Working Group on the Audit of Extractive Industries.

2nd meeting minutes

Minutes from the second meeting of the Working Group on Audit of Extractive Industries (WGEI) in Oslo 21st to 23rd September 2015

Monday 21st September 2015

Welcome and official opening of the workshop

By Per Kristian Foss, Auditor General, OAG Norway and John F.S. Muwanga, Auditor General SAI Uganda and WGEI Chair,

The workshop was officially opened with remarks from the Auditor Generals of Norway and Uganda.

Opening Remarks by Mr. Per Kristian Foss – Auditor General and host

  • The extractive Industry Sector has received attention over the years. The Supreme Audit Institutions play an important role in enabling transparency and reporting on whether the resources of a country are used in the best interest of the public.
  • The governance of the petroleum sector in Norway is characterized by a very high level of tax on oil and gas extraction where the rates are decided by the parliament. There is a high level of consensus regarding this system in parliament. Norway has conducted five performance audit reports in the oil and gas sector, but can still learn from other countries regarding identification of new audit topics.
  • Supreme Audit Institutions has an important opportunity in improving by sharing experiences and practical learning. The Working group in Audit of Extractive Industries was one of the first to initiate a Community of Practice (CoP).

Opening Remarks by Mr. John F.S. Muwanga Auditor General

  • The chair of the WGEI recognized all the participants and thanked the SAI of Norway for hosting the meeting and supporting the WGEI in setting up the CoP. The Chair also thanked the steering committee members for their support during the year.
  • The Chair appreciated the important materials shared by the member SAIs during the last year and GIZ initiatives regarding support to SAIs in the regions as well as IDI, NORAD, EITI, OECD, NPA, PWP
  • The Chair emphasized WGEI regional products to target particular areas of interest in specific Regions and emphasized the role the CoP could play in this regard.
  • The SAI of Uganda, who chair WGEI committed to providing two full time and other part time staff for the Purpose of supporting the operations of the CoP and WGEI secretariat.
  • The Chair reminded the audience of the six objectives of the WGEI and elaborated the benefit of SAIs sharing information with themselves and the larger society.


Report on activities since last meeting presented by Maxwell Poul Ogentho, SAI Uganda and head WGEI secretariat

Key issues raised during presentation:

  • The EI sector is a good example of an area where the work of the SAIs can potentially have a considerable impact on the lives of the citizens.
  • The head of the WGEI secretariat presented the highlights of the achievements of the WGEI since the last meeting, one year ago. (The report was already distributed to the participants ahead of the meeting).
  • He recited the definition of the Extractive Industries within the context of the WGEI which comprises; oil, gas and solid minerals.
  • The number of members-countries of the WGEI increased from 30 to 34 and these were the US, Libya, Egypt and Trinidad and Tobago.
  • Increased information sharing among members through the WGEI website and the newsletters periodically issued.
  • The CoP created during the first annual meeting of the WGEI in Kampala last year is operational and will act as a hub for receiving and disseminating EI information.
  • A number of activities in EI are already taking place in the various INTOSAI regions including Collaborative audits, Parallel audits, and trainings in extractive industries, among others.
  • The interest of non SAI stakeholders to share information with SAIs on EI has gathered momentum as seen in their participation in the two WGEI annual meetings.


Session 1: Global update I on the subject of illicit financial flows and international efforts to avoid non-taxation and profit shifting in the Extractive Industries by Dan Devlin, OECD and Mona Thowsen, Publish What You Pay Norway

Key issues raised during presentation by Dan Devlin OECD:

  • The international tax rules have recently been rewritten, driven by the G20 in partnership with OECD. There was a growing sense in many countries that the tax rules for multinationals hadn’t kept up with the realities of business. There are gaps between national tax settings and international rules. This has facilitated loss of revenue that governments didn’t foresee. Costs shifts into high tax countries, profits into lower tax countries, and this practice has had few consequences. This harms the competitive environment, especially for the companies that don’t engage in these kinds of activities.
  • There are big gains to be made for countries if tax losses can be prevented and OECD is working on numbers on tax losses. There is a growing perception that companies’ efforts to avoid tax are undermining the tax system. OECD has developed a 15 points action plan on Base Erosion and Profit shifting.
  • OECD is developing a toolkit on comparability data to assist developing countries address difficulties in accessing comparable data.

