CHAPTER

 3  –  www.eisourcebook.org  
The  Extractives  Industries  
 

Investment  in  the  EI  sectors  (oil,  gas  and  mining)  has  features  that  present  particular  challenges  
to  policy  makers.  They  arise  from  the  outset,  at  the  policy  design  and  legal  framework  stage,  
and   are   evident   in   subsequent   stages   to   the   management   and   allocation   of   revenues   –   and  
ultimately,   the   sustainable   development   of   these   resources.   Some,   perhaps   many,   of   these  
features  are  common  to  all  three  sectors,  such  as  the  extraction  of  resources  from  under  the  
ground  or  the  sea-­‐bed1,  their  ultimate  exhaustibility,  or  their  exposure  to  a  high  degree  of  price  
volatility.   Others   are   unique   to   each   sector.   For   example,   oil   and   gas   are   very   alike   at   the  
upstream   stage   (exploration   and   production),   but   natural   gas   takes   on   distinct   ‘network’  
characteristics  in  its  transportation  and  distribution  phases.  From  a  commercial  point  of  view,  
oil   is   riskier   to   find   than   the   mineral   deposits   typically   sought   by   mining   companies   but   once  
found  in  commercial  quantities,  that  risk  is  reduced  relative  to  the  commercial  risk  of  producing  
mining  deposits  (although  that  does  not  apply  to  the  environmental  risk).  Gas  is  different  again,  
with   its   risk   profile   requiring   a   complex,   highly   expensive   infrastructure   and   a   detailed  
contractual   regime   to   support   it.   Effective   management   in   the   public   interest   requires  
recognition  of  both  the  common  and  the  unique  features  of  EI  in  the  design  of  sector  policies  
and  institutions.      

This  Chapter  critically  examines  the  fundamental  characteristics  of  EI  sector  investment,  from  a  
perspective   that   gives   priority   to   public   policy   making   and   the   design   of   appropriate  
institutional   arrangements   in   the   public   sector.   It   identifies   the   common   features,   the   key  
differences   between   EI   sectors   and   the   investment   dynamics.   Its   focus   is   on   the   relationships  
that   governments   have   or   seek   to   have   with   investors   in   the   EI   sector   rather   than   on   how  
governments  themselves  can  respond  to  the  challenges  and  opportunities  of  natural  resource-­‐
led   development   (the   subject   of   Chapter   2).   Some   features   of   this   investor-­‐state   relationship  
are   relatively   constant   over   time,   while   others   are   more   dynamic,   such   as   industry   structure,  
showing  significant  changes  and  greater  complexity  in  recent  years,  not  least  due  to  companies  
from   emerging   markets   making   strategic   investments   aimed   at   securing   future   supplies   of  
energy  and  minerals.    
1
 In  this  sense,  the  ‘extractives’  industries  by  definition  stand  in  contrast  to  the  renewable  energy  industries  which  typically  rely  
upon  natural  resources  located  above  the  surface  (wind,  solar  power,  for  example).  

1  
There   are   many   aspects   of   this   investor-­‐state   dynamism   that   present   challenges   to   policy  
advisers  and  decision  makers  in  resource-­‐rich  states.  For  example:    

What  kind  of  company  or  pattern  of  companies  is  best  suited  to  achieve  a  country’s  policy  on  
extractives  and  development  generally?  

The   choice   is   wide.   Alongside   long   established   companies   from   the   OECD   countries   there   are  
state   owned   enterprises   (SOEs)   from   Malaysia,   South   Korea   and   the   Middle   East,   and   new  
players  from  China,  Russia,  Brazil  and  India,  all  making  significant  impacts.  Significant  diversity  
of  ownership  and  financing  structures  has  emerged  from  the  resulting  south-­‐south  pattern  of  
investment,   with   the   use   of   resource-­‐for-­‐infrastructure   deals   being   one   example   of   this.  
Moreover,   the   growing   number   of   so-­‐called   junior   or   mid-­‐cap   companies   as   investors   means  
that   a   focus   by   policy   makers   and   their   advisers   on   the   ‘super-­‐major’   companies   that   long  
dominated  the  EI  sector  is  now  inappropriate.  This  diversity  is  also  evident  in  the  destinations  
of  investment,  the  points  along  the  exploration  to  extraction  cycle  and  across  key  energy  and  
other   minerals   commodities2.   A   further   element   of   complexity   in   investor-­‐state   relations   is  
presented  by  the  international  character  of  investment  in  the  oil,  gas  and  mining  sectors.  More  
than   ever   before,   there   are   opportunities   for   investors   to   structure   their   operations,   on-­‐   and  
offshore,  to  take  advantage  of  this  context.  As  a  result,  national  tax  and  regulatory  authorities  
face  greater  challenges  in  regime  design,  in  monitoring  and  enforcement.    

   

2
 See  background  paper  to  Rents  to  Riches  book  by  Kaiser  and  Vinuela:  Rents  for  the  Future?  (author’s  copy),  p.  3.  

2  
 CHAPTER  3  –  www.eisourcebook.org  
3.1     Common  Features  

Long,   Risky,   and   Costly   Exploration   and   Development   Periods   Each   of   the   EI   sectors   is  
characterized  to  a  greater  or  lesser  degree  by  long,  risky  and,  in  the  case  of  oil  and  gas,  costly  
and   exceptionally   capital-­‐intensive   exploration   and   development   periods1 .   For   a   state   that  
wishes   to   go   it   alone   in   the   EI   sector,   these   features   mandate   significant   financial   resources,  
and   an   economy   with   sufficient   diversity   to   allay   concerns   about   EI   sector   investment   risk.2  For  
states   that,   more   typically,   choose   to   attract   and   rely   upon   international   investment,   these  
features   underscore   the   importance   of   having   in   place   a   legal,   contractual,   and   fiscal   regime  
that  investors  are  able  to  understand  and  trust.  These  states  must  also  satisfy  a  political  track  
record   that   can   provide   investors   with   reasonable   assurances   against   adverse   changes   in   terms  
if  a  major  discovery  has  been  made  and/or  exploitation  is  underway  (see  Chapter  4).    

