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

Author:
Patrick Heller, Perrine Toledano, David Mihalyi, and Tehtena Mebratu-Tsegaye
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
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.
Topic:
Gas, Transparency, Contracts, Monitoring, Energy, and Green Transition
Political Geography:
Global Focus

2. No Time to Waste: Governing Cobalt Amid the Energy Transition

Author:
David Manley, Patrick Heller, and William Davis
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Cobalt is critical. Along with other critical minerals, cobalt has important economic uses and currently few viable substitutes, yet its supply faces a high risk of disruption. Manufacturers of batteries for electric vehicles (EVs) want the metal. EV sales—and likewise, cobalt demand— could grow a lot more. Yet, cobalt may not remain critical for decades to come. EV buyers, battery manufacturers and miners fear the high prices and disrupted supply, as well as human right abuses, environmental destruction, corruption, and political risk. As with other critical minerals, industries are seeking to use less of the metal. The time available for the Democratic Republic of Congo (DRC) and other countries to benefit from mining the metal may be short-lived. Good governance is therefore important both for people in mining countries and for humanity to meet the Paris Climate Agreement. This report aims to help governments and their advisors in mining countries, such as the DRC, derive value from mining cobalt, develop industry along the battery-supply chains and address a host of problems from human rights abuses to corruption. The report is also for policy-makers working to ensure that the world delivers enough cobalt in time for the global energy transition.
Topic:
Natural Resources, Energy, Green Transition, and Cobalt
Political Geography:
Africa and Democratic Republic of Congo

3. Triple Win: How Mining Can Benefit Africa’s Citizens, Their Environment and the Energy Transition

Author:
Papa Daouda Diene, David Manley, Silas Olan'g, and Thomas Scurfield
Publication Date:
11-2022
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Africa’s mineral wealth is essential for the energy transition and for the hundreds of millions of people currently living in poverty in African mining countries. Whether and how governments and companies move to further extract this mineral wealth is not only economically and environmentally important for Africa, but also for the vital importance of protecting the world’s rapidly diminishing forests. The world therefore needs a mining triple win: policies that can benefit Africa’s citizens, their environment, and the energy transition. These policies need to work for all if they are to work for any of them. But mining in Africa has been riddled with injustice. Humanity cannot afford to repeat the mistakes that have beset Africa’s mining in the past. To achieve a triple win, this time must be different. There are a whole host of policies available, and many ideas from experts. NRGI has brought these together and considered how they may work to truly achieve a triple win.
Topic:
Environment, Poverty, Natural Resources, Mining, Minerals, Energy, and Green Transition
Political Geography:
Africa

4. Prospects for Mexico’s Lithium Sector After Reforms to the Mining Law

Author:
Fernanda Ballesteros
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The Mining Law reform establishes that lithium exploration, mining and use are activities for which the state is responsible, without the option to grant concessions, based on the argument that they are activities in the public interest. The Mining Law reform leads to the existence of a dual legal system for lithium. On the one hand, the concessions already granted are regulated and monitored by the Ministry of the Economy. On the other hand, exploration and mining that takes place after the reform will be carried out by the state through a state-owned company. The objectives and responsibilities of the state within this dual system are unclear. For the mining and processing of lithium to be an opportunity that translates into benefits for Mexican people, clear, consistent and credible policies are needed. There are challenges in terms of governance, both for the special system created and the general concessions system. At NRGI, we have identified three aspects of governance we believe require analysis: (1) failures in governance of the general system; (2) governance of state-owned companies; and (3) supply chains and value generation.
Topic:
Natural Resources, Reform, Mining, Lithium, Energy, and Green Transition
Political Geography:
North America and Mexico