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1. Resource-Backed Loans: Pitfalls and Potentialloan

Author:
David Mihalyi, Aisha Adam, and Jyhjong Hwang
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Through “resource-backed loans” (RBLs) countries access finance in exchange for, or collateralized by, future streams of income from their natural resource wealth. The authors of this report reviewed countries’ past experiences with RBLs across sub-Saharan Africa and Latin America from 2004 to 2018. They identify risks and opportunities RBLs pose and provide recommendations for countries considering taking RBLs in the future. The researchers identified 52 RBLs, 30 of which were taken by countries in in sub-Saharan Africa and 22 in Latin America. They are distributed across 14 countries in the two regions. Thirty-eight were lent by Chinese policy banks, seven are from commodity traders, four are from other Chinese state-owned enterprises, one is from Korea Exim, one is from Nigeria and one is from Russia's Rosneft. Forty-three of the loans are backed by oil, six by various minerals, two by cocoa, and one by tobacco. The total loan amount represented in the dataset is $164 billion, of which $66 billion went to Africa and $98 billion to Latin America.
Topic:
Natural Resources, Finance, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa, Sudan, Brazil, South America, Venezuela, Nigeria, Angola, Ghana, Ecuador, Guinea, South Sudan, and Congo

2. Coronavirus, Oil and Latin America: The Urgency of Economic Diversification and Energy Transition

Author:
Carlos Monge
Publication Date:
08-2020
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Key messages: Companies are demanding temporary bailouts, requesting that governments subsidize them with breakeven prices over sale prices, and allow them to postpone tax and royalty payments and agreed investments. Such actions may be necessary to preserve jobs and ensure domestic energy supplies. Governments are considering lowering social and environmental standards, fast tracking procedures and providing long-term subsidies to support ongoing projects and to attract new investments. For an industry already facing its twilight, these actions are not justified. Governments must urgently move ahead with economic diversification and energy transitions to ensure the availability of jobs, energy and fiscal incomes that the oil industry currently provides.
Topic:
Energy Policy, Oil, Diversification, Renewable Energy, Coronavirus, and COVID-19
Political Geography:
Colombia, South America, Central America, Mexico, and Peru

3. Big Sellers: Exploring the Scale and Risk of National Oil Company Sales

Author:
Alexander Malden and Joseph Williams
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
In many oil-producing countries, the national oil company (NOC) sells vast quantities of the state’s oil and gas. The sale of a state’s non-renewable natural resource endowment is often a revenue stream that can have a significant impact on a country’s national budget and the state’s ability to fulfil its national development priorities. It is important therefore that citizens are able to assess the performance of their NOCs, who they sell state assets to, under what terms they sell them and what they do with the resulting sales revenue. In this briefing the authors use data from NRGI’s new National Oil Company database to examine the governance and corruption risks posed by NOC’s oil sales activities. Using this newly compiled data including over $1.5 trillion in oil sales from 39 NOCs in 35 countries, they found that: The sale of oil is an economically significant activity for many countries. The oil, gas and product sales of 35 countries’ national oil companies (NOCs) to commodity traders and other buyers generated over $1.5 trillion in 2016, equaling 22 percent of these countries’ total government revenues. Most NOCs only pass on a small percentage of their oil sales revenue to government treasuries. NOCs from the 30 countries for which data are available transferred just 22 percent of their revenue to the country’s national treasury. This results in NOCs managing huge public revenues in environments that lack basic transparency, accountability and good governance practices. Seventy-nine percent of the identifiable oil sales, or $1.2 trillion, occurred in countries with “weak” or “poor” scores in the 2017 Resource Governance Index. While oil sales disclosure has improved in countries which are part of the Extractive Industries Transparency Initiative (EITI), non-EITI countries generated over 90 percent of the identifiable NOC oil sales revenue, or $1.4 trillion. This briefing also presents case studies from the Republic of Congo, Nigeria and Ecuador of ways oil sales data, where available, has been used to scrutinize NOCs’ commercial performance and to hold them accountable for the revenue generated when selling the state’s oil.
Topic:
Civil Society, Government, Oil, and Business
Political Geography:
Africa, South America, Nigeria, Ecuador, and Democratic Republic of Congo

4. Lessons for Generating Government Revenue for New and Prospective Liquefied Natural Gas Producers

Author:
Thomas Lassourd, Amir Shafaie, and Thomas Scurfield
Publication Date:
12-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The market for liquefied natural gas (LNG) is changing fast, with increasing demand, new sources of supply, and a growing spot market. Over the last decade (2008 to 2018), LNG prices in the three main markets of North America, Western Europe and East Asia have diverged significantly at times, creating arbitrage opportunities for sellers. This briefing presents two case studies of developing countries that have faced challenges in securing public revenue from their natural gas industries. Trinidad and Tobago and Peru offer two examples of developing countries that faced challenges in maximizing government revenue from LNG sales during that time. Although LNG markets are evolving, these examples offer lessons for new and prospective LNG producers, especially in sub-Saharan Africa. A key area (and the focus of this briefing) is the valuation of LNG sales and the corresponding impact on government revenues. Governments should pay close attention to LNG project structure and the long-term LNG sale and purchase agreements between LNG producers and offtakers, especially when they are related companies. Governments should push for these agreements to maximize the price flowing back to the LNG plant and the upstream producer and should favor project structures that facilitate this. In particular, the practice of diverting LNG cargos to more lucrative export markets than the ones initially designated in offtake agreements should be regulated and monitored by governments to balance the financial incentives to LNG sellers with the interests of LNG-exporting countries. This will become increasingly important as the market becomes more liquid and sellers have more options.
Topic:
Government, Gas, Tax Systems, Commodities, and Revenue Management
Political Geography:
South America, Caribbean, Peru, and Trinidad and Tobago