The   challenge   here   is   that   the   conditions   and   assumptions   that   exist   at   the   beginning   of   a  
project,  at  the  time  when  laws  are  to  be  drafted  and  contracts  awarded,  are  almost  certain  to  
change  in  the  course  of  the  length  of  the  project  investment.  When  they  are  made,  there  will  
usually   be   great   uncertainty   about   the   sector’s   potential,   based   on   what   is   known   about   the  
geology   at   the   time   of   exploration   and   also   about   the   economics,   markets,   risks   and   politics.  
The  incentive  for  a  state  to  revisit  the  terms  of  the  initial  bargain  struck  is  increased  by  the  shift  
in   bargaining   power   that   occurs   in   the   event   of   a   commercial   discovery   and   a   substantial  
investment  by  the  foreign  investor.  

Sophisticated  Management  and  Specialized  Technology   A   second   common   feature   is   the  

dependence  of  the  EI  sectors  on  sophisticated  management  and  specialized  technology3.  This  
dependence   has   a   bearing   on   the   development   of   host   state   institutional   capacity.   States  
developing   their   EI   sector   must   have   sufficient   institutional   capacity   to   adequately   oversee  
sector   operations,   but   also   for   adopting   the   competitive   licensing,   contractual,   and   fiscal  
regimes  that  are  required  to  attract  needed  skills  and  technology  (see  Chapter   5   and  Chapter  
7).  

1
 For  large  mining  projects,  this  distinction  will  be  less  apparent.  
2
 See   Boadway,   R.,   and   Keen,   M.   (2010).  Theoretical   Perspectives   on   Resource   Taxation   Design.   In:    Daniel,   P.,   Keen,   M.   and  
McPherson,  C.  (eds.).  The  Taxation  of  Petroleum  and  Minerals:  Principles,  Problems,  and  Practice.  London:  Routledge.  
3
 This  clearly  does  not  include  the  ASM  sector  but  it  is  nonetheless  an  integral  part  of  EI  generally.  

1  
Looking  beyond  the  short  term,  the  challenge  here  lies  in  finding  ways  of  enabling  a  transfer  of  
expertise   and   sourcing   of   business   to   local   firms   so   as   to   ensure   a   long-­‐term   benefit   to   the  
domestic  economy.  

Asymmetric  Access  to  Information   Partly   due   to   the   complex   management   skills   and  
technology  that  characterize  the  EI  sectors,  a  third  feature  common  to  EI  sectors  in  developing  
states  is  the  informational  disadvantage  that  governments  have  vis-­‐à-­‐vis  international  investors  
and   operators.4  The   government   is   likely   to   be   better   informed   as   to   its   own   future   fiscal  
intentions   but   the   private   investor   undertaking   exploring   and   development   will   probably   be  
better   informed   on   technical   and   commercial   aspects   of   a   project.   This   has   important  
implications   for   the   design   of   license   or   contract   award   procedures,   fiscal   design,   and   fiscal  
administration  as  well  as  the  engagement  of  outside  technical  assistance.  It  can  also  be  the  root  
of  subsequent  dissatisfaction  by  a  government  about  the  terms  negotiated  with  investors  by  its  
predecessor(s)  and  trigger  demands  for  a  review  of  those  terms.  

With   increasing   sources   of   competition   in   the   EI   sector,   and   the   role   of   national   resource  
companies,   this   is   less   of   a   problem   than   it   once   was.   This   remains   a   challenge   however   for  
many   governments   in   resource-­‐rich   economies   and   is   compounded   by   a   tendency   of   some   of  
them  to  be  overly  secretive  about  such  information  once  it  has  been  obtained.  

Price   Volatility   A   fourth   feature   common   to   both   the   petroleum   and   mining   sectors   is   the  
volatility   of   prices,   costs,   and   rents.   The   extreme   volatility   of   prices   not   only   poses  
macroeconomic   management   challenges,   but   also   raises   issues   with   respect   to   the   design   of  
fiscal  terms.    A  fundamental  policy  issue  with  which  governments  must  constantly  grapple  is  the  
question   of   who   should   bear   the   risk   of   price   and   revenue   volatility:   the   investor   or   the  
government?        

The   volatility   or   variability   of   costs   receives   much   less   attention,   but   deserves   more.   EI   costs  
vary  widely  across  time,  and  especially  across  projects,  creating  significant  issues  for  both  the  
design  of  fiscal  regimes  and  their  administration.  When  costs  soar  for  investors,  as  can  happen  
in  both  mining  and  hydrocarbons  sectors,  tensions  with  governments  are  likely  to  result  from  
the  necessary  remedial  actions.  Rents  (discussed  below)  are  also  volatile  as  a  result  of  dramatic  
fluctuations  in  price  (see  Figure  2.1  on  oil  prices  in  Chapter  2  above).  

4
 On  the  asymmetric  information  and  principal-­‐agent  problem,  see  Stiglitz,  J.  (1989).  Principal  and  Agent.  In:  Eatwell,  J.,  Milgate,  
M.,   and   Newman,   P.   (eds.).   The   New   Palgrave.   Allocation,   Information   and   Markets.   New   York:   W.   W.   Norton;   see   also  
Nutavoot,   P.   (2004).   Partnerships   in   Oil   and   Gas   Production-­‐Sharing   Contracts.   International   Journal   of   Public   Sector  
Management,  Vol.  17,  Issue  5,  pp.  431-­‐442.  

2  
The  challenge  lies  less  in  the  wide  variability  of  prices  than  in  the  difficulty  in  predicting  them.  
Most   forecasts   about   pricing   turn   out   to   be   wrong5.   And   the   consequences   can   be   severe:   apart  
from   the   impacts   of   variation   on   the   size   of   resource   rents,   long-­‐term   price   trends   can   make  
reserves   uneconomic   for   investors   to   extract,   even   if   technology   has   improved,   and   can   leave  
assets  stranded.  

Substantial   Rents   Both   the   petroleum   and   mining   sectors   are   capable   of   generating   very  
substantial   economic   rents.   By   ‘rent’   is   meant   the   excess   of   revenues   over   all   costs   of  
production,   including   those   of   discovery   and   development,   as   well   as   the   normal   return   to  
capital.   The   cost   of   extraction   can   be   significantly   less   than   the   price   that   the   resource   can  
obtain   on   the   market,   not   least   when   there   is   an   important   oligopolistic   element   in   world  
markets  as  is  the  case  with  oil  and  some  minerals.  These  rents  can  be  a  very  attractive  tax  base  
for   governments   on   both   efficiency   and   equity   grounds6.   Rent   capture   for   the   state   without  
prejudice   to   investment   requires   care   in   design   of   the   fiscal   regime,   particularly   since   rent  
revenues  can  be  highly  volatile.  By  way  of  illustration,  the  average  profit  measured  in  per  cent  
of  revenues  among  EI  companies  was  between  25-­‐30  percent  in  2006.  This  compares  with  less  
than   20   percent   for   the   pharmaceutical   industry   and   with   a   mere   five   per   cent   for   the   EI   sector  
in  20027.  

