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21. Managing Expectations About Tanzania’s Uncertain Gas Revenues

Author:
Thomas Scurfield and David Mihalyi
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
With negotiations between the Tanzanian government and a consortium of companies for a game-changing liquefied natural gas (LNG) project continuing, a decision on whether the project will proceed is still some years away. In this brief, the authors update a previous analysis of the possible outcomes for the LNG project and its potential impact on public financial management. This update accounts for new information and changes in company planning.
Topic:
Sovereign Wealth Funds, Gas, Legislation, Commodities, and Revenue Management
Political Geography:
Africa and Tanzania

22. How Tanzania Can Secure a Good Deal for its Offshore Gas

Author:
Thomas Scurfield and David Manley
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The Tanzanian government and a consortium of companies are negotiating the regulatory terms for a game-changing liquefied natural gas (LNG) project. In this brief, the authors update a previous analysis of some of the key decisions that will be made in the negotiation and their potential impact on whether the LNG project proceeds and the levels of revenues that the project could generate for the government. This update accounts for new information and changes in company planning. There is a reasonable chance that foreign investment in the LNG project will not happen under current conditions. NRGI’s economic model and specific assumptions of the project suggest that a long-term LNG price of USD 11 per mmBtu is needed for investors to earn the return they usually require from LNG projects. Current forecasts by the IMF and World Bank are $7-8 per mmBtu. As the authors discuss in the brief, the chances of investment will shrink further if, during the negotiations, the government increases taxes and requires companies to share a greater portion of the gas with Tanzania’s home market. Government officials could wait and hope that conditions improve, and perhaps then impose stricter terms. However, this would delay the point at which the country would start generating benefits from the project. If officials want to accelerate development, without harming long-term gains for the country, they could: adopt a more progressive tax regime, avoid raising the share of gas to be sold to the home market, and establish a legal framework that both company managers and future generations of Tanzanians will trust.
Topic:
Gas, Regulation, Legislation, Tax Systems, Commodities, and State-Owned Enterprises
Political Geography:
Africa and Tanzania

23. The Case for Publishing Indonesian Mining Agreements

Author:
Robert Pitman and Rani Febrianti
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The disclosure of contracts and licenses in the extractive industries is a rapidly growing global norm. There are now over 44 countries that have disclosed at least some extractive industry contracts or licenses, and the new EITI Standard makes it a requirement for all implementing countries to publish contracts and licenses that are granted, entered into or amended after 1 January 2021. This reflects a growing recognition among governments, the private sector and civil society organizations that disclosure of these documents helps to improve governance of natural resources and contributes to a more stable investment climate. In Indonesia, long-standing advocacy by civil society has resulted in notable advances. In 2011, a decision by the Central Information Commission declared that mining contracts are open documents and a 2016 decision by the Supreme Court declared that IUP licenses are also open documents. Together with a new EITI requirement for the publication of contracts and licenses, these decisions provide the groundwork for the government of Indonesia to develop disclosure practices that will position the country at the forefront of a global trend. This brief explains why Indonesia should proactively publish these important documents, gives an overview of the documents that it should make public, and suggests a path for making publication a reality.
Topic:
Treaties and Agreements, Mining, and Transparency
Political Geography:
Indonesia and Southeast Asia

24. Considerations for Taxing Myanmar’s Large-scale Mining Companies

Author:
David Manley, Sebastian Sahla, Ko Ko Lwin, and Khin Saw Htay
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Despite geological potential, Myanmar's mining sector has attracted few large-scale companies to date and the sector generates little government revenue. The authors of this briefing present the challenges the Myanmar government has faced in designing an effective mining tax regime. They suggest three ways in which the government could attract greater investment and allow the people of Myanmar to maximize benefits from the potentially significant mineral wealth of their country. The briefing is informed by the Natural Resource Governance Institute’s engagement with Myanmar’s Ministry of Natural Resources and Environmental Conservation (MONREC), helping the ministry implement strategic reforms.
Topic:
Natural Resources, Tax Systems, Mining, Private Sector, and Revenue Management
Political Geography:
Southeast Asia and Myanmar

