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Begin New Search Topic Contracts Publishing Institution Natural Resource Governance Institute Publication Year within 3 Years

1. Equitable Sharing of Mining Profits: The Best Deal for Tanzania?

Author:
Thomas Scurfield
Publication Date:
09-2023
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Tanzania’s unique approach to mining taxation, described as an equitable sharing of economic benefits between government and mining company according to a negotiated split, could leave the country shortchanged. Tanzanian citizens have access to the terms of only one profit-sharing deal, a 50-50 framework agreement for Barrick’s gold mines. The rest remain unpublished, despite laws that require the government to disclose deal terms. The Barrick deal predicates government revenues more heavily on mine profitability than a more typical regime, making these revenues more uncertain. This structure also increases the risk that companies may seek to avoid tax payments. Negotiating the split on a project-by-project basis, without any legal guardrails on the approach, increases the risks of corruption and unfavorable deal terms. The Tanzanian government could eliminate these risks by borrowing provisions from other countries that also require a specific government share of mine profits but take a different approach. However, unless the government has identified benefits from its current sharing mechanism that a more typical regime does not offer, it should not pursue a sharing mechanism and instead focus on improving the underlying regime, such as increasing its flexibility with regards to profits and reducing tax avoidance risks. To gain more trust from citizens, Tanzania’s government should explain how the mechanism works in existing deals.
Topic:
Government, Natural Resources, Tax Systems, Mining, Transparency, Contracts, and Energy Transition
Political Geography:
Africa and Tanzania

2. 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