Good Practices and Innovations in Public Governance 2003-2011

2007 Category 1: Azerbaijan
Since the Oil Fund of Azerbaijan is expected to take more than 150 billion dollars in
revenue over the next 15 years, a significant portion of government revenue, ensuring
financial transparency in the oil industry was regarded as crucial to promoting investor
confidence in the country as a whole.
The Solution
Following the declaration made by President Ilham Aliyev at the EITI Lancaster
House Conference that the Government of Azerbaijan would join EITI and support
the international efforts for higher transparency in the extractive industries as well as
volunteering Azerbaijan as a pilot country, the President himself promoted the establishment
of an interagency committee on EITI to implement obligations taken at the
EITI Conference. Cabinet Ministers of Azerbaijan established the National Committee
on EITI on 13 November 2003. The Committee was chaired by the Executive Director
of the State Oil Fund (SOFAZ). The Executive Director of the SOFAZ is also
overseeing the work of the EITI Secretariat of Azerbaijan, which is hosted by the Oil
Fund. The SOFAZ is responsible for the day-to-day running of EITI in Azerbaijan,
and the appropriate coordination with the foreign extractive industry companies. The
EITI Secretariat is closely cooperating with the foreign and local extractive industry
(oil and gas) companies and NGOs to implement EITI in Azerbaijan. The main task
of the SOFAZ included: building understanding with EITI process stakeholders (the
National Committee on EITI, extractive industry companies and civil society), increasing
awareness of government institutions involved in EITI process and developing
credible implementation mechanisms. It took almost one year to come to a mutual
agreement and as the result of productive cooperation a Memorandum of Understanding
(MOU) was signed on 24 November 2004 between all stakeholders.
21 foreign and local extractive (oil and gas) industry companies, including State Oil
Company of the Republic of Azerbaijan, Exxon, Statoil, Total, Lukoil, Chevron,
Shell, Devon Energy have signed the MOU. Currently the number of companies increased
to 24.
The reports are being submitted twice a year: annual on 15 March and semi-annual
on 15 August. A new audit firm is selected for each reporting cycle. Deloitte was announced
on 20 December 2004 as winner of the tender for the first reporting cycle
covering 2003 (annual) and 2004 (6 months). Since the Government of Azerbaijan
joined the EITI, Azerbaijan has disclosed Four Transparency Initiative Reports
(2003, 2004, first 6-months assertion of 2005 and annual 2005). The First report was
disclosed on 15 March 2005. It was the first published report of this kind in the
world. The full report and the press-release have been uploaded to the SOFAZ website:
www.oilfund.az and the EITI Secretariat of the UK DFID website: www.eitransparency.org
as well as the NGOs Coalition website: www.eiti-az.org
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