Policy decisions regarding revenue collection determine the wealth available for financing national development. Key governance challenges associated with revenue collection include weak tax administration, lack of coordination across government agencies and with oversight bodies, weak oversight of non-financial revenues, and corporate tax evasion.
The legal framework and fiscal regime establish the rules that will determine the economic contribution that royalties, taxes, in-kind revenues, infrastructure/barter arrangements, transportation revenues and other payments make to the national economy. The disclosures related to revenue collection that are required and/or encouraged under the EITI Standard should be implemented in ways that address national governance challenges and lead to meaningful policy reform.
Potential policy reforms in this area include strengthening fiscal policies and improving technical capacity to collect revenues, incorporating all revenue streams in the budget, and developing effective oversight mechanisms including audits and parliamentary checks.
3.2. The EITI Report must describe the legal framework and fiscal regime governing the extractive industries.
a) This information must include a summary description of the fiscal regime, including the level of fiscal devolution, an overview of the relevant laws and regulations, and information on the roles and responsibilities of the relevant government agencies.
b) Where the government is undertaking reforms, the multi-stakeholder group is encouraged to ensure that these are documented in the EITI Report.
EITI Report Data
According to the Constitution of the Republic of Azerbaijan, the laws of the Republic of Azerbaijan, Decrees of the President of the Republic of Azerbaijan, decisions of the Cabinet of Ministers and normative acts of central executive power bodies of the legal system, including international contracts according to the Constitution are considered as an integral part of the system international treaties of the Republic of Azerbaijan constitute the legal basis for the mining industry.
According to the legislation of Azerbaijan, all subterranean mining is state-owned. The legislation applied to the extractive industry includes the following.
The Civil Code of the Republic of Azerbaijan approved according to the law number 779 IQ dated 28 December 1999;
The Tax Code of the Republic of Azerbaijan approved according to the law number 905 IQ dated 11 July 2000;
The Code of Administrative Offences of the Republic of Azerbaijan approved according to the law number 906 IQ dated 11 July 2000;
The Water Code of the Republic of Azerbaijan approved according to the law number 418 IQ dated 26 December 1997;
The Customs Code of the Republic of Azerbaijan approved according to the law number 164 IVQ dated 24 June 2011;
The Labor Code of the Republic of Azerbaijan approved according to the law number 618 IQ dated 01 February 1999; and
The Land Code of the Republic of Azerbaijan approved according to the law number 695 IQ 25 June 1999.
The Law on “Usage of Energy Resources” of the Republic of Azerbaijan approved according to the 94 IQ numbered law dated 30 May 1996;
The Law on “Special economic regime for export oil and gas activity” of the Republic of Azerbaijan approved according to the 766 IQ numbered law dated 02 February 2009;
The Law on about “Gas Supply” of the Republic of Azerbaijan approved according to the 513 IQ numbered law dated 30 June 1998;
The Law on about “Subsoil” of the Republic of Azerbaijan approved according to the 439 IQ numbered law dated 13 February 1998; and
Law on “Precious Metals and Precious Stones” of the Republic of Azerbaijan approved according to the 924 IIQ numbered law dated 10 June 2005; and
Law on Energy of the Republic of Azerbaijan dated 24 November 1998.
In the event of any divergence between normative legal acts of the Republic of Azerbaijan with the legislative system (with the exception of the Constitution of the Republic of Azerbaijan) and the Production Sharing Agreements (“PSA”), these Agreements will prevail.
The general principles of taxation in the Republic of Azerbaijan are regulated by the Tax Code which consists of rules for determining, payment and collection of taxes, the rights and responsibilities of taxpayers and State tax authorities, as well as other parties to taxation procedures, tax control forms and methods, liability for tax law violations and the procedures for lodging complaints against unlawful actions (failure to take actions) committed by tax agencies and officials thereof.
Together with the main pipeline agreements, the PSA enter into force after being approved by the National Assembly of the Republic of Azerbaijan. These agreements regulate the accounting and tax regimes of the operating companies, contractors and sub-contractors’ activities.
In case there are any inconsistencies in regard to taxes between the Tax Code and provisions, provision stipulated by agreements or laws on production sharing, main pipeline, other similar agreements and laws, the provision stipulated by the legislation on oil and gas operations of export direction and special economic areas are given the higher priority.
Activities on the transportation of exported oil and natural gas are governed by tax regime agreements Main Export Pipeline (“MEP”) (Baku–Tbilisi–Ceyhan) and South Caucasus Pipeline (Baku-Tbilisi-Arzurum). The accounting and tax regime of companies operating on behalf of these agreements, also MEP participants and their contractors’ activities are regulated by the tax code.