The   challenge   for   some   states   will   lie   in   the   volumes   of   resource   wealth,   which   will   strain   the  
capacity   of   the   existing   state   system,   aggravate   capacity   problems   and   create   tensions   in   its  
relations  with  investors  in  turn.        

Adverse   Environmental   and   Social   Impacts   The   EI   sectors   can   have   major   adverse  
environmental   and   social   impacts.   In   the   past,   these   issues   have   not   always   been   well-­‐  
recognized  or  addressed  by  governments,  but  good  practice  has  improved  greatly  over  the  past  
two   decades.   Avoiding   or   mitigating   these   impacts   depends   on   appropriate   legislation   or  
regulation,   enforcement   capacity,   and   fiscal   regimes   that   incentivize   good   behaviour   by   the  
investor,  while  recognizing  the  costs  involved  and  the  need  to  internalize  those  costs.  

As  more  and  more  EI  companies  sign  up  to  international  standards  or  implement  their  own  in  
these   areas,   the   challenge   for   many   governments   is   to   ensure   that   local   communities,  
indigenous  peoples  and  other  affected  citizens  are  able  to  participate  in  decisions  relating  to  the  
exploitation  of  the  resource  and  benefit  from  the  development  of  the  resource.  

5
 IMF  (2012)  10.  
6
 IMF  (2012)  10.  
7
 Ericsson,  M.,  Mining  Industry  Corporate  Actors  Analysis  (2012),  p.  1.  

3  
Resource  Exhaustion  By  their  nature,  oil,  gas,  and  mining  resources  are  non-­‐renewable8.  They  
will   eventually   be   exhausted.   This   critical   feature   distinguishes   these   industries   from   most,  
perhaps  all  others,  and  presents  policy  makers  with  a  number  of  important  issues,  ranging  from  
decisions  on  optimal  rates  of  exploration,  development,  and  exploitation  (through  fiscal  regime  
design)   to   appropriate   frameworks   for   macroeconomic   planning.   It   can   act   positively   to  
encourage  fiscal  discipline  and  long-­‐term  planning  about  how  much  of  the  resource  wealth  to  
consume  and  how  much  to  save9.      

The  challenge  for  governments  is  rather  to  take  the  finiteness  of  presently  identified  resources  
into  account  in  their  domestic  planning  and  in  their  dealings  with  foreign  investors,  rather  than  
to  prepare  for  some  kind  of  unlikely  ‘resource  apocalypse’  when  exhaustion  occurs.      

Prominent   Political   Profile  Long  viewed  as  strategic  because  of  their  pervasive  influence  on  the  
economy  and  the  scale  of  the  revenues  they  generate,  the  petroleum  and  mining  sectors  have  
always  attracted  political  attention.  In  certain  circumstances,  this  attention  can  frustrate,  or  at  
least   increase,   the   difficulty   of   introducing   good   sector   management   practices.10  Every   effort  
should  be  made  to  minimize  this.  

Transparency  may  present  challenges  to  both  governments  and  investors  but  helps  to  diminish  
the  risk  of  rumour  and  speculation  among  citizens  about  resource  wealth  management.    

Enclave   Status   The  production  of  minerals  and  hydrocarbons  is  often  done  in  economic  areas  
that  are  small  in  scale,  and  geographically  limited,  with  relatively  few  linkages  to  the  rest  of  the  
economy.   For   offshore   petroleum   (both   oil   and   gas),   the   remoteness   from   centres   of  
population  is  even  more  evident.  

There  is  generally  agreement  now  that  the  challenge  for  governments  and  investors  is  to  ensure  
that  such  investments  are  designed  or  shaped  so  as  to  trigger  wider  developmental  impacts.    

Lack  of  location  mobility   In   contrast   to   many   other   economic   sectors,   the   extractives  
industries  are  less  mobile  about  location  decisions.  They  have  to  locate  where  the  resource  is,  
increasing  the  prospects  for  conflict.    

8
 Note  however  that  metals  can  be  recycled  to  reduce  the  demand  for  virgin  sites.  
9
 “The   importance   of   the   finiteness   of   petroleum   and   mineral   deposits   to   long-­‐term   economic   performance   and   commodity  
price   developments   is   questionable”:   IMF   (2012),   p.12.   Proven   oil   reserves,   for   example,   have   continued   to   rise   in   spite   of  
increasing  consumption  levels.  
10
 Van   der   Ploeg,   F.,   and   Venables,   A.   (2009).   Harnessing   Windfall   Revenues:   Optimal   Policies   for   Resource-­‐Rich   Developing  
Economies.   Conference   on   Public   Sector   Economics,   April   24-­‐29,   Munich,   Germany.   Available   at:   http://www.cesifo-­‐
group.de/portal/page/portal/CFP_CONF/CFP_CONF_2009/Conf-­‐pse09-­‐vanderPloeg/Conf-­‐pse09-­‐
papers/pse09_van%20der%20Ploeg.pdf  (last  accessed  22  May  2012).  

4  
This   feature   underlines   the   importance   of   community   and   local   engagement   if   a   project   is   to  
enjoy  a  sustainable  relationship  in  the  long  term.    

Innovation   Both  hydrocarbons  and  mining  industries  are  characterized  by  a  high  degree  of  
innovation.  In  the  former,  for  example,  the  introduction  of  hydraulic  fracturing  or  ‘fracking’  on  a  
commercial   scale   has   made   their   extraction   more   similar   to   conventional   mining.   In   copper  
mining,  the  introduction  of  new  techniques  has  increased  processing  efficiency  significantly  and  
as   a   result   production   has   continued   to   increase   in   spite   of   a   decline   in   the   quality   of   grades   of  
ore  mined.  

The   greatest   challenge   to   governments   in   producing   countries   lies   in   the   unexpected  

implications   of   innovation   for   policy   design:   for   example,   unconventional   oil   and   gas   discoveries  
on  a  large  scale  in  the  USA  have  implications  for  coal  use  in  Asia  and  for  the  prospects  for  new  
gas  discoveries  in  East  Africa.    

