Promoting investment through openness in Timor-Leste

Ahead of a block bidding round planned for the coming year, figures and analysis in Timor-Leste’s new EITI Report could play a key role both in promoting investment in Timor-Leste’s extractive industries and raising awareness of the sector amongst local communities.

“Transparency is now a baseline for us,” noted Petroleum & Natural Resources Minister Alfredo Pires. “The expanded reporting under the EITI Standard allows us to delve deeper into more qualitative issues, which should highlight the strong investment potential in our extractive industries.”

Despite the lack of production figures disaggregated by commodity, the report made significant strides in covering the legal framework for extractive industries, the operation of the Petroleum Fund, and disaggregated data by individual production sharing contract.

By the numbers

Timor-Leste’s extractive industries revenues grew 10% to US $3.6 billion in 2012. This was driven primarily by the US $214 million in additional taxes collected by the National Directorate of Petroleum and Minerals Revenue (NDPMR) as a result of other tax assessments and penalties.

The revenue structure remained largely unchanged from 2011, with profit oil and gas, income tax and additional profit tax as the three largest contributors respectively. Yet the ramp-up of production at the ENI-operated Kitan field from October 2011 compensated for the lower output at ConocoPhillips’ Bayu Undan caused by planned maintenance works.

These feature amongst the key findings of the 2012 EITI Report by Timor-Leste EITI. The report is Timor Leste’s first under the EITI Standard, which marks the most comprehensive exercise to date. The report was launched in Dili on 6 February.

Entrenching reporting

While the report found a US $330 million discrepancy between government and industry payments, some 9% of the total, this was due to the omission of four of the 20 oil companies, although all 12 mining firms were covered.

“Timor-Leste has established a strong track record in open revenue reporting. The key now is to entrench these reporting processes in government systems,” says EITI Chair Clare Short. “Future reports could also look more closely into revenue management and the link to spending priorities.”

This will be key to remain relevant to the Timorese national priorities. The country has a track record of openness established through annual EITI reports published since 2008. Expanding upstream investment to sustain current output will be key for public finances. Analysis of the exploration outlook and use of revenues will be key to highlight the sector’s potential and to building broader public support.

For more information about EITI in Timor-Leste, visit their website at www.eiti.tl or the country page on eiti.org.