The Tax Code sets out the general taxation framework in Azerbaijan and establishes the following taxes:
Value added tax (VAT);
Personal income tax;
Road tax; and
A special tax regime is applied for legally approved PSA, companies functioning in Azerbaijan Republic and covers PSA concluded between State Oil Company of Azerbaijan Republic and a number of multinational companies and regulating discovering, exploitation, sale of oil-gas fields in the Republic of Azerbaijan and distribution of profits from the sale, as well as Protocols made on the basis of them and clarifying certain aspects of taxation:
“Protocol on Profit tax”;
“Protocol on Value Added Taxes”;
“Protocol on taxation of foreign subcontractors”;
“Protocol on taxation of employees and individuals”; and
“Protocol on import and export taxes”.
The tax regimes applicable for entities working under the main Export Pipeline (Baku-Tbilisi-Ceyhan) HGA (“BTC”), the Host Government Agreement (“HGA”) and South Caucasus Pipeline (Shah Deniz Gas).
According to the legislation, payments made to the government in connection with the extractive industry are the following:
There are 4 oil and gas pipelines in Azerbaijan:
Each pipeline has its own transportation tariff set. The source of formation of the tariff depends on the ownership structure of a pipeline. Transit revenues are formed as the result of payments of transportation tariffs for each pipeline. The companies that transport oil through a pipeline make tariff payments based on transportation expenses incurred.
Roles and Responsibilities of Relevant Government Agencies
are signed on behalf of Azerbaijan Republic (interstate agreements) and on behalf of the government of Azerbaijan Republic (intergovernmental agreements).
The main procedures for signing the PSA agreements are the following:
Initial negotiations are held between SOCAR which represents Azerbaijan government and the company that is interested in the PSA;
A Memorandum of Intentions (“MOI”) is signed as an initial agreement after negotiation;
SOCAR executes MOI with the party (foreign oil company), whose offer is considered reasonable and acceptable by SOCAR;
After MOI us signed, SOCAR starts negotiations with that party on relevant terms and conditions of prospective PSA;
The inquiry for the delegation of authorities to SOCAR for negotiations on and signing of the PSA is submitted to the President of Azerbaijan Republic and such authorities are put in effect by appropriate statute of President;
Principles and conditions of further partnership agreed on the basis of Memorandum of Intentions;
Agreement signed on key principles and commercial terms of PSA;
PSA project agreed by the basis of an agreement of key principles and commercial term;
PSA signed and submitted to the Parliament of Azerbaijan Republic for ratification; and
PSA becomes effective after Presidental decree.
President of the Republic of Azerbaijan. In the Republic of Azerbaijan the executive authority belongs to the President of the Republic of Azerbaijan. The executive authority consists of centralised and local executive agencies and its main function is to implement the execution of laws. This sytem has a wide range of rights and covers a significant majority of the civil servants.
The Cabinet of Ministers of the Republic of Azerbaijan. It is the executive authority agency subordinated directly to the president, which is established for the implementation of the President’s responsibilities. They are also responsible for the preparation and presentation of the state budget to the president, its execution, financial and monetary policies, to ensure the implementation of state and social programs are included into the responsibilities of the Cabinet of Minister of the Republic of Azerbaijan.
The National Assembly (“Milli Majlis”) of the Republic of Azerbaijan. The National Assembly of the Republic of Azerbaijan is an authority carrying out the legislative power. The governmental agreements of the Republic of Azerbaijan which provide for rules different from the laws of Azerbaijan Republic, including PSA are approved (ratified) by the National Assembly of the Republic of Azerbaijan.
Ministry of Taxes of the Republic of Azerbaijan. The Ministry of Taxes is a central executive authority ensuring the implementation of state tax policy, timely and full collection of taxes and other revenues to state budget and fulfilling state control in this regard within the framework of integrated financial and budget policy carried out in Azerbaijan.
Ministry of Finance of the Republic of Azerbaijan. The Ministry of Finance of the Republic of Azerbaijan is the central executive authority agency implementing financial policy of the country. The Ministry implements its activities on the basis of Regulations that approved by the President Decree numbered 48 dated on 9 February 2009.
State Social Protection Fund of the Republic of Azerbaijan.State Social Protection Fund of the Republic of Azerbaijan is the extra-budgetary fund and the form of creation and use of a centralised monetary fund in order to organise social protection of the population. The Fund’s revenues are formed of the social insurance fees and allocations from the state budget.