   

5  
 CHAPTER  3  –  www.eisourcebook.org  
3.3    EI  Sector  Dynamics  

Most  accounts  of  the  EI  sector  emphasize  the  wide  diversity  of  their  structure,  noting  size  and  
ownership  patterns1,  and  changing  trends  in  them2.  These  features  continue  to  evolve.  Research  
in  recent  years  has  explored  the  important  role  that  National  Oil  Companies  (NOCs)  now  play  in  
the  international  oil  and  gas  industry,  for  example3.  Similarly,  there  has  been  research  into  the  
role   of   new   players   in   the   global   mining   industry   and   into   junior   companies   and   their  
effectiveness,   particularly   at   the   exploration   stage,   where   they   are   assumed   to   have   an  
advantage,  and  where  they  are  increasingly  in  evidence,  especially  in  sub-­‐Saharan  Africa4.  Some  
research   has   been   driven   by   the   awareness   among   policy   advisers   that   such   companies  
regularly   employ   the   panoply   of   international   taxation   rules   to   maximize   their   advantage,  
presenting  a  challenge  to  governments  in  states  with  poorly  developed  fiscal  regimes5.    

As   circumstances   change,   many   investors   are   accustomed   to   sell   an   interest,   merge   or   make  
other   acquisitions,   as   they   think   is   appropriate   in   their   pursuit   of   value.   The   decisions   they   take  
will  usually  be  made  within  a  framework  of  corporate  operations  that  goes  well  beyond  those  
of  a  single  country,  and  justified  to  stakeholders  who  are  in  the  vast  majority  of  cases  unlikely  
to  reside  in  the  country  hosting  the  investment  in  its  extractives.  These  and  other  ways  in  which  
the  contemporary  EI  industries  respond  to  exploration,  development  and  production  activities  
in   their   international   operations   may   be   too   little   understood   or   clouded   by   a   lack   of  
information  in  host  countries.  This  can  have  negative  effects  on  the  design  of  effective  public  
policies.    

1
 For  example,  UNCTAD  (2012)  Virtual  Institute  Teaching  Material  on  The  Economics  of  Commodities  Production  and  Trade:  Oil,  
Gas  and  Economic  Development,  New  York  and  Geneva:  United  Nations;  P  Crowson,  Mining  Unearthed  (2008)(Aspermont,  UK).  
2
 Ernst  and  Young:  Business  Pulse:  Exploring  Dual  Perspectives  on  the  top  10  risks  and  opportunities  in  2013  and  beyond,  Oil  
and   Gas   Report   (2013);   D   Humphreys,   Transatlantic   Mining   Corporations   in   the   Age   of   Resource   Nationalism   (2012),  
Transatlantic  Academy:  Washington  D.C.  
3
 S   Tordo,   BS   Tracy   and   N   Arfaa   (2011).   National   Oil   Companies   and   Value   Creation.   World   Bank   Working   Paper   No   218;   DG  
Victor,  DR  Hults,  M  Thurber,  Oil  and  Governance:  State-­‐owned  enterprises  and  the  world  energy  supply.  Cambridge  University  
Press,  Cambridge;  V  Marcel,  Oil  Titans:  National  Oil  Companies  in  the  Middle  East  (2005),  Brookings  Institution  Press.  Contrast  
their   more   tentative   role   in   the   mining   sector:   Raw   Materials   Group,   Overview   of   State   Ownership   in   the   Global   Minerals  
Industry  (2011),  World  Bank,  Washington  DC.    
4
 D  Humphreys,  The  Remaking  of  the  Mining  Industry  (2015),  Palgrave  Macmillan,  London  (restructuring  during  the  boom  years  
caused  largely  by  China’s  industrialization  during  that  period).    
5
 See  for  example,  several  of  the  contributions  to  Keen,  McPherson  and  Daniel  (2010).  

1  
 Box  3.4:  East  African  Hydrocarbons  
 
A  shift   in  the   locus  of  energy  transactions  from  West   Africa  to  East  Africa  during  the  boom  
years   was  driven  by  the  sale  of  concessions  and  licences,   and  by  acquisitions.  The  sale  of  a  
66   per   cent   interest  in  three   exploration  blocks  in  Uganda   by   Tullow,   which   raised   US$2.9  
billion,   was   the   largest   single   deal.   In   Tanzania,   the   energy   transaction   hotspot   in   2011,  
activity   centered   on   the   acquisition   of   Dominion   Petroleum   by   Ophir   Energy   and   on  
investment   in   exploration   licences   by   various   smaller   players.   In   Mozambique,   the   Thai  
energy  company  PTT  purchased  Cove  Energy  for  US$1.9  billion,  thus  acquiring  a  stake  in  
the  rich  gas  fields  off  the  coast  of  Mozambique.  In  August  2013  a  further  sale  was  made  in  
Mozambique:  ten  per  cent  of  a  large  gas  field  was  sold  by  Anadarko  to  the  ONGC  (India)  
for  US$2.64  billion.  

Sources:  Africa  Progress  Report  2013;  and  Source  Book  

For   an   illustration   of   how   this   pattern   of   buying   and   selling   assets   can   impact   on   a   country’s  
development   plans,   the   rapid   growth   in   hydrocarbons   activity   in   East   Africa   during   the   boom  
years  provides  plenty  of  relevant  material  (see  Box  3.4).  

Buying  and  Selling  Assets   The  typical  ways  for  internationally  operating  companies  to  obtain  
access   to   new   reserves   need   to   be   understood.   Exploration   activity   is   only   one   way   for  
companies   to   gain   access   to   reserves.   Companies   in   the   EI   sector   routinely   buy   and   sell   their  
interests  through  mergers  and  acquisitions  (M&A).  In  the  hydrocarbons  sector  it  is  common  for  
the   buyers   to   be   cash-­‐rich   National   Oil   Companies   from   countries   with   insufficient   domestic  
resource   bases   such   as   China   and   India.   In   2011   alone,   the   value   of   upstream   M&A   activity  
increased   by   almost   70   percent   to   reach   US$317   billion6.   Cash-­‐rich   NOCs   from   China   and   South  
Korea   played   an   important   part   in   that   activity.   In   2012   one   of   China’s   largest   oil   companies,  
CNOOC,  purchased  the  Canadian  company,  Nexen,  for  US$15.1  billion.  It  thereby  acquired  900  
million   boe   (barrels   of   oil   equivalent)   of   proved   reserves   and   1.222   billion   boe   of   probable  
reserves,  plus  contingent  reserves  of  5.6  billion  boe,  mainly  in  Canadian  oil  sands7.  At  virtually  
the   same   time,   another   Chinese   company,   Sinopec,   acquired   a   49   percent   equity   interest   in  
Talisman  Energy’s  UK  operations  for  US$1.5  billion.    
6
 Ernst  and  Young  Oil  &  Gas  M&A  in  2011:  :  https://webforms.ey.com/GL/en/Newsroom/News-­‐releases/Oil-­‐and-­‐Gas-­‐M-­‐and-­‐A-­‐
in-­‐2011-­‐volume-­‐up-­‐-­‐values-­‐down.   The   previous   year’s   figures   for   M&A   are   in:   Julian   Fennema,   Industry   Overview,   Cairn   Energy  
PLC   Annual   Report   2010:   http://www.cairnenergy.com/files/reports/annual/ar2010/2010_annual_report.pdf   (last   visited   7  
September  2013).    
7
 Oil  &  Gas  Journal,  30  July  2012,  p.  26.  

