Short-Term Research Consultants - Maximizing Benefits from Physical Oil Receipts

Short-Term Research Consultants - Maximizing Benefits from Physical Oil Receipts

Summary

The Revenue Watch Institute (RWI) seeks three consultants who will conduct research on how oil-producing countries govern the receipt and sale of physical crude oil receipts, either equity oil or profit oil. We anticipate that each consultant will cover 3-5 countries in one of the following regions: Latin America, Central Asia, Asia-Pacific, the Gulf of Guinea (not Nigeria), and the Middle East/North Africa.

The research, to be completed by 30 November 2011, will serve two agendas. First, it will provide comparative insight, such as on international good practices and common governance challenges, to a larger project on crude oil sales in Nigeria. Second, it will inform our understanding of the governance challenges and risks faced by oil producers in handling physical receipts so as to advance discussions around how to improve practice through country or global level interventions.

Consultants will need to come to the task with a strong understanding of the oil industry in the countries on which they focus.

Background

Commodity trading is a relative blind-spot in the global movement to improve extractive industry governance. Recognizing the importance of resource revenues to developing economies, international actors (such as EITI) have devoted significant attention to improving the transparency and management of financial payments from extractive companies to governments. However, the transactions around physical earnings have been neglected. For many oil producing countries, this is a major oversight: Yemen, Gabon, Cameroon, Congo-Brazzaville, Nigeria, Azerbaijan, Iraq and others all earn over two-thirds of their oil revenues in physical receipts. Mismanagement of a government’s ‘profit oil’ or ‘equity oil’ can be common. For example, in some countries, a lack of transparency allows portions of the government’s oil share to be passed on to associates of the ruling elite, who then sell on to commodity trading companies at a margin.

Several developments have led to a nascent but growing interest in addressing these physical oil transactions. The listing of Glencore on the London Stock Exchange has shone light on the secretive yet hugely influential global commodity trading business. Chain-of-custody approaches are becoming more common, as evidenced by new US reporting requirements on conflict diamonds and an initiative by the World Gold Council, and these track physical transactions as opposed to just financial ones. Moreover, growing interest in combating illicit financial flows has attracted attention to these physical flows as well, given the prevalence of corruption and trade mispricing (and the lack of transparency and oversight) that occur there. What is needed are improved understandings of how profit oil and equity oil are managed, how export and trading systems work, the effects of these systems on host country revenue inflows, and how they can be improved.

To address these issues in Nigeria, the Facility for Oil Sector Transparency (FOSTER) will execute a project on “Maximizing Benefits from Nigeria’s Physical Oil Receipts.” The project’s goal is to help ensure that Nigeria receives full and fair value for the government’s share of production, and that the revenues from this crude flow to the budget in an efficient and leak-proof manner. In Nigeria, as elsewhere, the physical chain of custody of crude oil and the accompanying financial transactions are poorly understood and prone to leakages. The precise problems are unknown to authorities outside of the national oil company, much less the public, leaving them ill-equipped to identify and pursue a reform agenda.

The comparative research described here will both inform the Nigeria work and advance thinking on crude oil transactions globally. International standards coupled with technical support for their implementation could help to maximize the public benefit derived from equity and profit oil receipts in Nigeria and elsewhere.

The Revenue Watch Institute (RWI) leads the implementation of this project as part of its participation in FOSTER. FOSTER is a multiyear DFID-funded program, implemented by Oxford Policy Management, RWI and the Centre for the Study of Economies in Africa, which seeks to strengthen transparency, accountability and performance throughout the Nigeria’s oil sector through engagement with government and civil society.

RWI is a non-governmental organization that promotes responsible management of oil, gas and mineral resources for the public good. With effective revenue management, citizen engagement and government accountability, natural resource wealth can drive economic growth and development. RWI provides the expertise, funding and technical assistance to help countries realize these benefits. Revenue Watch has a staff of nearly 50, headquartered in New York and with staff in Peru, Azerbaijan, Ghana, Nigeria, Tanzania, Indonesia and the UK, and projects in more than 30 countries. Please visit our website for more information: www.revenuewatch.org.


Purpose of Consultancy

The consultants will create a resource that explains how diverse oil producing governments manage their physical crude oil receipts.
For each country the research will aim to answer the following questions:

• How does the country govern its physical receipts, including the determination of the government’s share, transport and export systems, the selection of buyers, the determination of price, and the subsequent handling of revenues from these sales?

• What is the value of physical receipts (including relative to total oil and total budget revenues, and relative to company earnings), from which concessions and fiscal regimes do they derive, and has this changed significantly over time?

• What problems, if any, undermine the realization of the full and fair value of the crude? What is the cause of these problems, and what is their monetary scale?

• What reforms, systems, or mechanisms for oversight have improved the governance of these transactions, or are responsible for their successful functioning?

• What policies or practices could improve these systems?

Each of the three consultants will handle 3-5 countries from the selected regions: Latin America (Brazil, Venezuela, Mexico, etc.), Central Asia (Azerbaijan, Kazakhstan), the Gulf of Guinea (Angola, Gabon, Congo-Brazzaville, Equatorial Guinea; not Nigeria) and the Middle East/North Africa. Should the consultant’s expertise not be regional in nature, we are open to receiving proposals for another group of 3-5 countries.


Deliverables, Timeline and Roles:

We require that the consultants complete deliverables according to the timeline as follows:

By September 15, 2011:
Identification of countries, and development of common template
Based on preliminary research, the consultants will propose a list of 3-5 countries to cover in each of their regions. In addition to the consultant’s expertise, countries should be selected with information availability in mind—the consultant should be confident that he/she can answer most of the above questions. As this is a comparative project, we also ask the researchers to develop together a common template for the collection and presentation of information about each individual country.

By October 31:
Information gathering, drafting report
Consultants will conduct the research and produce draft reports. The report will contain a general section of 3-5 pages that summarizes the findings, highlights relevant strong/weak practices from the countries considered, and offers recommendations. This will accompany the 5-7 pages about each country that answers the questions listed above. We encourage the use of diagrams and other visualizations to make this material more accessible to a range of audiences. We also would appreciate receiving any documents or data that the consultant uncovers during this process so as to add to our available resources.

By November 31:
Submission of final report
Based on feedback received from RWI and a peer reviewer, consultants will revise and submit the report.

Jan/Feb 2012:
Presentation at workshop
We plan to hold an international meeting to discuss these issues and would expect the consultant to prepare and present a presentation of the findings from the research.


Each researcher will spend around 20 days on the project, though this will vary depending on the number of countries profiled by each researcher. We have a limited pool of funds for travel, though to the extent possible would prefer to hire consultants who already have the contacts and knowledge needed to write the reports without conducting much field research.

Qualifications:

• Extensive oil industry expertise, including ideally crude oil trading.

• A background of work relevant to the oil industry in one of the target regions – the Middle East, Africa, Latin America or Central Asia.

• Excellent and proven writing and research skills.

• The ability produce written materials that stand up to scrutiny by industry experts yet are accessible to laypersons.

Management:
The consultant will be report to RWI Governance Advisor Alexandra Gillies.

To Apply:
Please email CV and a cover letter (including proposed target countries) to rwi@revenuewatch.org with the subject line OIL TRADING CONSULTANT. Please respond as soon as possible, and before 19 August 2011.