Discussions and contributions from audience:

  • Defining transfer pricing (TP): Within a multinational group, there can be one entity in the mining country and one entity in a trading hub. TP is the process of transactions between the producing entity to the trading entity, within the corporate group. The question of what prices they are using in this transaction arises. TP process can be used to shift profit from one place to another.
  • Defining the Arms-length principle: the benchmark of the transaction one is trying to review. If two independent companies traded with each other, the prices they would use could be an estimated price using market conditions.
  • India has experienced challenges to get information from the private sector. This is a limitation on the mandate of many countries so sharing information between SAIs is important. Similar problem in Zambia, most of the mines are owned by private companies, the OAGZ must rely on work of private auditors. In Uganda there is also a challenge to get access to information on the PSAs.
  • TP is also an issue in Norway. There is also lack of information, but in the oil sector the tax authorities have set a price to avoid conflict about what the price should be.
  • TP is also an issue in South Africa. The technicalities are difficult, and also there it is difficult to get information from the private sector. The suggestion to share information between countries was proposed

Key issues raised during presentation by Publish what you pay:

  • PWYP argues that natural resources belong to the state. The state represents its citizens. When access to non-renewable and finite resources is given to a company, the state should expect transparency in return.
  • The EI sector has enormous potential to improve the lives of citizens, because of the huge amount of money involved. Still much of the flow goes other ways, particularly out of developing countries. The illicit financial flow from Developing countries increases steadily.
  • The scope of the problem is largest in sub-Saharan Africa, but developing Europe is not far behind. 3 types of illicit financial flows: corruption, bribery, theft by government official (5%). criminality, drugs and human trafficking (35%), commercial transaction through multinational companies use of tax havens (60%).
  • Large multinationals are able to pay for legal advice to avoid laws and regulations and also to avoid laws and regulations. This has turned into an industry. Clauses are pushed into national legislation. Secrecy jurisdiction often used interchangeably with the term ‘tax haven’.
  • There are billions of USD lost in transfer pricing. Profits have moved from source country to the extractive industry company. Investors do not get access to profits as it is locked in the companies and in tax havens.
  • Basic premise for SAIs: their role is to enhance public sector credibility and contribute to better use of public resources. A more general vision could be; how can SAIs contribute to the optimal use of a country’s resources through the improvement of revenue collection. Could it be one of the SAI’s roles, to ensure that countries benefit from the presence of Multi-National companies? Targeting civil society – SAIs could have an important role as political space for civil society.

Discussions and contributions from audience arising from Publish what you pay presentation:

  • In many countries SAIs face the same challenges, as SAIs experience a diminishing role and mandate.
  • SAIs can be a useful watchdog – a watchdog could bite or bark. Right now SAIs should bark. Tax avoidance is in principle legal, but SAIs could speak out to bring awareness to the legislators.
  • SAIs have a challenge in presenting the value and benefits of their work.
  • The PWYP extended country by country reporting provides information on Investments, production; revenues and costs should be publicly available. PWYP put together a reporting template for the industry. This would be beneficial for investors, tax authorities, capital market, good companies (competition) for the home countries.
  • These measures are supposed to be preventive; it should remove the incentives for MN to raise funds in tax havens. The country by country reporting is an easy solution; it shows where the cash build is and enables the government to ask questions. The quality of information, this should be already audited information.


Session 2: Global update II on the subject of SAIs value added – how to conduct a multi-national EI audit

Speakers: Alexandre Leite de Figueiredo, of SAI Brazil TCU/representing OLACEF and Ole Husebø Schøyen, OAGNorway; / AFROSAI-E collaborative audit teams

Key issues raised during OLACEFS presentation

  • Alexandre Figueiredo from SAI Brazil gave a presentation on the collaborative audit in OLACEFS, in which Brazil (coordinator), Colombia and Peru participated. The OLACEFS Capacity building committee defined “public revenues from oil and gas production” as a strategic theme. In all of these countries oil and gas has a big impact on the total revenue.
  • One of the reasons for doing this collaborative audit was the possibility to benchmark.
  • The audit was facilitated by a consulting group which developed a diagnosis on institutional and regulatory conditions, and did research on themes of common interest and common risks among participating SAIs. Both, Colombia and Peru Brazil decided to do the audit as a performance audit.
  • Among several proposed audit themes, the preferred theme was “Measurement, calculation and payment of government take”. The institutional and legal framework was different between the different countries, and it allowed the participating SAIs to compare best practices and make recommendations to their respective governments.

