Overview of Extractive Industries in Asia Pacific Maryati Abdullah National Coordinator, Publish What You Pay Indonesia Steering committee member of Open Government Partnership (OGP) Presented at the Workshop on ‘Reversing the Resources Curse’, held by Ford Foundation. Ghana, Accra August 25th – 30th, 2013

Primary Energy World Consumption in1992, 2002 and 2012 Percentage Primary energy consumption increased continually year by year and it was dominated by oil and coal Statistical Review of World Energy, BP 2013

Distribution of Proved Oil Reserves in1992, 2002 and 2012 Percentage World proved oil reserves at the end of 2012 came to 1668.9 billion barrels, and it was sufficient to meet 52.9 years of global production. An increase in official Iraqi reserves was the single largest addition, adding 6.9 billion barrels. OPEC members continued to dominate, holding 72.6% of the total global production. South & Central America continued to hold the highest R/P ratio. Global proved reserves have increased by 26%, or nearly 350 billion barrels, over the past decade. Trends based on 10 years periods showed that proved oil reserves kept increasing in south and central America, Europe and Eurasia, and Africa. Although the Middle East has the highest reserves, from time to time their reserves went into decrease. So did the Asia and Pacific. Meanwhile, reserves in North America went up and down. Statistical Review of World Energy, BP 2013

Oil Production/Consumption by region Million barrels daily Production by region Consumption by region World oil production increased by 1.9 million b/d in 2012, more than double the growth of global consumption. US output grew by 1 million b/d, the largest increase in the world and in the country’s history. The recovery of Libyan production drove robust growth in African output. Global oil consumption grew by just 890,000 b/d, with declines in Europe and North America offsetting gains elsewhere. The consumption of oil in the Asia Pacific region was larger than its production, making most countries in the region to become net importers of oil. North America, Europe and Eurasia also experienced similar condition. Statistical Review of World Energy, BP 2013

Total Oil Supply in Asia & Oceania 2008 – 2012 thousand Barrels per Day Processed from US Energy Information & Administration, www.eia.gov , accessed in August 23th, 2013

Major Oil Trade Movement 2012 Trade flows worldwide (million tones) Mostly the big market for oil trade in Asia Pacific are China, Japan, India and Singapore. Oil traded in Asia Pacific was not just supplied by Asia Pacific Countries (such us Indonesia, China, etc) but also by Middle east, Europe & Eurasia. Statistical Review of World Energy, BP 2013

Crude Oil Price 1861 – 2012 US Dollars per barrel, world events Statistical Review of World Energy, BP 2013

Distribution of Proved Gas Reserves in1992, 2002 and 2012 Percentage World natural gas production increased by 1.9% in 2012. The US once again recorded the largest national increase. Production grew in every region except Europe & Eurasia, where declines in Russia and the UK offset gain generated in Norway. Natural gas consumption increased by a below-average 2.2%. As was the case with production, the US recorded the largest national increase and consumption rose in every region except Europe & Eurasia, where consumption fell to the lowest level since 2000. In the 10 years periodically, mostly the trend of proved gas reserves was decreased in all region. The ranking of reserves are in the middle east, Europe & Eurasia, Asia Pacific, Africa then north America and followed by South & Central America. Where Asia Pacific to be the thirth for south and central america, Europe and Eurasia, and Africa. Middle east-event the highest reserves located in there, it reserve was periodically decreased as well as in Asia and Pacific. While in North America was up and down. Statistical Review of World Energy, BP 2013

Gas Production/Consumption by region Billion cubic metres Production by region Consumption by region World natural gas production increased by 1.9% in 2012. The US once again recorded the largest national increase. Production grew in every region except Europe & Eurasia, where declines in Russia and the UK offset a gain in Norway. Natural gas consumption increased by a below-average 2.2%. As was the case with production, the US recorded the largest national increase and consumption rose in every region except Europe & Eurasia; EU consumption fell to the lowest level since 2000. Statistical Review of World Energy, BP 2013

