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1. New Producer Contract Terms and Uncertainty: Lessons From the Recent Past

Author:
Patrick Heller, Perrine Toledano, Tehtena Mebratu-Tsegaye, and David Mihalyi
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
The petroleum industry is volatile, and governments in “new producer” countries have operated at a significant information disadvantage when negotiating with international oil companies. This challenge is growing today; new producer countries face intensifying questions around whether to offer fiscal incentives to maintain investment in the face of 1) the pandemic-induced volatility in oil prices and 2) long-term questions about the future of the industry in the face of the climate crisis and the global energy transition. This confluence of short-term and long-term uncertainty is prompting a reexamination of the narrative that once took hold in many new producer countries. The traditional story was one of linear progression from being non-producers to small levels of production to ultimately having oil and gas become a major economic contributor over the long term. This notion of progression was associated with a commonly held theory: After a country’s first major discovery, the geological risk that wells will be dry was expected to decrease. Countries could therefore shift from a position of having to grant tax breaks (and other concessions) to international investors, to taking a tougher stance in laws and negotiations for new projects going forward. In this paper we examine whether this theory has been borne out in practice and make recommendations to support new producers in their navigation of the uncertainty associated with the energy transition. Among the eight “new producer” countries, for which we analyzed a total of 26 contracts signed before and 25 contracts signed after discovery events (all occurring between 2001 and 2014), the evidence is mixed. Only three of the eight countries in our sample—Ghana, Mozambique and Uganda—demonstrated a clear pattern in the direction of more stringent terms in post-discovery contracts. They featured definitive steps to increase some of the obligations of contractors to the state, and no significant terms that became less stringent. Five out of eight countries did not meaningfully alter their approach to gain greater concessions from their company partners.
Topic:
Energy Policy, Oil, Governance, Gas, and Private Sector
Political Geography:
Uganda, Africa, Mozambique, and Ghana

2. Risky Bet: National Oil Companies in the Energy Transition

Author:
David Manley and Patrick Heller
Publication Date:
02-2021
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The global energy transition from fossil fuels to cleaner energy will profoundly affect the global economy. It will limit how much greenhouse gases humanity emits and hopefully avoid catastrophic global warming. This transition will, however, also have a profound effect on state-owned national oil companies (NOCs). NOCs—in which the government is the sole or the dominant shareholder—produce half of the world’s oil and gas, and invest 40 percent of the capital in the global oil and gas industry. They are also important for millions of citizens in the developing countries where many NOCs operate. This report explores the risks the energy transition brings for NOCs and governments reliant on oil revenues. With the pace of energy transition uncertain, the authors of this report offer a warning to governments and NOCs as they consider their future investment plans.
Topic:
Climate Change, Energy Policy, Oil, and Investment
Political Geography:
Global Focus

3. National Oil Companies and Energy Transition in the Middle East and North Africa

Author:
Laury Haytayan, Patrick Heller, David Manley, and Ben Potter
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
As the world looks toward an energy future that is less reliant on fossil fuels, governments in the Middle East and North Africa (MENA) region must adapt. The petroleum sector is a major employer in the region, the primary source of fiscal revenue, the dominant generator of exports and the source of energy that powers economies. With the pace of energy transition uncertain, a growing number of oil companies are revising downward their long-term assumptions about fossil fuel consumption and prices, and private capital has been progressively moving away from the sector. This transition creates opportunities for cleaner and more reliable energy for citizens in the MENA, a region rich in renewable energy potential. MENA governments and their national oil companies (NOCs) recognize the need for adaptation. Several countries have launched vision statements or reform plans aimed at diversifying NOC portfolios, increasing efficiency and reducing their exposure to market decline. This briefing derives from in-depth research and interviews on the challenges and reform plans of three MENA NOCs (Saudi Aramco, Qatar Petroleum and Algeria’s Sonatrach) and draws out implications for other NOCs in the region. The authors seek to inform the strategies of governments and NOCs on how to manage NOC portfolios and the evolution of state-NOC accountability mechanisms and hope that nongovernmental analysts and civil society organizations will use this briefing as a tool to help understand and scrutinize public reform plans.
Topic:
Energy Policy, Oil, and Natural Resources
Political Geography:
Middle East and North Africa

4. National Oil Companies and Climate Change: Insights for Advocates

Author:
Patrick Heller, Greg Muttitt, Alexandra Gillies, Paasha Mahdavi, David Manley, Valerie Marcel, Joachim Roth, Lourdes Melgar, Francisco J. Monaldi, and Angelo Picciariello
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
National oil companies are the “hidden half” of the global oil industry. The authors of this briefing write that climate and development advocates who seek to reduce fossil fuel supply and promote sustainable economies must engage with these state-owned companies, many of which are based in countries with high levels of poverty.
Topic:
Climate Change, Energy Policy, Oil, Natural Resources, and State-Owned Enterprises
Political Geography:
Global Focus

5. Sustainable Drive, Sustainable Supply: Priorities to Improve the Electric Vehicle Battery Supply Chain

Author:
Patrick Heller, Ethan Elkind, and Ted Lamm
Publication Date:
07-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The global transition from fossil fuel-powered vehicles to electric vehicles (EVs) will require hundreds of millions of batteries. The need for such massive production raises questions from the general public and critics alike about the sustainability of the battery supply chain, from mining impacts to vehicle carbon emissions. Growing demand for the mineral inputs for battery production can provide an opportunity for mineral-rich countries to generate fiscal revenues and other economic opportunities. But where extraction takes place in countries with weak governance, the benefits expected by citizens and leaders may not materialize; in some cases extraction can exacerbate corruption, human rights abuses and environmental risks. To address these questions, the Center for Law, Energy & the Environment at U.C.-Berkeley and NRGI are conducting a stakeholder-led research initiative focused on identifying strategies to improve sustainability and governance across the EV battery supply chain. CLEE and NRGI convened leaders from across the mining, battery manufacturing, automaker, and governance observer/advocate sectors, to develop policy and industry responses to human rights, governance, environmental, and other risks facing the supply chain. This report "Sustainable Drive, Sustainable Supply: Priorities to Improve the Electric Vehicle Battery Supply Chain" shares the major conclusions of this multi-stakeholder convening and accompanying outreach to experts in the field: Lack of coordinated action, accountability, and access to information across the supply chain hinder sustainability efforts Inadequate coordination and data sharing across multiple supply chain standards limit adherence Regulatory and logistical barriers inhibit battery life extension, reuse, and recycling The report recommends the following priorities as industry, government and nonprofit leaders respond to these challenges: Industry leaders, governments and civil society could strengthen mechanisms to improve data transparency and promote neutral and reliable information-sharing to level the playing field between actors across the supply chain and between governments and companies Industry leaders, governments and civil society could ensure greater application of supply chain sustainability best practices by defining and categorizing existing standards and initiatives to develop essential criteria, facilitate comparison and equivalency, and streamline adherence for each segment of the supply chain Governments and industry leaders could create new incentives for supply chain actors to participate in and adhere to existing standards and initiatives, which may include sustainability labeling and certification initiatives Industry leaders could design batteries proactively for disassembly (enabling recycling and reuse), and industry leaders and governments could collaborate to build regional infrastructure for battery recycling and transportation and create regulatory certainty for recycling
Topic:
Energy Policy, Sustainability, and Supply Chains
Political Geography:
Global Focus