Key issues raised during AFROSAI-E presentation

  • The presentation focused on the lessons learned of the AFROSAI-E collaborative audit, coordinated jointly by AFROSAI-E and IDI. The participating countries were Ghana, Kenya, Nigeria, South Africa, South Sudan, Tanzania and Uganda.
  • The audit consisted of three phases: Pre-planning meeting, Planning meeting, Reporting and review workshop.
  • So far only Uganda has delivered a report to the parliament.
  • Collaborative audits are costly exercises, and in combination with doing performance audits, it becomes even more costly. Some benefits were exchange such as skills, and the bar was raised for some of the countries.

Discussions and contributions from audience:

  • A question was raised whether doing a collaborative audit contribute to mutual learning or raising the quality of audits. The lessons learned from AFROSAI-E were that some more basic learning on performance audit would have been necessary for some of the participating SAIs. For OLACEFS it was felt that for SAIs with little performance audit experience, the audit was valuable. A difference between the two was that OLACEFS was able to provide closer follow-up and coaching by a leading SAI.
  • Peer learning and review of each other’s work went well with the AFROSAI-E collaborative audit and was both cost- and time efficient.
  • Selection of audits was done differently between the countries. SAI Brazil decided to pose a very specific topic that could easily be operationalized in the different countries, and the SAIs could easily decide whether this is relevant. For that reason, only three SAIs participated. While OLACEFS chose a top-down approach, AFROSAI-E chose a bottom-up approach where all participating SAIs could agree on a topic; because of group dynamics, and finding the common the denominator, this may have led to less ownership to the selected topic.
  • It was mentioned that the Nordic countries have a long tradition of carrying out collaborative audits.

Conclusions and recommendations:

  • It is important to separate between the main results for all countries, and results for the individual countries. The OLACEFS audit gave some tangible results in terms of improved government procedures and transparency. For Colombia the audit gave them confidence to showcase themselves as oversight body on the management of oil and gas. It was also their first successful performance audit, and skills acquired are now applied on other audit areas. For Peru the audit contributed to its process of meeting the EITI requirements, and also allowed the SAI to strengthen its performance audit skills. Brazil also gained experience in taking a leading role in coordinating audits, and facilitate information exchange and experiences. Also, the participating auditors got to know each other and have established their own community of practice by sharing information.
  • The OLACEFS collaborative audit gave a good debate on common challenges and good practices. The method of collaborative audit is now likely to be replicated for other areas such as mining.
  • One of the key lessons was that the SAIs should have a clear idea of what the risks are in their countries. Especially when doing a performance audit, the identified risk should be founded on country specific risks, not generic and theoretical risks. For the AFROSAI-E collaborative audit a common reporting template was missing, which partly resulted in lack of sufficient data for some countries.
  • It may be a better solution for a single SAI to coordinate the project.


Session 3: Global update III on the subject of Surveying Extractive Industry risks and potential audits by Jeroen Doornbos, Netherland Court of Audit (NCA)and Sybrand Struwig, Auditor General office of South Africa(AGSA)

Key issues raised during presentation from AGSA:

  • The EI sector is high-risk, and the companies themselves usually have a risk-assessment of their own. It is useful for the SAI to obtain these risk assessments.
  • For the auditor it is important to be aware of international markets, including oil and minerals prices and global demand. There are specific accounting procedures which apply to the industry. Also the group financial statements for multinational companies can be complex to analyze.
  • Industry-specific laws and regulations apply to EI, in addition to public sector laws and regulations. These specific regulations include complex production sharing contracts.
  • A number of audits can be carried out on Extractive industries, and these may be tailored to the risks identified. The risks should guide which audit to be performed.

