World Bank Involvement in Extractive Industries Paulo de Sa Manager Oil, Gas and mining Unit (SEGOM) November 5, 2013

 Promote shared prosperity The World Bank and Extractive industries  End Extreme Poverty  Promote shared prosperity twin wbg goals Revenue Maximization, Transparency & Governance, Poverty Targeted Expenditures Leveraging Inclusive Growth Local Content, Jobs, Infrastructure Conflict Prevention and Managing Fragility. Sustainability: Resources, Environmental & Social ei themes in support 1. Revenue Maximization, Transparency & Governance, Poverty Targeted Expenditures EI provides one of the best sources of revenue for fighting poverty and dwarfs aid inflows. But it needs to be maximized and managed in a transparent manner (e.g. EITI) to ensure that the benefits reach the people. 2. Leveraging Inclusive Growth, Local Content, Jobs, Infrastructure The government, private sector and communities can create shared value. The more the local economy can participate in the EI operation and leverage its infrastructure, the larger and more inclusive the benefits. Direct employment is low due to mechanization but skills development will increase local employment in higher income positions. Roads, rail, ports and power needed by EI (and built by private sector) can be made for multiple uses. 3. Conflict Prevention and Managing Fragility There is a high correlation between fragile and conflict affected states and EI. Deeper diagnosis and solutions to reduce and prevent conflict are essential to ensure poverty gains are not eroded. 4. Sustainability: Resources, Environmental and Social EI development needs to take place with minimum environment/social footprint (e.g. GGFR), and specific consideration to community and gender issues.

Strategic Setting: Governance Challenges for Extractives Weak institutions, poor governance and lack of infrastructure remain major concerns. The lack of modern geological data and overall knowledge of mineral potential is one of the key barriers to improving the quality of resource deals (Collier). Lack of human capacity. Poor capacity to negotiate investment agreements and monitor contract enforcement. Weak Public Financial Management and Public Investment Management. Limited local economic SME capacity and insufficient local and regional strategic planning to harness the economic linkages. Weak track record in sharing benefits with local communities. Political and institutional dimensions are important determinants of how resource rich countries perform.

SEGOM: Core Areas of Intervention Sector Governance and Reform Legal & regulatory framework and licensing/contracts /auctions Institutional strengthening and capacity building Geodata Acquisition Hydrocarbon resources data management Better governance and transparency (EITI agenda) Oil, Gas and Poverty Alleviation Gas policies as part of a lower carbon energy growth Gas pricing, Gas Master Plan and development of domestic markets Utilization of flared gas (GGFR) Sustainable Livelihoods Environmental and Social management Local economic development planning, economic linkages and local content Health & Safety Support for reducing energy poverty 4

Transparency and Accountability across the whole chain The Extractive Industries Value Chain Better deals that are better managed for more development impact World Bank has the capacity to support key links in the value chain Transparency and Accountability across the whole chain 5

Strategic Setting: Challenges for Gas Green Growth – leveraging gas as a transition to renewables: opportunity to optimize the use of gas in power systems, including intermittent renewables (e.g. integrated gas and renewables planning) Access to energy and diversification of energy sources: Links to the Sustainable Energy for All (SEFA) Agenda Trade: Foster exploration and an efficient use of gas at the country and regional level (e.g. infrastructure integration and/or demand pooling) Integration of Gas-to-Power Value Chain: Harmonization of policy, regulation, and tariff setting to assure that gas is properly valued and risks mitigated along the entire value chain. Harness new potential Shale Gas resources: Evaluate its potential and promote sound policy and regulation around its development

Role of the World Bank in Gas-to-Power Electricity Gas Transportation & Treatment Electricity Transmission & Distribution Gas Production Power Generation Electricity Consumers Resource estimation Fiscal terms/tax Licensing Regulation and monitoring Reduction of flaring Gas pricing Investment (IFC/MIGA) Investment (private/public) Tariffs Regulation Open access rules Investment (private/public) IPP framework/bidding Regulation and monitoring Electricity pricing Guarantees Energy efficiency Investment Regulation and monitoring Electricity pricing Guarantees Efficiency Integration of renewables Electricity pricing Subsidies Energy efficiency Cross-cutting issues Pricing & Tariffs Credit support Reliability Safeguards Policy and Regulation Transparency 7

Gas Map of Africa: Where the Opportunities Are and how the Bank is Helping to Capture them Gas as an Agent of Transformation Resource: Huge undeveloped discoveries Non-associated gas, LNG Rationale for Bank involvement: Governance, macro management Industrial development Bank Interventions: Revenue management Institutional capacity building Local gas market development Forward/backward linkages (SME’s) Gas as a Squandered Resource Resource: Huge proved reserves in Nigeria Predominantly associated gas Rationale for Bank involvement: Energy access Flaring avoidance Bank Interventions: GGFR Gas and power pricing reform Contract guarantees Infrastructure finance Gas as an Alternative to Coal Resource: Potential increase in pipeline gas exports from Mozambique Potential shale gas and coal-bed methane Offshore exploration beginning Rationale for Bank involvement: Lower carbon growth strategy Possible Bank Interventions: Regional pipeline expansion Regulation of shale gas activities