Production of Marketed Natural Gas in Asia & Oceania, 2008 - 2011 Billion Cubic Feet Processed from US Energy Information & Administration, www.eia.gov , accessed in August 25th, 2013

Major Gas Trade Movement 2012 Trade flows worldwide (million tonnes) Statistical Review of World Energy, BP 2013

Oil&Gas Comsumption per capita 2012 Oil in Tonnes Gas in Tonnes oil equivalent Statistical Review of World Energy, BP 2013

Distribution of Proved Coal Reserves in1992, 2002 and 2012 Percentage Statistical Review of World Energy, BP 2013

Coal Production/Comsumption by Region Million tones oil equivalent Production by region Consumption by region Statistical Review of World Energy, BP 2013

Asia Leads Growth in Global Coal Production Since 1980 Asia. Asian coal production doubled between 1980 and 2000, and more than doubled again between 2001 and 2010. Asian coal production accounted for over one-half of global coal production in 2010 compared to 22% in 1980. Chinese and Indian coal production each increased around 400% since 1980. Indonesian production, although smaller, grew rapidly as well. In 2010, China accounted for about 75% of total Asian coal production, followed by India (13%) and Indonesia (8%). Link for ½ minutes video http://www.eia.gov/todayinenergy/detail.cfm?id=4210 Processed from US Energy Information & Administration, www.eia.gov , accessed in August 25th, 2013

Total Primary Coal Production in Asia & Oceania 2008 – 2012 thousand short tons Processed from US Energy Information & Administration, www.eia.gov , accessed in August 25th, 2013

Timber Trade Flow Tropical Timber Top Production and Export Sources : http://www.idhsustainabletrade.com/hout-tropical-timber-trade-flow, accessed in August 25th, 2013

Major Trade Flow of Palm Oil Figure above demonstrates the trade flows of palm oil between the primary production regions for palm oil (Malaysia and Indonesia), and their respective flows into the world’s primary palm oil consumer markets (India, Indonesia, China, EU, and the U.S.). Palm oil production is economically vital for Malaysia and Indonesia and their rural communities. Oil palm represents 3.2% of the Malaysian GDP and 6% to 7% of the Indonesian GDP (RSPO, 2011a). The industry is inherently labor-intensive, requiring a global average of five workers per hectare. Competing oil crops often require approximately one worker for every 200 hectares. In Malaysia, the palm oil sector employs 590,000 direct workers (including many laborers imported from Indonesia), and 35% of production derives from smallholders (NEAC, 2009). In Indonesia, 3.7 million people are engaged in the palm oil industry and downstream industries, with 45% of production from smallholders (RSPO, 2011a). Booming commodity prices in recent years have trickled up through this labor-intensive system, helping to lift millions out of poverty in Indonesia and Malaysia and contributing to a more than doubling of the Indonesian middle class in the decade leading up to 2009 (Bellman, 2011). [WWF Report, P. WWF Report 2012, Accessed from www.rspo.org, August 25th, 2013

Key Issued & Good Governance in Extractive Industries

Key Issues on Extractive Industries Social & Human Right Issues Indigenous people right (and FPIC requirement) Militarization on EI operation security Land grabbing & right to livelihood of community Violation & social conflict Gender & Child right Environment, Land & Spatial Issues Trans-boundary haze, Over-lapping Concession & spatial transparency Deforestation & Biodiversity loss (such us sumatra tiger habitat, elephant, etc) palm oil in the peat land (making Indonesia among the top emitter of Green Gas Houses) Pollution, and emergency contingency plan implementation in EI areas Economic & Good Governance Issues Potential loss of revenue, tax illicit, EITI and contract transparency Revenue sharing, peak production & revenue windfall Development plan, poverty alleviation and sustainable spending Economic sustainability, social corporate responsibility and local content issue Natural resources/ Sovereight wealth funds Bribery & money laundering issues on anticorruption Regulatory framework, and institutionalization of EI governance

