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Begin New Search Author David Mihalyi Publication Year within 5 Years

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. A Race to the Bottom and Back to the Top: Taxing Oil and Gas During and After the Pandemic

Author:
David Manley, David Mihalyi, and Colin Fleming
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Earlier this year as people around the world responded to the coronavirus pandemic, their demand for oil tumbled. At the same time, OPEC and Russia initially failed to agree to coordinate supply cuts. Consequently, the price of a barrel of Brent crude oil fell from $60 in December 2019 to $20 in April 2020. As of this publication, the price is $43. If the price stays low, and if oil executives expect the price to remain low, companies may lobby governments to reduce taxes and other costly regulations. Payments to governments are often larger than costs for a company, so there is pressure on governments to reduce taxes to keep projects viable. This briefing considers the following key questions: Where will the oil price go next? What is the impact on currently operating projects, undeveloped projects, and those that are yet to be discovered? How should governments respond in changing oil and gas taxes? Will governments try to “race to the bottom,” but then lose a race back to the top? Key messages: There’s no certainty over future prices. Some rise is likely in the next few years, even if an energy transition results in a structural decline in the oil price in the longer-term. Governments must consider this uncertainty and probable rise when taxing oil and gas. Tax breaks on most currently operating projects are likely a waste of public money. Some governments may be pressured into reducing tax on projects awaiting development. But they must identify which projects would become viable with lower taxes, and which do not need a tax break. If in doubt, governments should consider whether a project that needs a tax incentive really will provide value for the country. For most countries, relative to total oil and gas produced, the production from projects that could be delayed or cancelled is small. But not so for the “new producer” countries like Senegal and Guyana. Changing taxes to make a country more attractive has the most impact before companies have invested – e.g., in attracting investment in licensing rounds. But setting low taxes now could force a government to raise taxes later if prices rise again. If a tax break is unavoidable, governments could use a “sunset clause” to limit the duration of the tax break. Ideally, governments should set progressive tax regimes that respond to changes in profit. But as many taxing authorities struggle to measure profit, governments could set simpler tax regimes based on sales revenue or prices – but must prepare to change tax rates in the future, and be prepared for the repercussion for a government’s credibility with investors. Governments should disclose contract terms detailing tax changes, tax exemptions, incentives and estimated break-even prices of projects to help government auditors, local think tanks, and the public check and support tax policy decisions.
Topic:
Oil, Natural Resources, Gas, Tax Systems, Commodities, Coronavirus, and Revenue Management
Political Geography:
Global Focus