2  
For  an  IOC,  this  kind  of  sale  to  an  NOC  (or  other)  buyer  can  represent  a  way  of  raising  funds  for  
new  projects,  but  it  can  also  be  a  way  of  generating  a  return  from  selling  an  asset  that  has  been  
created  by  identifying  commercially  viable  reserves.  Its  market  value  is  derived  from  its  future  
production  potential.  As  the  project  matures,  the  share  value  increases,  and  a  sale  follows.  This  
kind  of  IOC  has  a  different  business  model  from  that  of  the  better-­‐known  integrated  oil  and  gas  
company   (Exxon   Mobil   or   Shell   are   examples   of   such   companies):   instead   of   producing   oil   from  
a   successful   exploration   effort   to   realize   a   steady   stream   of   available   cash   to   return   to   its  
shareholders  in  the  form  of  dividend  payments,  it  sells  the  asset  at  an  early  stage.  In  this  way  it  
avoids   the   complexity   of   bringing   a   large   find   into   production,   drawing   upon   large   upfront  
investment   and   often   requiring   a   joint   venture   structure   to   finance   the   development.   Other  
IOCs   may   choose   to   produce   any   reserves   found   themselves,   just   as   they   may   acquire   new  
projects  in  order  to  gain  access  to  the  reserves  they  contain,  and  thereby  increase  the  volume  
of  reserves  under  their  control  (without  having  discovered  them  in  such  cases).    

A   similar   trend   is   evident   in   the   mining   sector,   where   the   level   of   spending   on   mergers   and  
acquisitions  tends  to  be  greater  than  that  on  exploration  and  development.  In  2011  the  total  
value   of   M&A   deals   rose   by   43   percent   to   US$   162.4   billion,   with   mega-­‐transactions   of   one  
billion   dollars   or   more   accounting   for   two   thirds   of   total   transaction   value8.   Gold   and   coal   were  
the   dominant   commodities   in   these   transactions.   In   2012,   nearly   one   in   three   mining  
companies   was   reported   to   be   considering   an   expansion   by   means   of   M&A   in   the   coming   12   to  
24  months.  When  it  occurs,  such  activity  reflects  a  transfer  of  ownership  of  the  present  stock  of  
mines   and   associated   processing   facilities.   Inevitably,   its   value   is   significantly   higher   than   the  
value  of  annual  additions  to  that  stock,  which  derives  from  exploration  and  development.  Just  
as  in  the  hydrocarbons  sector,  junior  companies  will  expect  to  gain  their  rewards  by  selling  on  
any  discoveries  to  larger  mining  companies  for  exploitation.    

From  the  above,  it  should  already  be  clear  that  the  business  models  of  companies  in  EI  activities  
are  far  from  uniform  and  need  to  be  understood  by  governments  and  their  advisers  in  designing  
policies   for   this   sector.   There   are   in   the   EI   sector   companies   that   can   be   classified   as   large,  
integrated  IOCs;  junior  or  ‘independent’  IOCs;  and  NOCs,  which  can  be  internationally  operating  
or  regional  or  simply  of  national  scope  in  their  operations.  The  company  that  is  likely  to  sell  its  
asset   in   the   event   of   an   exploration   success   is   also   usually   one   with   a   higher   than   average  
appetite   for   risk,   and   that   can   have   advantages   to   governments   looking   for   a   ‘first-­‐mover’   to  
generate  interest  in  their  territory.      

8
 Resource   Investing   News,   1   March   2012:   Mining   Companies   Poised   for   Mergers   and   Acquisitions,   KPMG   Study   Shows;  
http://resourceinvestingnews.com  (last  visited  February  2013).  

3  
Policy  Effects   Policy  needs  to  take  into  account  the  real  differences  among  types  of  company  
and   the   M&A   dynamic   arising   from   the   maturity   of   prospects   from   exploration   to   extraction,  
and   a   shift   that   commonly   occurs   from   junior   to   more   major   producers.   This   is   particularly  
evident  in  the  petroleum  sector  where  the  investment  returns  on  successful  projects  tend  to  be  
higher   and   pay-­‐back   periods   tend   to   be   shorter   than   in   mining.   Decisions   need   to   be   taken  
about   the   kind   of   companies   that   a   government   wishes   to   see   become   active   as   investors  
within  its  borders.  Many  years  ago,  the  Norwegian  government  policy  was  organized  around  its  
preference  for  the  larger,  integrated  companies  in  its  emerging  hydrocarbons  sector,  while  its  
North   Sea   neighbour,   the   UK,   favoured   the   entry   of   a   diverse   range   of   companies   into   offshore  
exploration   activity.   Nor   is   this   a   matter   that   affects   policy   only   at   the   very   beginning   of   the  
value   chain   (the   award   of   rights   stage).   It   also   has   impacts   at   later   stages,   with   M&A   activity  
being  prevalent  throughout.  This  is  to  some  extent  the  lifeblood  of  a  healthy  industry  but  it  is  
also   a   flow   which   governments   will   typically   seek   to   maintain   a   close   eye   on.   In   particular,   they  
will  wish  to  ensure  that  the  environmental  conditions  associated  with  the  license  to  operate  are  
carried  over  to  the  new  company.    