Finance/Private Sector Development: Examples of an Integrated Approach - Mozambique SEGOM (Oil & Gas Unit): Preparation of Gas Master Plan including downstream potential (financed by AAPF and PGI) EI-TAF grant for legal support for mining negotiations and gas (LNG) negotiations Direct/ immediate services to the government to improve sector governance TA Project preparation ($50 mln IDA + pledges of US$20+ mln from at least two other donors for co-financing) for Government capacity building for both mining and gas EITI implementation Finance/Private Sector Development: Supply chain linkages (through Growth Poles Project) Economic Management: Fiscal and revenue management (PRSP series) Demand Side Governance work (jointly with EITI and CSO support grant) 9

Gas pricing policy study EITI implementation Africa Energy/SEGOM: Examples of an Integrated Approach - Ghana SEGOM: Oil & Gas Capacity Building Project supports 11 agencies with responsibility for managing the sector ($38 mil) Gas pricing policy study EITI implementation Africa Energy/SEGOM: “Energizing Economic Growth in Ghana,” 2013 comprehensive study of petroleum and power sectors Policy advice and TA on LNG import options SEGOM/Economic Management: Revenue management and forecasting technical assistance Africa Energy/SEGOM (AFTEG) Power sector financing and TA WAGP guarantees 10

Summary Inventory of Our Oil and Gas Activities Technical Assistance Examples Gas pricing policy development Ghana, Iraq, Bangladesh Gas master planning/domestic gas sector development Mozambique, Ghana, Tanzania, Iraq LNG import strategy Bangladesh, Lebanon, Vietnam, Philippines Balancing LNG Exports with domestic needs Yemen, Tanzania Shale gas and coal-bed methane policy and regulation Poland, Botswana Capacity Building Ghana, Tanzania, Mozambique, Kenya Financing Examples Lending for gas-fired power plants Nigeria, Ghana, Bangladesh, Mauritania, Egypt Partial risk guarantees for power/gas sales contracts Nigeria, West African Gas Pipeline, Cote d’Ivoire Gas distribution system efficiency improvement Pakistan, Ukraine Gathering systems (including flare reduction) Kazakhstan,

Global Programs and Facilities That Support the Work Extractive Industries Transparency Initiative (EITI) Global standard for good governance in EI. Revenue transparency, tripartite process and platform for governance and accountability. Extractive Industries Technical Advisory Facility (EI-TAF) Better deals. Reducing asymmetry of information. Rapid response and support for contract negotiations Global Gas Flaring Reduction (GGFR) Capturing flared gas for energy access & power/industry

Global Gas Flaring Reduction (GGFR) GGFR, a public-private partnership, supports national efforts to increase the use of associated natural gas, thus reducing gas flaring and venting which waste resources and increase global CO2 emissions. GGFR aims to improve energy efficiency, expand access to power by developing gas markets, and mitigate climate change through the reduction of greenhouse gas emissions from flaring. Since its inception, GGFR has received almost $45 million in donor contributions which have helped finance 40 projects/activities (mostly in the Africa region). GGFR has successfully contributed to a 20% decrease in global gas flaring the past seven years. Gas flared annually in Africa could produce 200 TWh electricity (more than twice AFR’s power consumption (excl. South Africa). GGFR Phase 4 began on January 1, 2013.

Extractive Industries Transparency Initiative (EITI) EITI promotes and supports improved governance and transparency in resource-rich countries through the full publication and verification of company payments and government revenues. As of March 2011, 38 countries are implementing EITI of which 20 countries have been declared compliant. SEGOM manages a multi-donor trust fund that assists countries to implement the EITI. Since 2005, the EITI MDTF has received $61.5 million from 15 donors. Next rules - Broadening and deepening EITI: Improving quality of reports Enhancing CSOs participation New agenda: licensing and contract transparency, tax administration, budget transparency Updated by Carmen

Extractive Industries Technical Advisory Facility (EI-TAF) EI-TAF assists developing resource-rich countries to structure extractive industry transactions and related sector policies. EI-TAF facilitates rapid-response, third-party advisory services and capacity building for resource policy frameworks and transactions. 14 on-going projects in Liberia, Sierra Leone, Mozambique, Kenya, Guinea, Rwanda and Mauritania, Colombia, Haiti, etc. Through its Knowledge Management window EI-TAF supports the production and dissemination of global knowledge products. The flagship product is the EI Source Book. Established in 2009, EI-TAF has received a total of $25 million in contributions from 7 donors. Next steps include expanding the facility and increasing funding to US$ 50 million.