25. 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

26. Indonesia’s Oil and Gas Revenues: Using Payments to Governments Data for Accountability

Author:
Alexander Malden and Fikri Zaki Muhammadi
Publication Date:
12-2019
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Under mandatory disclosure laws in the European Union, Canada and Norway, companies listed or incorporated in these countries must disclose the payments they make to government entities for their extractive activities. Under these laws, seventeen international oil and gas companies have reported over $15 billion in payments to Indonesian government entities since 2014. This report explores some of the ways this timely source of payment data can be used as an accountability tool. Civil society organizations, media outlets, government officials, parties to Indonesia’s Extractive Industries Transparency Initiative (EITI) and oversight actors can use payment data in combination with other data sources to: Verify the size and recipient of oil and gas project signature bonuses Estimate and verify the revenue that local and regional government entities should receive from an oil and gas project that operates in their region Estimate and verify the government’s share of production from a project under the new gross split production-sharing contract (PSC) model
Topic:
Government, Oil, Gas, Accountability, and Data
Political Geography:
Indonesia and Southeast Asia

27. Fiscal Sustainability in Mongolia in 2018

Author:
Tsolmon Baatarzorig, Nyambaatar Batbayar, and Ragchaasuren Galindev
Publication Date:
01-2018
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
In 2017, Mongolia received an extensive bailout package from the International Monetary Fund (IMF) under its Extended Fund Facility (EFF). Since taking the IMF loan, Mongolia has had good economic luck. A record high year of coal production combined with a surge in commodity prices has left the country with a budget revenue windfall. This has allowed gross domestic product (GDP) to grow by 5.3 percent, which was higher than the forecasted 3 percent. Mongolia has reduced its fiscal deficit and public debt is declining. The country’s credit rating has improved and it has managed to repay two large foreign currency-denominated bonds. The government has also recently created a Fiscal Stability Council to improve budget oversight.
Topic:
International Affairs and Natural Resources
Political Geography:
Mongolia and Global Focus

28. The Fiscal Regime for Uganda’s Mining Sector: A Need for Reform?

Author:
Thomas Scurfield
Publication Date:
12-2018
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
There is growing discussion within Uganda about the need to increase the public benefits from the country’s mining sector. The government has declared its intention to enact a new fiscal regime for the sector. This has coincided with growing optimism that the country will resume large-scale mining after decades of only artisanal and small-scale activity. However, for Uganda’s potential to be realized, significant investment in exploration and development is necessary. This brief is a response to a request by the Ministry of Finance, Planning and Economic Development to review the prevailing fiscal regime and inform the government’s approach to revising it. The design of the fiscal regime will likely have a significant effect on the ability of the country to attract the investment it needs. A critical element will be the regime’s stability. Frequent changes could reduce investors’ confidence that they will make a sufficient return on their investments, and thus deter investment. To reduce pressure from companies, the government or other stakeholders for future changes, Uganda will need to impose a tax burden that is neither too high nor too low.
Topic:
Natural Resources
Political Geography:
Uganda

29. Tip-Toeing Toward Transparency: Jade and Gemstone Sector Disclosures in Myanmar

Author:
Paul Shortell
Publication Date:
12-2018
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Myanmar exports more than 90 percent of global jade supply and is also a leading source of high-quality rubies, sapphires and other varieties of colored gemstones. Mining of these precious stones generates billions of dollars annually, making it one of the country’s most significant sectors. Yet the jade and gemstone industry has remained largely shrouded in secrecy, with most profits flowing to armed groups and political elites rather than supporting broad-based economic and social development.1 The Extractive Industries Transparency Initiative (EITI) is a global standard designed to “promote the open and accountable management of oil, gas and mineral resources.”2 Since Myanmar became a candidate country in 2014, the EITI process has helped to shine light on the previously opaque jade and gemstone sector. Myanmar EITI released its first reconciliation report, covering fiscal year
Topic:
International Affairs and Natural Resources
Political Geography:
Global Focus

30. Ukraine Legislates Extractives Sector Transparency and Accountability

Author:
Natural Resource Governance Institute
Publication Date:
09-2018
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
In September 2018, Ukraine passed milestone legislation setting out principles for the collection, disclosure and dissemination of extractive industry data. The law mandates project-level payments and beneficial ownership data disclosure. It also mandates the release of “material” elements of extractive industry-related contracts. The law was bolstered by a government-approved reform action plan, incorporating measures proposed by a Ukrainian civil society organization with NRGI support. DiXi Group contributed to data on Ukraine in the Resource Governance Index, and the organization’s experience informed an important public debate in the parliament’s energy committee. This is the beginning of an era of transparency and accountability in Ukraine. NRGI will continue to provide assistance so that the laws and roadmap are implemented.
Topic:
International Affairs and Natural Resources
Political Geography:
Ukraine