South-­‐south  Investment   A  significant  change  in  recent  years  has  been  the  growing  role  of  
EI   companies   from   the   emerging   economies,   in   terms   of   supply,   demand   and   investments  
overseas,   especially   in   low-­‐income   countries.   In   this   group,   China,   India,   and   Brazil   are   the  
countries   whose   national   or   private   companies   have   made   the   most   notable   impacts   on   the  
international  EI  scene.  Russia  is  also  one  of  the  countries  that  provide  a  home  to  new  corporate  
players,   even   though   it   is   not   located   in   the   South.   Companies   from   other   countries   such   as  
Malaysia   and   Thailand   (hydrocarbons),   Peru   (silver),   South   Africa   (platinum)   and   Botswana  
(diamonds)  have  made  significant  impacts  on  global  EI  markets  in  recent  years.  Countries  in  this  
group   are   taking   a   much   larger   share   of   global   spending   on   exploration   in   the   mining   sector,  
amounting  to  60  per  cent,  according  to  one  study9.    

Much  of  the  literature  on  the  development  implications  of  EI  has  focused  upon  the  impacts  of  
FDI   from   OECD   or   developed   countries   or   ‘north-­‐south’   flows.   However,   the   rise   of   these  
players  from  emerging  economies,  and  so-­‐called  BRICs  in  particular,  raises  questions  about  how  
‘south-­‐south’  flows  will  affect  established  patterns,  which  it  is  still  too  early  to  answer.  As  David  
Humphreys  notes,  in  a  study  of  such  companies  in  the  mining  sector:  

 “[I]nvestors   from   these   countries   sometimes   bring   a   rather   different   set   of  

 perspectives   to   their   overseas   investments,   emphasizing,   on   the   one   hand,   raw  
 material   security   of   supply   considerations   along   with   the   commercial   prospects   of   a  

9
 D  Humphreys  (2009),  Emerging  Players  in  Global  Mining,  p.  2  

4  
  mining   project   and,   on   the   other   hand,   the   benefits   of   such   investments   taking   place  
 within  the  context  of  a  broader  government-­‐to-­‐government  financial  and    cooperation  
agreement”.10  

The   various   kinds   of   company   that   are   typically   found   in   the   oil,   gas   and   mining   sectors   may   be  
distinguished  according  to  one  or  more  of  five  principal  indicators:  ownership  structures;  size;  
the   resources   they   concern   themselves   with;   risk   strategy   and   method   of   financing.   They   are  
summarized  below.  

3.3.1  Oil  and  Gas  

Large,   integrated   companies   which   operate   internationally   at   all   stages   of   the   petroleum   cycle:  
exploration,  production,  transportation,  refining  and  marketing.  These  are  usually  known  as  the  
IOCs   and   are   privately   owned   for   the   most   part,   based   in   the   USA   and   Europe.   The   six  
companies   commonly   attributed   to   this   group   are   BP,   ExxonMobil,   Shell,   Chevron,  
ConocoPhillips  and  Total.  Sometimes  called  ‘super-­‐majors’,  these  companies  account  for  about  
two  thirds  of  the  world’s  Exploration  and  Production  (E&P)  investments,  with  the  balance  being  
invested  by  NOCs.  They  are  especially  prominent  in  deep-­‐water  exploration  and  development  
and   LNG   projects   where   their   size   and   resources   allow   them   to   manage   and   finance   such  
projects  more  easily  than  other  companies,  and  to  face  the  risks  that  these  projects  entail.  

National   Oil   Companies   (NOCs)   are   common   among   resource-­‐rich   states,   with   around   90  
percent   of   the   world’s   oil   and   gas   reserves   under   their   control   and   75   percent   of   the  
production.   The   largest   is   Saudi   Aramco   (Saudi   Arabia).   Some   NOCs   have   become   more   and  
more   active   beyond   their   home   base,   increasing   competition   with   the   more   established   IOCs  
for   access   to   new   or   existing   petroleum   reserves.   Examples   of   companies   that   have   ventured  
outside   their   national   territory   are   the   Chinese   companies,   CNOOC,   CPNC,   and   Sinopec,   the  
Indian   ONGC,   Petrobras   (Brazil),   Gazprom   (Russia)   and   Petronas   (Malaysia).   NOCs   are   also   used  
by   their   home   states   as   vehicles   to   secure   much   needed   energy   resources   for   domestic  
industries’  needs.    

Junior,  sometimes  called  independent,  companies  do  not  have  the  high  overhead  costs  of  the  
IOCs.   Their   size   can   vary   considerably,   with   the   smaller   ones   typically   hoping   to   significantly  
10
 Ibid  (2009),  p,  21.  

5  
profit   from   the   sale   of   promising   prospects,   sometimes   to   larger   ‘independent’   companies.  
They  are  usually  prepared  to  accept  higher  risks  at  the  exploration  stage,  both  in  terms  of  the  
hydrocarbons  they  target  and  in  terms  of  the  countries  in  which  they  explore.  For  this  reason  
they  often  dominate  in  initial  exploration,  especially  in  frontier  settings.  They  tend  to  respond  
quickly   to   the   current   demand   and   change   their   exploration   focus   rapidly.   For   the   most   part,  
they  operate  on  the  basis  of  funds  raised  from  individual  investors  and  equity  finance,  often  in  
provincial  stock  markets  such  as  those  in  Canada  and  Australia,  making  their  expenditure  highly  
volatile.    

Oil   service   companies   are   usually   confined   to   the   provision   of   services   and   supplies   to   the  
operating   companies   that   manage   exploration   and   production   on   behalf   of   their   consortium  
partners.   Drilling   wells   and   oilfield   management   are   frequently   out-­‐sourced   by   operators   to  
specialized   service   providers.   The   larger   service   companies,   like   Halliburton   or   Schlumberger,  
are   capable   of   becoming   involved   in   pre-­‐exploration,   exploration   and   production,   but   may   take  
a   business   view   that   to   do   so   would   pit   them   competitively   against   their   oil   company   clients,  
and  refrain  from  such  activities.  

Within   the   industry   three   segments   are   commonly   distinguished:   ‘upstream’,   meaning   the  
exploration,  development  and  production  activities;  ‘midstream’,  meaning  the  storage,  trading  
and   transportation   of   crude   oil   and   natural   gas,   and   ‘downstream’   meaning   refining   and  
marketing.   Some   companies,   such   as   ExxonMobil,   Shell,   and   BP,   perform   activities   in   each   of  
these   segments.   However,   many   of   the   thousands   of   firms   in   the   oil   and   gas   industry   are  
specialists   or   niche   players,   while   others   carry   out   different   activities   that   fall   within   one   or  
more  of  the  above  segments.  In  the  Value  Chain  that  is  used  in  the  Source  Book,  the  upstream  
activities  fall  within  the  first  and  fifth  chevrons,  while  some  of  the  activities  in  the  midstream  
and  downstream  segments  are  treated  in  the  second  chevron,  Sector  Organization.  The  market  
for  crude  oil  is  shaped  by  many  players:  refiners,  speculators,  commodities  exchanges,  shipping  
companies,   international   oil   companies,   national   oil   companies,   independent   companies   and  
the  Organization  of  Petroleum  Exporting  Countries  (OPEC).  For  the  most  part,  the  Source  Book  
focus  is  on  the  upstream  activities.    

