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1. Tangled Web: The Role of Oil, Gas and Mining in Funding Regional Governments in Indonesia

Author:
David Manley, Rani Febrianti, and Hari Subhash
Publication Date:
03-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Indonesia’s system of funding provincial, district and city governments is one of the most complex in the world, and has undergone substantial expansion over the last two decades. While the system allows thousands of authorities to function, it is failing in three respects: inequality of funding between regions persists, funding for some governments is unpredictable and volatile and some oil- and gas-rich regions have not sufficiently prepared for a possible future with much lower revenues. Indonesia’s planning ministry, Bappenas, should investigate these issues further focusing particularly on clarifying policy objectives, ensuring more reliable funding, supporting oil- and gas-rich regions in becoming more resilient to a long-term decline in prices and clarifying the published rules around the funding system.
Topic:
Civil Society, Government, Oil, Gas, Media, Mining, and Political Parties
Political Geography:
Indonesia and Southeast Asia

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. 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

4. The National Oil Company Database

Author:
Natural Resource Governance Institute
Publication Date:
04-2019
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The National Oil Company Database helps fill a significant gap in knowledge of the global economy. National oil companies (NOCs) produce approximately 55 percent of the world’s oil and gas, pumping out an estimated 85 million barrels of oil equivalent per day. The World Bank has estimated that they control up to 90 percent of global oil and gas reserves, thereby serving as gatekeepers for international oil companies’ access to hydrocarbons. Within their home countries, NOCs influence the degree to which billions of people benefit—or suffer—as a result of their countries’ hydrocarbon wealth. Many of these companies manage multi-billion-dollar portfolios of public assets, execute complex projects across their territories and at sea, employ citizens in the tens or hundreds of thousands, and perform a range of public services from providing energy to building infrastructure.
Topic:
Government, Oil, Economy, and Database
Political Geography:
Global Focus

5. Beyond Revenues: Measuring and Valuing Environmental and Social Impacts in Extractive Sector Governance

Author:
Nicola Woodroffe and Tim Grice
Publication Date:
09-2019
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Oil, gas and mining projects can generate substantial revenues for host countries. At the same time, extractive activities generate a range of other positive and negative economic, environmental, social, political, institutional and cultural impacts. Host countries must weigh the economic benefits of extractive projects against their environmental and social impacts. However, environmental and social impacts are often assessed in separate processes and by separate institutions from those assessing financial revenues and the modeling, measuring and reporting of these impacts is rarely integrated with financial impacts.
Topic:
Environment, Oil, Natural Resources, Governance, Gas, and Mining
Political Geography:
Global Focus

6. Assessing Tunisia’s Upstream Petroleum Fiscal Regime

Author:
Thomas Lassourd and Carole Nakhle
Publication Date:
09-2019
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The authors of this paper examine Tunisia’s upstream petroleum fiscal regime, in consideration of the government’s stated policy priority of reversing a decade-long decline in reserves and production. Although the country’s “Jasmine Revolution” led to improved civic rights and the country is a strong regional performer on the Natural Resource Governance Institute’s (NRGI) Resource Governance Index, foreign investment has dropped since 2011, in part because of regulatory ambiguity and political instability. Tunisia’s proven oil and gas reserves are very small, especially by regional standards. With limited geological prospects, the existing context is not conducive to oil and gas investment, especially for exploration. Tunisia offers different contractual arrangements and fiscal regimes: a concession-based system, which often involves joint ventures between the state-owned company, ETAP, and international oil companies and production sharing contracts. This paper analyses the various arrangements and fiscal instruments, focusing primarily on production sharing contracts, which have become the dominant contractual forms for foreign investors and do not require any public (ETAP) capital investment. The government of Tunisia publicly discloses all contracts and concessions.
Topic:
Oil, Natural Resources, Gas, and Fiscal Policy
Political Geography:
North Africa and Tunisia

7. Mongolia's Missing Oil, Gas and Mining Contracts

Author:
Robert Pitman
Publication Date:
02-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Many of the most important contracts for publicly owned oil, gas and minerals in Mongolia remain secret, despite government promises to make contracts public. A review of publicly available contracts in Mongolia suggests that contracts are unlikely to contain the kinds of information about a project that are commercially sensitive. Likewise, evidence suggests that there is no reason to think that confidentiality clauses prevent disclosure of contracts. Contracting regimes in Mongolia are complex and therefore in many instances, it will be necessary to publish several contracts and associated documents for each project. There are five steps that the government can take to make contracts public: 1) explain the contracting landscape, 2) define the scope of disclosure, 3) establish a contract disclosure rule, 4) make contracts accessible, and 5) support contract use.
Topic:
Civil Society, Government, Oil, Gas, Journalism, Tax Systems, Mining, Private Sector, and Contracts
Political Geography:
Mongolia and Asia

8. 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

9. 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

10. Financing Options for the Ugandan National Oil Company

Author:
Thomas Lassourd
Publication Date:
09-2015
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
This briefing note is an effort to help frame the main tradeoffs and assess four potential funding models for the newly created national oil company of Uganda. It is based on NRGI’s international experience and understanding of the local context. Uganda’s national oil company will have a critical role. It is expected to professionally manage all aspects of state participation in the sector and act as a center of expertise for the government. It is also expected to play a strong role as a minority equity partner in the USD 4.3 billion Hoima refinery project and potentially in a USD 4 billion export pipeline. Under all possible funding options, strong audit and reporting processes should be required, as well as parliamentary oversight. The chosen funding model will also need to balance the needs of the national oil company with national development needs in Uganda. Funding model options can be adapted to meet Uganda’s unique situation. NRGI is at the disposal of Uganda’s government and parliament to discuss these models.
Topic:
Development, Energy Policy, Oil, Natural Resources, and Governance
Political Geography:
Uganda and Africa