Concentration of NGO Work Along the EI Value Chain in 10 Asia Pacific Countries Decision to extract/not to extract Awarding of contracts/ licenses Fiscal Terms Extraction prosess Trading of commodities Tax and revenue collection Development project/policies Revenue Mngt and allocation I 87% II 43% III 18% IV 56% V 12% VI VII VIII Survey conducted by Revenue Watch Institute-Asia Pacific Office in 10 Countries : Myanmar, Cambodia, Philippines, Indonesia, Mongolia, Malaysia, Papua New Guinea, Timor Leste, Vietnam, Thailand Revenue Watch Institute, 2009

Resources Governance Index Average Country Scored by Region and Average Note: The OECD region includes five countries; the Latin America & Caribbean nine countries; Eurasia & South Asia six countries; East Asia & Pacific 10 countries; Sub-Saharan Africa 17 countries; and the Middle East and North Africa 11 countries. The East Asia and Pacific region as a whole performs poorly on the Index. The region’s average score of 44 out of 100 places it below the Index’s global average of 51 and at the same level as sub-Saharan Africa (see Figure 2). However, regional averages mask great variation between countries. Resources Governance Index, RWI 2013

Resources Governance Index East Asia and Pacific Index Score and Ranking For the 10 Asia-Pacific nations in the Index, oil, gas and minerals accounted for an average of 25 percent of total exports and 34 percent of government income in 2006-2011. Good governance helps that citizens fully benefit from their natural resources. To determine how each country performs, the Index looks at four key areas of transparency and accountability: Institutional and Legal Setting: the degree to which laws, regulations and institutional arrangements facilitate transparency, accountability and open, fair practices Reporting Practices: government disclosure of information. Safeguards and Quality Controls: the presence and quality of checks and oversight mechanisms that encour- age integrity and guard against conflicts of interest. Enabling Environment: the broader governance environment, based on more than 30 external measures of accountability, government effectiveness, rule of law, corruption and democracy. Main findings Diversity within the region is striking. While none of the Asia- Pacific countries earned a satisfactory score, Indonesia and Timor-Leste received above average grades, suggesting significant progress toward a well-governed and accountable resource sector. In contrast, Cambodia and Myanmar received failing scores, with Myanmar ranking last out of all 58 nations. Mongolia, Timor-Leste and Indonesia earned satisfactory scores of 80, 77 and 76 on Institutional and Legal Setting. These countries have comprehensive oil, gas and mining legislation, including an independent licensing process and clear frameworks for resource revenue collection. China, Malaysia and Myanmar lack laws and institutions that encourage integrity and openness, leading to poor performance. Timor-Leste received a strong score of 82 on Reporting Practices, reflecting the government’s commitment to transparency in the oil sector. It is the only country in the region to publish contracts with companies, though these disclosures are not routine. With the exception of Malaysia, regulating authorities do not publish environmental impact assessments or consult with communities prior to awarding extractive rights. While information on exploration and production is generally available, China, Cambodia, Myanmar, Papua New Guinea and Vietnam publish very little information on resource revenues. Performance on Safeguards and Quality Controls ranges widely, from Indonesia’s satisfactory 75 to Myanmar’s failing score of 2. China, Indonesia, Malaysia, Myanmar and Vietnam Figure 2: Average country score by region and component do not require government officials to disclose their financial interests in extractive projects. Only Indonesia requires over- sight of its licensing process; the other countries lack effective monitoring or do not allow appeals of licensing decisions. Malaysia’s Enabling Environment score of 60 was the region’s highest, reflecting strong government effectiveness but weak democratic accountability. Myanmar scores close to on all measurements of governance. Timor-Leste received its lowest score on this component, the result of poor government effectiveness, control of corruption and the rule of law. Resources Governance Index, RWI 2013