VZCZCXRO7275
OO RUEHIK
DE RUEHC #4935/01 0500049
ZNR UUUUU ZZH
O 190046Z FEB 10
FM SECSTATE WASHDC
TO ALL DIPLOMATIC AND CONSULAR POSTS COLLECTIVE IMMEDIATE
RUEHTRO/AMEMBASSY TRIPOLI IMMEDIATE 2738
RUEHRY/AMEMBASSY CONAKRY IMMEDIATE 3581
RUEHPU/AMEMBASSY PORT AU PRINCE IMMEDIATE 0858

UNCLAS SECTION 01 OF 03 STATE 014935 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EAID ECON ETRD PGOV
SUBJECT: THE ENERGY GOVERNANCE AND CAPACITY INITIATIVE 
 
STATE 00014935  001.2 OF 003 
 
 
¶1.  SUMMARY.  The Office of the Coordinator for 
International Energy Affairs (S/CIEA), in coordination 
with USAID, our missions overseas, and State's regional 
and functional bureaus, is proud to unveil the Energy 
Governance and Capacity Initiative (EGCI).  EGCI is 
designed to help countries with recent energy 
discoveries develop the institutional capacity to 
sustainably manage these resources.  We have identified 
the first tier countries for this program and will be 
sending out assessment missions in the coming weeks and 
months.  Working closely with other agencies to harness 
USG technical expertise, EGCI will help countries 
develop energy master plans, buildup regulatory regimes, 
ensure proper fiscal oversight of resources, and combat 
corruption.  The goal is simple and clear: help these 
countries avoid the "resources curse" and gain the 
ability to use their energy revenue windfalls to achieve 
long term development goals.  While EGCI can't do that 
alone, it can build on the political will of countries 
to help them achieve this goal.  END SUMMARY 
 
The Revenue Management Challenge 
 
¶2.  EGCI addresses a very real threat to U.S. 
development, economic and foreign policy goals in 
resource rich developing countries.  As the President 
stated during his 2009 trip to Ghana, development 
depends on good governance and the U.S. should focus on 
supporting governance wherever possible.  Effective 
revenue management and governance of the energy sector 
is especially crucial for energy-rich countries.  They 
often lack the institutional capacity to manage the 
development of their resources.  Oil and gas revenue 
windfalls are transitory; a failure to implement a 
strong regulatory regime and effective sector management 
from the outset can result in the permanent loss of what 
could have been a developing country's best chance to 
raise itself out of poverty.  In many cases, poor energy 
sector governance has led to political and economic 
instability, domestic conflict and regional insecurity. 
 
¶3.  New energy producing countries are at the greatest 
risk for mismanagement because they often lack the 
institutional capabilities to mange their energy and 
financial sectors.  Revenue management systems, in 
particular need to be in place in advance of monetary 
streams in order to enable effective control and 
planning as well as to minimize the likelihood of 
corruption.  Support for governmental entities, such as 
finance and energy ministries, and the creation of 
independent regulators are essential to ensuring good 
governance in this sector.  Support for civil society 
organizations also is integral to achieving democratic 
and transparency goals as they relate to energy 
resources. 
 
EGCI Objectives 
 
¶4.  Implementation of a formalized approach to 
strengthening energy sector governance and transparency 
is crucial given its importance to the economies of many 
developing countries.  EGCI is the first USG effort to 
promote an integrated approach to good governance and 
transparency of the energy sector in energy resource 
rich countries.  The benefits of having an integrated 
program become even greater when the range of U.S. 
foreign policy and economic interests affected by the 
energy sector are taken into account.  For countries 
like Ghana, Uganda, and Papua New Guinea, each of which 
is poised to receive tens of billions of dollars in new 
oil and gas export revenues during the coming decade, 
the need to bolster institutional capacity shortfalls is 
critical in order to guarantee their long-term economic 
and political stability.  We believe that EGCI programs, 
along with sustained diplomatic attention to energy 
sector issues, can make a difference in targeted 
countries. 
 