The Ministry of Ecology and Natural Resources of the Republic of Azerbaijan . The Ministry of Ecology and Natural Resources of the Republic of Azerbaijan is a central executive authority implementing state policy in the field of environmental protection, use of natural resources, effective use of subsoil waters, mineral raw resources and surface resources, their restoration, observation and forecast of hydro-meteorological processes in the territory of the Republic of Azerbaijan, including the part of the Caspian Sea belonging to the Republic of Azerbaijan.
One of the main goals of this authority is implementing state policy on studying natural resources, their use, restoration and protection and ensuring ecological safety in this regard and preservation of biodiversity.
Ministry of Energy of the Republic of Azerbaijan. The Ministry of Energy of the Republic of Azerbaijan is a central executive authority implementing state policy and its governing in fuel-energy sector. The fuel-energy sector consists of activity in the field (hereafter–in the relevant filed) of energy defined by the law of Azerbaijan Republic on Energy.
According to the regulations of the Republic of Azerbaijan, it develops drafts of agreements on use of hydrocarbon reserves on production sharing or other terms and conditions, carries on negotiations on these agreements, signs them in the defined manner, monitors the implementation of the concluded agreements.
State Oil Fund of Azerbaijan Republic. State Oil Fund of Azerbaijan Republic (“SOFAZ”) is a mechanism for implementing management of profit collection for the benefit of future generations. SOFAZ has been established as an extra-budgetary fund and functions as a legal entity having an independent management structure from the Government or the Central Bank of the Republic of Azerbaijan. The mission of SOFAZ transforming depletable hydrocarbon reserves into financial assets generating perpetual income for current and future generations.
State Oil Company of Azerbaijan Republic . SOCAR is a state oil and natural gas company of Azerbaijan. It produces oil and natural gas, carries out oil refining and implements operation of oil and gas pipelines in the territory of the country. Additional elaborated information can be found in the section # 3.5 “State Participation in Extractive Industry” of this Report.
Ongoing reform in extractive industry
During the fiscal year covered the EITI Report there were some reforms apllied to the extractive industry:
Under resolution No.35 dated 6 February 2014 changes has been applied to the ordinance 333 made by the Cabinet of Ministers on 2 December 2013. According to the decision made by the Cabinet of Ministers the rate of excise tax applied to oil products has been changed. These changes came into force from 1 January 2014;
As per "On regulation of tariffs of petroleum products across the country", the Tariff (Price ) Council Decision No.14, dated 2 December 2013 and the amendments to the Tariff (Price) Council Decision No.1, dated 10 February 2014 new tariffs related to sales of oil products across the country were introduced;
The Decree of the President of Azerbaijan Republic on the Amendments to the Decree No. 57 dated 19 December 2013 on the “Approval of the Budget of the State Oil Fund of Azerbaijan Republic for 2014”;
Decree of the President of the Republic of Azerbaijan on amendments made to the Decree of the President of Azerbaijan Republic number 844 dated 24 January 2003 on “improvement of the structure of the State Oil Company of the Azerbaijan Republic” dated 24 February 2014; and
Based on the Decree of the President of the Republic of Azerbaijan No.3 dated 22 October 2013 the Ministry of Fuel and Energy was eliminated and transformed into the Ministry of Energy. At the present time the Ministry of Energy executes it’s operations based on the Decree of the President of the Republic of Azerbaijan No.149 dated 11 April 2014.
Review of the NGO Coalition
According to Requirement 3.2 of the Standard EITI report shall describe the legal norms regulating the extractive industry and the fiscal regime. This shall include information on fiscal regime, as well as summary of fiscal obligations, summary of corresponding laws and rules and information on the roles and duties of corresponding state agencies. According to this requirement of the Standard, secton 3.1 of 2014 EITI Report includes general information on the extractive industry of the country, legal norms on the functioning of the extractive industry, fiscal regime and role of state agencies. Apart from the repeated information from the report of the previous year, there are also certain additions: the links of the e-portals of the legal norms (laws and orders) accepted within the country, information on the government bodies that received the payments by the extractive industry to the government, general information on the structures of the state budget and consolidated budget, information on the taxes paid to local (municipality) budgets and reforms on extractive industry.
