iraqi and foreign employment rate in the fields of licensing rounds and the percentage of foreign employment in each field. In terms of beneficial ownership, the report reveals an explicit violation of the contracting regulations applicable in Iraq by one of the Basrah fields. As for the results of reconciliations, discrepancies were identified in approximately 1.125 billion USD, attributed to differences in the mechanisms of recording delay penalties, differences in the registration dates of some transactions, in addition to differences in recording data on cash or accrual basis. It is also worth noting that there are differences of about 15.9 million USD, which the Independent Administrator was unable to justify. The report presents in one of its sections recommendations that aim primarily to increase transparency of disclosure by some governmental entities, in addition to raising their awareness of the importance of EITI and its role in increasing transparency and accountability. The recommendations also stress on the need to establish open communication channels with all international companies, whether buyers or operators, concerned with the oil and gas sectors in Iraq. This is in order to enhance their efficiency in reporting the IEITI required data, identifying solutions to advance the mining sector, solving the problem of the Iraqi and foreign employment numbers, and encouraging the Ministry of Oil to adopt a unified mechanism in calculating the produced gas. In the end, I would like to extend my sincere thanks and gratitude to those who contributed to preparing this report and did not hesitate to provide us with information and advice. In particular, Mr. Thamer Abbas Al-Ghadban, Deputy Prime Minister for Energy Affairs, Minister of Oil, and Chairman of the MSG, for his efforts in following up the stages of issuing the report and in directing the relevant entities to provide the required data. I would also like to thank Ernst & Young for their effort in preparing the report, the Ministry of Oil, its various departments and affiliated companies, Ministry of Industry and Minerals, Ministry of Planning, and Ministry of Finance, as well as the international companies, whether field developers or crude oil buyers. Finally, I would like to thank my colleagues in the MSG and my colleagues at the National Secretariat for their continuous efforts to ensure that the report adheres to all standards and that the accurate information is received in a timely manner. Alaa Mohie El-Deen Chief Executive Officer Contents List of Abbreviations .................................................................................................................... 5 Executive Summary ...................................................................................................................... 7 1. EITI in Iraq ...................................................................................................................... 12 1.1. About the Extractive Industries Transparency Initiative (EITI) ....................................... 12 1.2. EITI Implementation in Iraq ........................................................................................ 12 1.3. EITI Governance and Leadership in Iraq ...................................................................... 13 1.4. MSG Governance ...................................................................................................... 13 1.5. MSG Workplan .......................................................................................................... 14 2. Legal Framework and Fiscal Regime for the Extractive Industries......................................... 15 2.1. National Governance Structures ................................................................................ 15 2.2. Overview of the Regulations Applicable to Extractive Industries .................................... 16 2.2.1. Extractive Sector Regulations in Federal Iraq ........................................................... 16 2.2.2. Overview of the Corporate Income Tax and Withholding Tax Regimes Applicable to the Oil and Gas Sector in Federal Iraq ............................................................................................. 20 2.2.3. Extractive Sector Regulations in the Kurdistan Region.............................................. 22 2.3. State Participation in the Extractive Industries ............................................................ 22 2.3.1. MSG Definition of State-Owned Enterprises (SOEs) ................................................... 22 2.3.2. The Prevailing Rules and Practices in Relation to the Financial Relationship between the Government and its Owned Companies ..................................................................................... 24 2.4. Fiscal Framework...................................................................................................... 27 2.5. Reforming of the Regulatory and Fiscal Regime in 2017 .............................................. 28 2.6. Procedures for Granting Licenses .............................................................................. 30 2.7. Registry of Licenses .................................................................................................. 34 2.8. Contracts in the Extractive Industries ......................................................................... 39 2.9. Beneficial Ownership of Material Extractive Companies ................................................ 43 3. Extractive Industries Exploration, Production and Export Activities ...................................... 44 3.1. Oil and Gas Sector in Federal Iraq ............................................................................... 44 3.1.1. Oil and Gas Fields in Iraq ........................................................................................ 44 3.1.2. Oil and Gas Reserves in Iraq ................................................................................... 46 3.1.3. Drilling and Well Workovers Carried out by the Iraqi Drilling Company ........................ 48 3.1.4. Significant