Key issues raised during presentation from NCA:

  • The presentation focused on the national risk analysis carried out by the Netherlands Court of Audit.
  • Until 2014 NCA focused its audits mostly on the spending of gas revenues and security of energy supplies.
  • NCA has not done any real audits on the extractive/upstream process because it was considered to be a low-risk sector, but in 2012 several houses and churches collapse because of earthquakes. These were caused by EI activities, such as mining and extraction of gas. As a response to this, NCA took a few measures such as performing a risk analysis of the sector.
  • NCA applied a risk analysis with an externality approach. The analysis identified the consequences for “innocent” parties affected by the EI activities. It resulted in a critical risk assessment and some of the findings were that safety was not embedded as a separate public interest.

Discussions and contributions from audience:

  • It was mentioned that Netherlands government seemed to be quite swift in tackling the risk.
  • OAGN mentioned that an audit on decommissioning of oil platforms is in the pipeline. There should be a potential of exchanging experiences with NCA on this.
  • Asked on how the audit criteria were applied, NCA replied that it took a conscious decision to not focus on audit criteria to have a more free risk assessment process.

Conclusions and recommendations:

  • For auditors there is need to understand a very broad range of risks, including international risks.
  • EI risks may manifest themselves in the long term. In many cases it is the government/taxpayers that end up paying the bill.
  • Risk assessments can be used not only to assess risks within government and related to the environment, but also internally in the SAI; such as the competence gaps and areas where more research is needed.


Tuesday 22nd September 2015

Session 5: NORAD Oil for Development Programme by Petter Stigset, OfD

Key issues raised during presentation:

  • NORADs OfD Programme is supporting developing countries in managing oil resources. It is an institutional cooperation based on demand. The programme has supported 35 countries over 40 years.
  • The goal is Poverty reduction through responsible management of petroleum resources
  • Some challenges encountered are; how to adapt experiences from Norway to another environment, how to build sustainable institutions, how to share experiences without overwhelming, how to build local ownership
  • Important factor: peer to peer, that Norwegian members of OfD actually have direct knowledge of the Norwegian experience, commonalities and same level.
  • Promotion of Norwegian industry is completely excluded from the OfD. To maintain credibility there needs to be a “firewall” between Norwegian industry and OfD

Discussions and contributions from audience:

  • Why OfD is not operating in Nigeria?: Extremely challenging country to work with management of natural resources. No formal request so far received from the state.
  • Can OfD help SAIs increase the knowledge of the petroleum sector?: OfD is organizing seminars for Civil Society and might include SAIs. OfD to address the issue of Capacity development of SAI
  • Important to maintain a distance between SAIs and OfD because of the roles of the different institutions.
  • OfD do not design new legal frameworks, but do, for example, support CSOs, provide legal experts, give advice, line up experiences and give input on effects. OfD do not work directly with parliament, but train parliamentarians.

Conclusions and recommendations:

  • Be careful with auditing fragile institutions, due to pressure and time.


Session 6: Sector risk assessment and audit along the value chain by Trygve Christiansen, OAGN

Key issues raised during presentation:

  • This approach shows the government side of the EI value chain. It was elaborated using the World Bank value chain for EI and slightly altered by AFROSAI-E.
  • The value chain has 7 steps; Legal framework, Surveying and data management, Awarding contracts and licenses, Monitoring of operations, Collection of revenue, Revenue management and allocation, Implementation of sustainable policies
  • The presentation focused on possible risks for each value-chain step.

Discussions and contributions from audience:

  • What is the best approach to audit when a country is in a start-up phase?: If there already is a petroleum act/mining act, a possibility is to look at special regulations. Easier to intervene when there is a legal framework in place.


Session 7: Panel debate – How to ensure, and audit, local content in EI operations moderated by Jostein Tellnes, OAG Norway. The panelists were: Stephen Kateregga, SAI Uganda; Mette Gravdahl Agerup, Norwegian Ministry for Petroleum and Energy; Willy Olsen, Norwegian Oil & Gas partners and Beate Thoresen, Norwegian People’s Aid

Key issues raised during introduction:

  • Local content is the added value brought to a host nation, outside the value created from revenue generated. Both the industry and government have a responsibility for ensuring local content.

