EFIC, the Australian government’s export credit agency, reports that resource nationalism has become a growing issue for mining and petroleum companies working in emerging economies, as they move to exploit new supply sources.
Recent cases of governments moving to seize control of resources include Venezuela’s campaign to raise taxes and royalties on petroleum projects and to give state oil company PDVSA a majority stake in oil operations. Bolivia has nationalised its gasfields.
In Russia, the Kremlin is considering partial nationalisation of three petroleum projects, in two of which Shell and ExxonMobil have invested a total of US$25bn. It has also threatened to cancel licences of certain foreign mining companies.
EFIC chief economist, Roger Donnelly, reports in the latest EFIC Market Watch newsletter that resource nationalism is set to continue, and is spreading particularly in the Middle East and North Africa. Kuwait, Algeria, Dubai and Qatar are all moving either to harden fiscal and contract terms for international oil companies (IOCs), or to restrict access to acreage. Meanwhile, Angola has said it will join Opec, and Ecuador and Sudan are thinking of following suit.
“None of these developments are good news for IOCs. They will tilt the playing field in favour of less profit-driven national oil companies from countries like China, India and Malaysia. This will leave IOCs operating in countries like Angola facing the prospect that their production will be controlled by Opec quotas,” Donnelly says.
“So far, Australian companies have not been much affected by resource nationalism. But with many junior and major Australian companies active in the Middle East and North Africa, this is set to change.”
Other examples of resource nationalism include the Uzbekistan and Kyrgyzstan governments “de-facto expropriations of western mining companies by imposing back taxes and initiating bankruptcy proceedings. Iran’s government was elected on a platform that included opposition to foreign investment in oil and gas. A host of other countries have also moved to harden the fiscal and contract terms facing foreign investors in a bid to gain a greater share of booming commodity revenues.