Iraq EITI Report Oil, Gas & Minerals 2017 The Extractive Industries Transparency Initiative 2017 report is issued in accordance with Requirement 4.8 of the EITI Standard. The Multi-Stakeholder Group (MSG) has exerted enormous eorts in supervising its preparation process and determining the standards that are applicable to the extractive sector in Iraq; mainly determining the types of revenues and payments that must be included. Many challenges were encountered throughout the report preparation process , mainly in the information collection process from reporting entities, both governmental and private sector, due to the failure of many of the reporting entities in providing the information required for the preparation of the report on time. Such delays aected the project’s schedule despite the numerous eorts exerted by the Independent Administrator, the National Secretariat and the Ministry of Oil. Nonetheless, these eorts ultimately resulted in a very high participation rate by the reporting entities, which enhanced the quality and comprehensiveness of the report and consequently its responsiveness to the transparency requirements. Another factor impacting the project timeline was the attempt to obtain information from the Kurdistan Regional Government and the companies operating in the region to no avail, despite exhaustive eorts made by the Independent Administrator and concerned entities in the federal government to attain the KRG’s participation in the IEITI reporting process. This required us to submit an adaptive implementation request to the EITI, who approved the request on 19 March 2019. What mainly distinguishes this report from previous reports is its style of information presentation, its accessibility, identication of information sources and the inclusion of electronic links for ease of reference. Moreover, the MSG worked with the government in dening state-owned entities in accordance with Law No. 22 of 1997 (amended), as entities that are wholly owned by the government. The MSG also engaged in discussions with governmental entities for identifying the state’s policy in relation to contract disclosures. With regards to contracts in the oil and gas sector, the Ministry of Oil has published on its website its policy with regards to the disclosure of petroleum contracts. Furthermore, this report also presents crude oil reported production and export data for 2017 separately identifying licensing rounds production, national eorts production, and the total cumulative amounts paid to the licensing round companies from 2011 to the reporting year. The report outlined total gas production, quantities invested and the percentage of aring which is an indication of the development of the gas industry and the reduction of its environmental impact, which became the basis of the new standards issued in June 2019. It also shows that the extractive industries make up the majority of Iraq’s exports and is the largest contributor towards the country’s Gross Domestic Product and government revenues. Also, there were sucient details on the amount of taxes collected from the oil extractive sector with a focus on dierences of over USD 31 million. The report also shows the total amounts actually allocated and disbursed in petrodollars and for the development of the regions and the reasons for non-disbursement. The report also publishes for the rst time the size of Iraqi and foreign workers in licensing round elds and the proportion of foreign workers in each eld. In terms of utility ownership, the report revealed a clear violation of the contracting principals in force in Iraq in one of the Basrah elds. As for the results of reconciliations, dierences were identied at around one billion and 125 million US Dollars, attributed to dierences in delay penalties recording mechanism, dierences in the recording dates of some transactions, in addition to dierences in recording data on cash or accrual basis. It is also worth noting that there are dierences of approximately USD 15.9 million which the Independent Administrator could not justify. The report includes in one of its sections recommendations aimed primarily at increasing the transparency of reporting by certain governmental entities, in addition to increasing their awareness towards the importance of the initiative and its roles in increasing industry transparency and accountability. Recommendations also stressed on the need for building open communication channels with all international companies involved with the oil and gas sector whether they are buyers or operators, with the aim of enhancing their reporting eciency of IEITI required data, identifying solutions to the attempt of promoting the mining sector and solving the problem of preparing government employees and Iraqi and foreign workers and the adoption of a unied mechanism for the calculation of gas produced by the Ministry of Oil. In the end, I would like to extend my sincere thanks and gratitude to all those who contributed to the preparation of 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 Aairs, Minister of Oil and Chairman of the Multi-Stakeholder Group for his eorts in following up with the stages of issuing the report and in directing the concerned entities to provide the required data. Our thanks also go to Ernst & Young, which prepared the report, and the Ministry of Oil and its various departments and aliated companies and the Ministry of Industry and Minerals, Ministry of Planning, and Ministry of Finance. As well as international companies, whether eld developers or crude oil buyers. I would also like to thank my colleagues at the MSG and my colleagues at the National Secretariat for their continued eorts to ensure that the report complies with all standards and that accurate information is received in a timely manner. Alaa Mohie El-Deen Chief Executive Ocer 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 Exploration Work