Discussions and contributions from audience:

  • The general focus of the questions: 1) What type of local content policies area likely to be effective? 2) What are the key challenges in implementing local content policies? 3) What are the most important topics for auditing local content?
  • The legal framework in Uganda enshrines local content and Ugandan companies deliver the majority of the value of goods and services. It is however a problem that the law does not state precisely what constitutes a Ugandan company. Many foreign companies set up a Uganda registered company to bypass the spirit of the law.
  • In Norway a strategy was developed early to make sure that Norway could build its own local content. Norway had some key preconditions: An educated public, a big shipping industry, experience in managing hydroelectric plants etc. In Norway it was important to incentivize investments and to build national expertise. The international oil and gas companies were asked to use Norwegian suppliers if these were competitive and could deliver good services.
  • It can be risky insisting too much on enforcing local content. It may delay the investment decisions and progress of the project.
  • Local content requirements often are irrelevant for local communities because they cannot offer the expertise and services needed.
  • The point of view of the industry is that the cheapest way to extract resources is to build local capacity. Local content rules are actually prohibited in WTO. International workers bring with them knowledge and with today’s oil price future projects may be in danger. Too much regulation is harmful, because it will harm the investments.
  • If a government includes a high target of employees to be citizens of the host country, it also takes a huge part of the responsibility to invest in good universities, training abroad etc.
  • A question was posed regarding the sustainability of developing own petroleum industry when the oil reserves only have a shorter life span. There are certain risks related to having too many people employed in a highly specialized industry. When a project is finished or when the companies leave the country, the country would have a big group of people which have a set of skills which are not needed anymore. There are also a lot of risks in training local staff in an industry which may have a short life span and which is vulnerable for international fluctuations.

Conclusions and recommendations:

  • As auditors we need to look at the effects of the local content policies, because they may be negative. Also, the process of developing local content policies must include the local communities affected.


Session 8: Status of WGEI Community of Practice, available audit tools and resources by Maxwell Poul Ogentho, SAI Uganda /WGEI Secretariat, and Ingvald Heldal, Community of Practice Coordinator (CoP)

Key issues raised during presentation:

  • The presentation focused on the status of the community of practice. A full-time coordinator is working at the offices of OAGU in Kampala together with the WGEI Secretariat.
  • The website of WGEI and Community of Practice presented, included the audit reports which are categorized according to the value chain.
  • Two newsletters have been issued already and new editions will come out every sixth week.
  • The CoP Implementation strategy was presented, and the activities were categorized in short, medium and long-term activities.
  • Some challenges for SAIs were posed to the participants, including how confidentiality of information shared can be maintained.

Discussions and contributions from audience:

  • Some of the reports are in the local language, and it would be good if this is translated.
  • The participants requested that information from non-SAI organization also becomes available.


Sessions 9 and 10: Group work on WGEI Community of Practice Work Plan and Plenary with group feedback and discussion on way forward

Chaired by Yashodhara Ray Chaudhuri, SAI India and John F.S Muwanga, Auditor General of Uganda and WGEI Chair,

Key issues raised during presentation:

  • Based on the Community of Practice Concept Note, the CoP coordinator devised a draft short, medium and long term operational plan for the running of key CoP functions. The activities in this plan largely correspond with the activities of the WGEI work plan approved at the last WGEI meeting.
  • Groups were asked to review the activities proposed and supplement if they felt any major issue was outstanding. In addition, members were asked to indicate areas and activities in which their SAI could likely contribute in the short, medium and long term. These expressions were forwarded to the CoP coordinator and WGEI secretariat head, and will form the basis for the update of the WGEI work plan.

Discussions and contributions from audience:

  • It was clarified that The CoP is not a separate entity from the WGEI but a tool through which the objectives of the WGEI is achieved. In practice, the CoP is the platform through which WGEI members, observers and other relevant stakeholders share information, develop knowledge and network around relevant issues.

Conclusions and recommendations:

  • Based on input from WGEI members, the CoP coordinator and the WGEI Steering Committee will update the WGEI work plan approved at the last WGEI meeting and include suggested priority activities for the short, medium and long term.
  • Once approved by the Steering Committee, the revised work plan will be shared with all WGEI members.
  • It is critical that members that expressed interest in contributing to the different activities in the plan, is verified with their respective Auditors General and confirm their commitments/contributions where possible.