The “International agreements” subsection mentions 2 documents: one is the agreement signed in Moscow on pipelines and the second is the agreement signed in Kiev on the establishment of oil and gas transmission systems. Both are not very essential documents. And this is the end of the international agreements section of the report. The report creates some wrong impression that the international agreements of the country on extractive industry, including the transmission and transit of oil and gas are just about these two documents. Therefore, it would be better to either exclude the “international agreements” subsection or enrich this subsection with more detailed information.
Nevertheless, it is only the names of the legal norms that are mentioned, with no information provided on how and which relations of the extractive industry are regulated through these norms. Listing the existing legal norms is not enough to fully describe the legal regime. In order to comprehend the legal regime, it is necessary to provide a short summary on specific relations and mechanisms that each legal norm listed regulates in regard to the extractive industry, as well as the interaction of these norms and mechanisms. This would increase the importance of the information provided.
The description of the state budget and consolidated budget in the report is not quite clear. Neither is the mechanism on extractive revenues entering into the state and consolidated budgets (system input) and hierarchy distinct. Therefore, we think that information on legal and fiscal regimes shall be stated in the form of graphs (visual schemes) rather than listing.
According to the Standard, the Report shall reflect the reforms carried out by the government during the reporting year. The given Report lists the changes in the legal norms related to the extractive industry in 2014; however, nothing is mentioned about the main point of the changes in legal norms and their possible impacts on the regulation of the activities in the extractive industry.
In order to understand the legal regime, short summary of specific relations and mechanisms that each legal norm mentioned in the Report regulates in regard to the extractive industry shall be provided, the interaction of these norms and mechanisms shall be stated and also information on fiscal and legal regimes shall be presented in the forms of graphs (visual schemes);
Information on the volume of all oil and gas and mineral resource deposits and produc types (oil, gas, condensate, silver, gold, etc.) shall be included into the report;
3.4 The EITI Report must disclose, when available, information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI Report.
This information is expected to include:
a) Size of the extractive industries in absolute terms and as a percentage of GDP, including an estimate of informal sector activity.
b) Total government revenues generated by the extractive industries (including taxes, royalties, bonuses, fees, and other payments) in absolute terms and as a percentage of total government revenues.
c) Exports from the extractive industries in absolute terms and as a percentage of total exports.
EITI Report Data
GDP growth amounted to AZN 59.0 billion manat in 2014 and per capita GDP amounted to 6.3thousand manat. Added value creation in the production process of industrial products exhibited leading position in sectoral structure of GDP with 41.5% share. The value added by mining industry production consitutes the significant part in GDP strucuture and it’s share in industry was 34.6%.
The size of mining industry in absolute terms was AZN 20.4 billion manat out of total GDP amount of AZN 59.0 billion manat.
In the calculation of macroeconomic indicators the shadow economy is also taken into account. The share of shadow economy observed in GDP Azerbaijan consists of 9.1%. Although this information is not publicly available and no official record of this information, the State Statistics Committee, "Statistical News" was referring to an article published in a scientific journal.
Government revenues from the extractive industry.
Consolidated total income of the state budget amounted to 23.1 billion manat. During the reporting period receipts from the mining industry amounted to 14.2 billion manat and this made 61.7% of the total budget revenues.
Key regions/areas where production is concentrated in 2014 (in kind and value)
Most of the oil reserves (i.e. 80%) are located in Apsheron Peninsula, Baku and Apsheron archipelago at the depth of 3000-4000 metres in the shelf of the Caspian Sea. The formation of oil deposits in rocks belongs to Cenozoic period. Oil production is connected with the excavation works in Balakhany-Sabunchu-Ramana with inclusion of Bibiheybat.
The main oil producing areas are located near Baku. There are 5 areas onshore of oil and gas condensate put into exploration at the territory of the Apsheron peninsula and the Lower and Middle Kura, coastal areas of the Caspian Sea and Shamakhi-Gobustan. There are 43 oil, gas and condensate regions in the Azerbaijan Republic from which 38 are suitable for exploitation.
Oil (including condensates), million tonnes
The main oil producing areas, such as Sabunchu, Surakhany and Bibiheybat are located near Baku. Oil production in Baku reached 41,366 thousand tonnes, which represents 98.6% of the total oil production.
In 2014, onshore and offshore oil production in kind (including condensates) was 1,679 tonnes and 40,273 tonnes respectively.
Natural gas, million cubic metres. (raw materials)
In 2014, the natural and associated gas production volumes was 15,610 million cubic metres and 13,945 million cubic metres, respectively.
Gold, kg (the main production)
Silver, kg (the main production)
Value of products
The total value of the mining industry in 2014 was 21,981 million manat which consist of crude oil and natural gas production amounted 20,977 million manat and the metal ores production amounted 55 million manat.