¶5.  EGCI will employ a whole-of-government approach to 
tap into the technical expertise of the USG (e.g., 
USAID, Treasury, Interior, Commerce, and State) to 
address specific shortcomings identified in targeted 
countries and to create sustainable peer-to-peer energy 
governance relationships with the USG.  Such government- 
to-government assistance offers unbiased, sound advice 
and guidance that many countries need and simply cannot 
 
STATE 00014935  002.2 OF 003 
 
 
obtain elsewhere.  This assistance will be specifically 
designed to complement other reform efforts (e.g., EITI; 
Norwegian Agency for Development Cooperation, Australian 
Agency for International Development, as well as other 
foreign development agency efforts and World Bank Group 
programs), while tailored to address capacity shortfalls 
in ways otherwise not obtainable.  The EGCI approach is 
to make relatively small investments in technical 
assistance and training in countries that are receptive 
to our assistance with the objective of building up 
their capacity to adequately manage their resources.  We 
anticipate that USG resources will not be needed for 
long in target countries because resource revenues 
should be available for governments to cover longer term 
needs once revenues begin to flow. 
 
¶6.  Examples of possible EGCI programs and activities 
are: 
 
--Workshops and seminars on leasing, revenue management 
and regulatory best practices for the oil and gas 
sectors; 
--In-country support to create an independent energy 
sector regulator; 
--Legal and technical guidance to support the 
implementation of reforms and policies to create the 
commercial environment needed to attract large scale 
investment; 
--Advice on oil and gas revenue sharing and 
distribution, including related financial and tax 
management; 
--Implementation of financial tracking systems and other 
measures to reduce corruption; 
--Technical training in oil and gas resource 
identification, assessment methodology and best 
practices related to data analysis and management; and 
--Capacity building assistance to boost in-house 
technical and management skills in ministries and 
governmental entities related to the energy sector. 
 
¶7.  While specific goals will vary by country, based on 
particular needs, possible end results in country could 
be: 
 
--Creation of an independent energy sector regulator; 
--Development of an energy sector master plan; 
--Implementation of a transparent and efficient revenue 
management system; 
--Establishment of optimized budget policies and 
financial management mechanisms; 
--Clarification on tax and legal policies affecting 
hydrocarbon sector investment; 
--Implementation of anti-corruption measures; and 
--Completion of technical training to bolster technical 
and functional management capabilities of Energy, 
Finance and other relevant government ministries. 
 
Where We Are Now 
 
¶8.  S/CIEA worked directly with regional bureaus, 
missions and USAID to carefully select priority 
countries, based on specific criteria.  All these 
countries have oil and/or natural gas resource potential 
that could support significant near-term production and 
revenue generation.  Institutional capacity shortfalls 
exist to varying degrees, but the countries were 
selected based on our analysis that substantive gains in 
solving these shortfalls can be made within two to three 
years.  After this time, the selected country would be 
on a sustainable path that can be monitored through 
other U.S. assistance efforts, multilateral development 
banks or non-governmental organizations. 
 
¶9.  We are working closely with the Office of the 
Director of Foreign Assistance (F) to identify resources 
for EGCI.  For activities taking place in FY 2010, F has 
identified resources to cover the travel costs of 
assessment missions and initial training programs that 
may be agreed upon following assessments.  These funds 
will be managed by USAID's EGAT Bureau.  Once assessment 
missions are complete, we will have a better idea which 
programs are suitable for specific countries going 
forward.  F will work with S/CIEA and specific countries 
to make sure funding is available within country budgets 
for EGCI in FY 2011.  For FY 2012, interested posts 
should incorporate planning and funding requests for 
EGCI in their mission program planning.  Missions are 
also encouraged to look at the level of personnel 
support needed to ensure that energy and governance 
issues, including EGCI programs, are adequately covered. 
 
STATE 00014935  003.2 OF 003 
 
 
¶10.  We are currently assembling teams to send out to 
the first tier of EGCI countries (e.g., Uganda, Papua 
New Guinea, Liberia, Sierra Leone, Ghana, Suriname, 
Guyana, Vietnam, and Timor Leste).  After these 
technical teams complete their assessment missions, we 
will work with USAID, Interior's Minerals Management 
Service (MMS) and U.S. Geological Survey (USGS), 
Treasury's Office of Technical Assistance, Commerce's 
Commercial Law Development Program, and other bureaus 
within State to identify programs tailored to the 
countries' specific needs. 
 
¶11.  Once this program is established, we will be 
looking at other countries that may benefit from EGCI. 
We look forward to working with our partners in the 
interagency on this program.  If individual posts have 
an interest in EGCI, please contact Paul Hueper 
(hueperpf@state.gov) or Michael Sullivan 
(sullivanma2@state.gov) at S/CIEA. 
 
¶12.  Minimize considered. 
CLINTON