Wednesday 23rd September 2015

Session 11: Parallel sessions I


Key issues raised during presentation:

  • A very comprehensive set of slides from the presentation can be found on the WGEI website.

Discussions and contributions from audience:

  • A comment was made on how ring-fenced tax regimes, such as PSAs, can lead to excessive transfer pricing. Companies will try to shift costs from one PSA to another, although this is not legal.
  • Questions were made on what constitutes a healthy government take. The answer to this is that what is a reasonable government take will vary from country to country. Also, the answer is dependent on whether one uses the company perspective or the government perspective.

Conclusions and recommendations:

  • All the different fiscal models have their pros and cons. Important variables are the capacity and strength of the tax authorities, the government’s willingness and ability to share risks and invest, the need for getting revenue now or later and lifespan of reserves. All these variable will influence the choice of fiscal model.
  • A general recommendation was not to choose too many fiscal regimes, to avoid the taxation management becoming unmanageable. A combination of some regimes may work, but not all of them together at the same time.


  1. SOVEREIGN FUND MANAGEMENT; LEGAL FRAMEWORK, ALTERNATIVE MODELS by Bjørn G. From, Investment Director, Asset Management Department, Norwegian Ministry of Finance

Key issues raised during presentation:

  • If you want to maximize government take, you must maximize the total take. We rather want 70% of something big than 90% of something small. For that, you need the help of private sector, and incentives to maximize total profits.
  • Petroleum production in Norway started in 1971 but the country spent 19 years before having a proper system in place.
  • Petroleum revenues are not really revenue as such; it’s rather an “asset swap”. A country exchanges the petroleum in the ground for money, you are not really You can only sell petroleum one time, and need to treat it different from normal VAT and taxes which will keep coming every year.
  • Key point of the fund: ALL revenues are injected into an endowment fund, the annual real return is used to subsidize the budget. How much of the return we inject is governed by the fiscal policy guideline (“Handlingsregelen”), and the expected average is max 4%. The rule is flexible, in good times we spend less, in bad times we spend more than the average.
  • NB: Not a pension fund but a vehicle for generating long term management of government petroleum revenues and supporting the national insurance pension scheme.
  • Structure of the fund: Why should the Ministry be involved in the management of a fund? Because of the size; it’s 250% of GDP, and the transfer is total 15% of the budget. When investing, you need to understand the risk tolerance of the Members of Parliament and we need to explain to them the consequences of various decision. Any long term strategy needs to be well anchored in parliament and be sustainable also with change of majority.


  1. ENVIRONMENTAL IMPACT ASSESSMENTS: WHAT ARE THEY AND HOW DO YOU AUDIT THEM?By Mari Lise Sjong, Senior Adviser, Norwegian Environment Agency

Key issues raised during presentation:

  • What are EIAs and what do they contribute to?
  • The EIA process.
  • Impact assessments – challenges.
  • The importance of monitoring and following up of EIAs.

Discussions and contributions from audience:

  • Audits of the consequences on the environment of development projects are more important than audit of system compliance.
  • SAIs should audit EIAs in a country-perspective to assess whether government institutions are fulfilling their responsibilities.
  • Quality of EIAs differ – often no quality assurance nor certification of those who carry out EIAs.
  • More focus on the consequences of shale oil.

Conclusions and recommendations:

  • WGEI should consider working more closely with the INTOSAI Committee on environmental audit – many similar perspectives and that committee has also a focus on the environmental impact of the extractive industries.


Session 12: Parallel sessions II



Key issues raised during presentation:

  • A very comprehensive set of slides from the presentation can be found on the WGEI website.

Discussions and contributions from audience,

  • A question was raised regarding what is negotiable within the production sharing agreements. In principle everything is negotiable, and also the decision on whether to negotiate is also negotiable. However, the current trend is that less of the content of the PSAs become negotiable. Model PSAs have been introduced in a number of countries and these are rarely subject to changes.
  • It was also discussed whether a SAI could make its audit report on the PSAs public if the PSAs themselves are confidential. A solution may be that the audit report should be made public, but there may be need to suppress certain details that are considered very business sensitive.