The share of the export in the extractive industry
Oil and gas are the main export products of Azerbaijan. Total exports in 2014 amounted to 21.8 billion US dollars. Products exported during 2014 were as follows:
Review of the NGO Coalition
Section 3.3 on “Contribution of the Extractive Industry to Azerbaijan Economy” of 2014 EITI Report includes information on annual GDP, field and production structure of GDP (including the share of the extractive industry), information on the absolute value of total state revenues in the extractive industry (including taxes, royalties, bonuses, fees and other payments) and their special weight in total state revenues, volumes of oil, natural gas, silver and gold productions in 2014 and territorial production volumes, absolute value of extractive industry exports, share of the extractive industry in investments on fixed assets, employment characteristics and structure on the fields of economy.
The following information not included into the report of the previous year was added to 2014 EITI Report: evaluation of the share of shade economy in GDP, total amount of payments by extractive company to State Social Protection Fund (SSPF) in 2014, number of local and expatriate staff at BP.
In our Coalition opinion on 2013 Report we mentioned that “stating investment and employment information on companies in this section, as well as distribution of employments in extractive companies based on local and expatriate staff would increase the quality of the report”. 2014 Report includes the dynamics and structure of BP employees only. We think that MSG should be focused on this issue, take necessary measures for collecting this type of information from other extractive companies and ensure the inclusion of such information into the reports of the following years.
§4.1(a) - A description of each revenue stream, related materiality definitions and thresholds should be included in the EITI Report. The MSG should document the options considered and the rationale for establishing the definitions and thresholds. Payments and revenues are considered material if their omission or misstatement could significantly affect the comprehensiveness of the EITI Report. In establishing materiality definitions and thresholds, the multi-stakeholder group should consider the size of the revenue streams relative to total revenues.
§4.1(b) - The following revenue streams should be included:
i. the host govern-ment’s production entitlement (such as profit oil);
ii. national state-owned company production entitlement;
iii. profits taxes;
vi. bonuses, such as signature, discove-ry and production bonuses;
vii. licence fees, rental fees, entry fees and other considerations for licences and/or concessions; and
viii. any other signify-cant payments and material benefit to government.
Any revenue streams or benefits should only be excluded where they are not applicable or where the multi-stakeholder group agrees that their omission will not materially affect the comprehensiveness of the EITI Report.
In order to ensure that companies and government entities disclose all material payments and revenues, the MSG defines which payments and revenues are material. The assessment of materiality thresholds for revenues (in kind and in cash) received by the Government from foreign and local extractive companies operating in the Republic of Azerbaijan is determined in two stages:
Determination of material revenue sources to be included in the report:
Material revenue sources defined by the EITI Multi-stakeholder groups are as follows:
Oil production revenues in kind and in cash;
Natural and associated gas production revenues in kind and in cash;
Base and precious metals production revenues in kind and in cash;
Royalty, Value Added Tax, Land tax, Property tax, price change and other taxes (excluding employee profit tax, contributions to the State Social Protection Fund and withholding tax).
The extractive companies transfer the acreage fees, transit fees and bonuses to the State Oil Fund of Azerbaijan Republic;
The extractive companies transfer the natural and associated gas to the State Oil Company of Azerbaijan Republic; and
The extractive companies transfer the taxes including (profit tax, VAT, land tax, property tax, price change and other taxes) to the Ministry of Taxes of the Republic of Azerbaijan.
It should be noted that due to absence of dividend payments, starting from the year 2013, the dividend column was excluded from the reporting templates as per MSG decision dated on 12 April 2012.
Determination of the materiality threshold in terms of sum/volume considered for each revenue source above
Transfers to the Government of Azerbaijan from the mentioned revenue sources are considered material if their sum/volume exceeds zero (0).
Reconciliation by Revenue stream (Foreign companies)
The table below shows the total Basic Payments reported by extractive companies and Government entities, taking into account all adjustments
Reconciliation by extractive Company (Foreign companies)
The table below shows the total Basic Payments reported by extractive companies and Government entities, taking into account all adjustments.
Although we have presented the report form to the foreign extractive companies, there was no any payment to the Government.
Reconciliation by extractive Company (Local companies)
We present in the table below a summary of the revenue streams (aggregated figures) reported by the local extractive companies and government:
Reconciliation by Revenue stream (Local companies)
We present in the table below a summary of the revenue streams (aggregated figures) reported by the local extractive companies and government:
Payments paid to Government according to PSA
Payment to Government by Foreign Extractive Companies on PSA in 2014:
The definitions of transit fee and transportation tariffs are similar, and from now on this will be referred as transportation tariff in this report. The description of the transportation tariff can be found in the section 3.1 at page 19 of this Report.