Gas   Natural  gas  is  commonly  found  in  association  with  oil.  The  techniques  for  discovery  are  
the   same.   Hence,   the   larger   oil   companies   are   often   also   among   the   largest   producers   of  
natural   gas.   Some   companies   have   started   out,   however,   as   gas   companies   and   moved   into   oil:  
Encana  (Canada);  ENI  (Italy);  BG  (UK)  and  ELF  (France)  are  examples.  Gas  is  very  much  like  oil  in  
the  upstream  segment,  and  very  different  from  it  in  the  midstream  segment.  Even  so,  there  are  
important   and   distinct   characteristics   of   gas   within   the   upstream   segment   which   differ   from  
those  of  oil:  in  particular,  gas  processing  and  natural  gas  liquefaction  (LNG).  In  the  midstream  
segment,  transportation  of  natural  gas  is  more  complex  and  much  more  challenging  than  crude  

6  
oil,   albeit   with   fewer   environmental   risks:   constructing   and   operating   pipelines   to   bring   natural  
gas   from   remote   locations   to   markets   gives   rise   to   complex   issues   of   cross-­‐border   regulation  
(Chapters   5   and   6).   However,   transportation   of   gas   has   become   significantly   easier   over   the  
past  decade  with  the  expansion  of  the  LNG  industry,  dominated  by  the  largest,  international  oil  
companies,  offering  significant  opportunities  to  countries  along  the  coast  of  Africa  and  the  Aceh  
province  of  Indonesia,  where  large  gas  deposits  have  been  found  far  from  the  main  consumer  
markets.  In  turn,  however,  this  has  infrastructure  implications  for  emerging  gas  producers  that  
the  Source  Book  takes  note  of  (Chapters  5,  6  and  9).        

3.3.2  Mining  

Large,   international,   multi-­‐product   mining   companies   are   relatively   few   in   number,   and   have  
become   more   concentrated   than   ever   in   recent   years.   They   comprise   Anglo   American,   BHP  
Billiton,   Rio   Tinto,   and   Glencore.   They   are   involved   in   every   stage   of   the   industry   value   chain  
and   typically   have   an   interest   in   several   types   of   minerals.   The   rationale   behind   this  
diversification  in  the  minerals  sector  is  to  spread  the  risk  of  their  activities  and  achieve  a  higher  
average  rate  of  return  than  would  be  achieved  with  a  single  product  such  as  gold,  coal  or  iron  
ore.   Looking   at   the   largest   companies   more   closely,   many   are   much   less   diversified   than   at   first  
appears.  Of  the  top  15  companies,  six  are  more  than  50  percent  iron  ore  producers,  four  are  
copper  producers  and  three  are  gold  producers11.  For  the  most  part,  then,  they  are  dependent  
upon   one   metal   for   more   than   50   percent   of   their   production.   These   companies   tend   to   be  
diligent   in   their   approach   to   environmental   and   social   performance   standards   and   social  
investments.   They   commonly   adhere   to   international   standards   and   reporting   requirements,  
through   for   example   ICMM’s   Sustainable   Development   Principles,   and   the   IFC’s   performance  
standards.  

National   Resource   Companies   are   fewer   in   number   and   much   less   influential   in   mining   than  
their  counterparts  in  hydrocarbons.  Typically,  they  focus  on  a  limited  number  of  minerals  and  
sell   them   on   the   international   market.   Early   efforts   at   state   ownership   and   control   included  
significant   failures   in   Africa   such   as   the   nationalization   of   copper   mines   in   Zambia,   and   the  
various   state   companies   established   in   centrally   planned   economies,   largely   in   East   Europe   and  
parts   of   Asia   where,   for   a   long   time,   it   was   associated   with   a   heavy   industry   development  
model.   The   former   was   part   of   a   wave   of   nationalizations   of   foreign   mining   companies   in  
developing   countries   in   the   late   1960s   and   early   1970s.   During   the   1960s   there   were   32  

11
 Ericsson,  M.,  Mining  Industry  Corporate  Actors  Analysis  (2012),  p.  8.  

7  
expropriations   of   foreign   mining   companies   and   during   the   period   1970-­‐1976   the   number  
reached   4812.   Governments   retreated   from   state   control   in   the   1990s   but   it   remains   high   in  
many   metals,   partly   due   to   the   growth   of   state-­‐controlled   mining   in   China.   In   the   diamond  
industry   there   are   examples   of   successful   state   holdings   in   Botswana   and   Namibia,   where   both  
countries   have   formed   joint   venture   companies   with   De   Beers 13 .   In   copper,   there   is   the  
example   of   Codelco,   the   Chilean   producer.   In   iron   ore,   there   is   the   Indian   mining   company,  
National  Mineral  Development  Corporation.      

Junior   mining   companies   are   typically   medium   or   smaller   sized   companies   focused   on  
exploration   activities   in   one   country   or   region   or   a   specific   mineral   or   group   of   minerals,   and  
may  be  owned  by  domestic  entrepreneurs  or  international  firms,  sometimes  backed  by  venture  
capital14.   There   are   hundreds   of   such   companies.   Indeed,   many   mineral-­‐rich   countries   have   a  
group  of  such  companies  of  differing  sizes,  sometimes  operating  only  one  mine  each.  Examples  
of   this   are   Chile,   Peru   and   Mexico.   They   will   usually   have   local   ownership   and   staffing.   Such  
companies   can   accept   higher   risk   than   the   larger   ones,   both   in   terms   of   the   type   of   mineral  
target   sought   and   the   countries   in   which   they   explore.   They   also   “tend   to   seek   the   products  
that  are  presently  fashionable,  and  they  can  and  do  change  their  exploration  focus  quickly”15.  
For  exploration  companies  that  focus  solely  on  exploration,  they  are  likely  to  recoup  their  capital  
not  by  developing  the  reserves  themselves  (by  which  stage  their  interests  are  likely  to  be  diluted  
significantly),  but  by  selling  on  most,  if  not  all,  of  their  discoveries  to  larger  companies  with  the  
technical,   financial   and   marketing   skills   and   access   to   the   capital   markets   for   the   necessary  
funds.   Sometimes   the   larger   companies   provide   the   junior   ones   with   the   necessary   capital   to  
support  their  operations  and  an  assurance  of  a  market  for  their  discoveries  if  successful.  