Conclusions and recommendations

  • Production sharing agreements are becoming increasingly more available to the public. The “old” contracts remain secret, while the new PSAs, which are based on model agreements, tend to be made public. Auditors should have access to both old and new PSAs and perform audits on all aspects of the agreements.
  • SAIs should audit a number of areas related to the PSAs: whether government sells its share of profit oil to the market price, whether government is verifying cost recovery statements prepared by the companies, the regulator’s performance in monitoring the operators’ metering system.


  1. DECOMMISSIONING: WHAT ARE THE RISKS? THE NORWEGIAN AND SOUTH AFRICAN EXAMPLES by Gisela Hytten, Advisor, SAI Norway and Sybrand Struwig, Senior Audit Manager AGSA

Key issues raised during presentation:

  • Decommissioning is about preserving nature for a sustainable future.
  • It is a very specialized area, you need to plan for this and set aside the finances in advance. Needs to be guaranteed by a fund. Often, the provision is there in an agreement, but it is not backed by cash.

Example of Norway, offshore:

  • Definition: Responsible disposal of offshore facilities when they reach the end of their operational, technical and financial life.
  • Ministry of Petroleum and Energy approves cessation plans, the Petroleum Directorate oversees implementation. They vet the financial estimate of the decommissioning plan.
  • Three authorities involved; NPD; Norwegian Environmental Directorate and the Norwegian Safety Directorate.
  • Financial risks are also considerable. Authorities can ask for guarantees, but have not yet done so.
  • Risks are long term.

South African experience

  • Performance audit conducted in 2009.
  • Nearly 6000 abandoned mines, but only one designated staff in Department to oversee the process. Cost of decommissioning much higher than estimated.
  • Communication between authorities insufficient.

Discussions and contributions from audience,

  • Any possibility of experience sharing between countries and SAIs on this, especially on benchmark questions like “what is reasonable liability time span” and “what is a cash guarantee”?
  • Whilst in Norway and South Africa, audit of this topic is based on clear conditions, rules and regulations, other countries may not have such clear rules.
  • In Vietnam, the rules and regulations related to the topic are not clear. The audit office is thus looking for benchmarks regarding what are appropriate standards (costs and quality) for decommissioning.

Conclusions and recommendations,

  • The key issue will be for SAIs to ensure authorities hold companies responsible, and “force” them to include decommissioning plans and costs in their operational plans and budgets.
  • This is a key topic; exchange of audit reports, risk analysis and other best practice on decommissioning would be most welcome.


  1. EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI): WHAT ROLES CAN SAIS PLAY IN A COUNTRY’S EITI PROCESS? GLOBAL EXAMPLES by Bady Baldé, Regional Director for Central African countries and Madagascar at the EITI International Secretariat, based in Oslo.

Key issues raised during presentation:

  • EITI’s work processes and reporting – how they compile, verify and reconcile collected data and prepare the reports.
  • Several reporting examples were given, among others from: Legal framework in Albania, Report of production data in Zambia, Contact disclosures in Liberia, Government revenues in Nigeria, Sales in-kind revenues in Iraq, Beneficial ownership and Barter agreements in DR Congo, Environmental protection in Mongolia, Revenue distribution in Norway.
  • SAIs involvement was strongly desirable and encouraged by EITI. Basis for an EITI’s report will often be: Companies publish what they pay to treasury, whilst Governments publish what they receive. What was paid by whom and did the revenue go where it was supposed to? Many SAIS do not reconcile or certify government accounts in such respect.

Discussions and contributions from audience:

  • Discussions revealed that differences from one country to another, both concerning SAI involvement and use of EITI’s reports.
  • Pronounced interest by some SAIs for establishing closer relations and cooperation with EITI, as partners for discussions and mutual exchange of information.

Conclusions and recommendations:

  • Benchmarking could be performed to achieve documentation for SAIs’ interest and potential contributions and benefits of SAIs involvement in such reporting.


Session 13: Conclusions and sum-up by John F.S Muwanga, Auditor General OAGU and WGEI Chair,

Key issues raised during the sum-up:

  • The Chair expressed gratitude to the organizers, contributors and participants of the meeting.
  • It was mentioned that the Community of practice will help share experiences, information and audit expertise.
  • The chair mentioned that during the meeting we had seen how several issues presented particular challenges to the SAIs such as production sharing agreements and different fiscal systems.