§4.1 c.Sale of the state’s share of production or other revenues collected in-kind:
Where the sale of the state’s share of production or other revenues collected in-kind is material, the government, including state owned enterprises, are required to disclose the volumes sold and revenues received. The published data must be disaggregated to levels commensurate with the reporting of other payments and revenue streams.
Reporting could also break down disclosures by the type of product, price, market, and sale volume. Where practically feasible, the multi-stakeholder group is encouraged to task the Independent Administrator with reconciling the volumes sold and revenues received by including the buying companies in the reporting process.
EITI Report Data
Reconciliation by in-kind Revenue stream (Foreign companies)
We present in the table below a summary of the in kind transfers to the government (aggregated figures) reported by the foreign extractive companies and government:
The table below shows the list of foreign companies which made the transfers of crude oil to the Government.
The table below shows the list of foreign companies which made the transfers of natural gas to the Government.
The table below shows the list of foreign companies which made the transfers of associated gas to the Government.
The table below shows the transfers of gold, silver and copper made by R.V. Investment Group Services Company to the Government.
§4.1 d. The MSG and the independent administrator are required to consider whether there are any agreements, or sets of agreements, involving the provision of goods and services, including loans, grants and infrastructure works, in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. To be able to do so, the MSG and the Independent Administrator need to gain a full understanding of the terms of the relevant agreements and contracts, the parties involved, the resources which have been pledged by the state, the value of the balancing benefit stream, e.g. infrastructure works, and the materialityof these agreements relative to conventional contracts. Where the MSG concludes that these agreements are material, the MSG and the Independent Administrator are required to ensure that the EITI Report addresses these agreements, providing a level of detail and transparency commensurate with the disclosure and reconciliation of other payments and revenues streams. Where reconciliation of key transactions is not feasible, the MSG should agree an approach for unilateral disclosure by the parties to the agreement(s) to be included in the EITI Report.
EITI Report Data
Infrastructure provisions and barter arrangements
Information regarding infrastructure provisions and barter arrangements was not included in EITI Report for the year ended 2014 due to the fact that on 34th meeting of EITI Multi Stakeholder Group which took place on 10th of December 2014 was decided to eliminate this information from the EITI report as it was not applicable in the Republic of Azerbaijan.
§4.1 f. Where revenues from the transportation of oil, gas and minerals constitute one of the largest revenue streams in the extractive sector, the government and state-owned enterprises (SOEs) are expected to disclose the revenues received. The published data must be disaggregated to levels commensurate with the reporting of other payments and revenue streams.
The EITI Report could include:
i. a description of the transportation arrangements including: the product; transportation route(s); and the relevant companies and government entities, including SOE(s), involved in transportation;
ii. definitions of the relevant transportation taxes, tariffs or other relevant payments, and the methodologies used to calculate them;
iii. disclosure of tariff rates and volume of the transported commodities;
iv. disclosure of revenues received by government entities a SOE(s), in relation to transportation of oil, gas and minerals; and
v. where practicable, the multi-stakeholder group is encouraged to task the Independent Administrator with reconciling material payments and revenues associated with the transportation of oil, gas and minerals.
EITI Report Data
The definitions of transit fee and transportation tariffs are similar, and from now on this will be referred as transportation tariff in this report.
The positive difference of USD 7.5 million included in the Government’s schedule relates to transit fees that were paid by the Government to itself for the transit of its own oil entitlement. Each month SOFAZ and contractors pay fees to the Azerbaijan International Operating Company (AIOC), the operating company of the ACG oilfield), the levels of which are determined by the Republic of Azerbaijan and Georgia for the transportation of oil (Government’s entitlement to oil profits) through Western Route Pipeline and operating costs (operational and capital expenditure). AIOC pays Georgia’s share from the total fees collected. SOFAZ receives only the transportation tariff’s share determined by the Republic of Azerbaijan. Because of the nature of the transaction this is a permanent difference.
Review of the NGO Coalition
“Transportation” and “Transit” terms, as well as the issues on transportation of the produced oil of the country through pipelines or railway and the transportation of the oil produced by other countries shall be clarified and information on transportation tariffs, tariff rates and other transportation indicators shall be revealed in accordance with subparagraph 4.1.f of the Standard;