Small-­‐scale  miners  and  artisanal  workers  play  a  key  role  in  mining  which  has  no  parallel  in  the  
hydrocarbons   sector.   Their   work   may   take   on   a   corporate   character,   with   workers   employed   to  
mine,   but   this   is   generally   on   a   very   small   scale.   The   sub-­‐sector   is   the   equivalent   of   subsistence  
agriculture  and  is  labour  intensive,  employing  on  a  conservative  estimate  as  many  as  30  million  
people   around   the   world,   always   operating   informally   but   sometimes   also   illegally16.   These  
companies   and   workers   usually   account   for   minor   shares   of   global   mining   production.   They  

12
 UNCTAD,  World  Investment  Report,  New  York  and  Geneva  2007,  p.  108.  
13
 Raw  Materials  Group,  Overview  of  State  Ownership  in  the  Global  Minerals  Industry,  World  Bank;  Washington  D.C.  (2011),  p.  
10.  
14
 In  some  classifications  the  medium  and  junior  companies  are  separated  out  into  two  categories:  for  example,  in  the  Oxford  
Policy  Management  study  (2013),  Extractive  Industries,  Development  and  the  Role  of  Donors,  p.13.    
15
 P  Crowson,  ‘Mining  Unearthed’  (2008),  Aspermount,  UK,  p.118.  
16
 This  includes  a  significant  number  of  child  laborers,  In  2011  Human  Rights  Watch  estimated  that  the  number  of  child  laborers  
in  artisanal  gold  mining  in  a  single  African  country,  Mali,  numbered  between  20,000  and  40,000,  with  many  of  them  starting  
work   as   young   as   six   years   old:   A   Poisonous   Mix:   Child   Labor,   Mercury   and   Artisanal   Gold   Mining   in   Mali,   Human   Rights   Watch,  
USA.    

8  
tend  to  concentrate  on  high  unit  value  products,  such  as  gold  and  gemstones,  and  are  widely  
found  in  developing  countries.  Health  and  safety  conditions  among  such  miners  are  often  poor;  
they   exhibit   a   high   degree   of   employment   of   women   and   children   and   they   often   cause  
significant  environmental  damage.  The  benefits  to  a  host  country  of  such  mining  are  unlikely  to  
be  reflected  in  any  tax  returns  and  mining  codes  and  tax  systems  are  usually  not  responsive  to  
this   kind   of   activity.   This   sector   is   on   the   increase   with   impacts   on   the   sensitive   or   protected  
ecosystems   and   biodiversity   and   encroachment   on   World   Heritage   Sites   (although   large   scale  
mining  also  can  have  such  impacts).  It  is  relatively  insulated  from  the  rise  and  fall  of  commodity  
prices  (in  contrast  to  large-­‐scale  mining  operations)  because  the  economic  returns  will  remain  -­‐  
even   in   a   downturn   in   prices   -­‐   significantly   higher   than   similar   artisanal   activities,   such   as  
fisheries  and  agriculture.  A  ‘rush’  of  activity  can  have  sudden,  dramatic  impacts:  in  Madagascar,  
gemstone  rushes  have  attracted  as  many  as  100,000  miners  congregating  in  limited  areas  with  
slash-­‐and-­‐burn   agriculture   used   in   support   of   the   Artisanal   and   Small-­‐scale   Mining   (ASM)  
communities.    

Diversification     In   the   1970s   and   1980s,   a   number   of   very   large   oil   companies   such   as  
Exxon   and   Shell   moved   into   the   mining   sector   to   create   genuinely   EI   companies.   They   assumed  
that   the   prospects   for   long-­‐term   growth   within   the   oil   industry   were   being   challenged   by   the  
spread   of   state   ownership   and   NOCs,   and   had   the   cash   available   from   high   oil   prices   to   fund  
programs   of   diversification.   Mining   and   petroleum   were,   they   thought,   so   similar   in   their  
characteristics   and   basic   requirements   that   it   would   be   possible   to   operate   profitably   across  
both   sectors.   This   proved   an   economically   unsuccessful   series   of   experiments,   underlining  
differences  in  the  respective  businesses,  and  they  were  soon  brought  to  an  end.  

3.3.3  Unconventional  Oil  and  Gas  

The  leading  companies  in  the  development  of  shale  gas  and  oil  include  super-­‐majors  like  Shell,  
Total   and   ExxonMobil,   large   international   energy   companies   like   Anadarko,   Pioneer,   Encana,  
Talisman   and   BHP   Billiton,   and   smaller   independent   companies   that   specialize   in   shale   gas  
(Cuadrilla   in   the   UK   is   an   example).   Most   of   these   operate   in   the   United   States   and   Canada,  
since  markets  for  unconventional  oil  and  gas  outside  of  North  America  are  still  in  their  infancy.    

9  
 CHAPTER  3  –  www.eisourcebook.org  
3.4   Conclusions  

Investment  in  the  EI  sectors  (oil,  gas  and  mining)  has  features  that  present  particular  challenges  
to   policy   makers.   There   are   significant   differences   between   oil   and   gas   on   the   one   hand   and  
mining   on   the   other,   and   indeed   within   the   mining   sector   itself,   in   spite   of   their   undoubted  
similarities  in  certain  areas.  Both  are  capable  of  playing  a  major  role  in  a  government’s  plans  for  
resource-­‐led  development.    

Effective  management  in  the  public  interest  requires  recognition  of  both  the  common  and  the  
unique   features   of   EI   in   the   design   of   sector   policies   and   institutions.   However,   it   will   also  
involve   strategic   decisions   about   the   kind   of   company   or   pattern   of   companies   that   is   best  
suited  to  achieving  the  kind  of  overall  policy  held  by  a  country  hosting  these  investments.    

Some   features   of   this   investor-­‐state   relationship   are   relatively   constant   over   time,   while   others  
are   more   dynamic,   such   as   industry   structure,   showing   significant   changes   and   greater  
complexity  in  recent  years,  not  least  due  to  companies  from  emerging  markets  making  strategic  
investments  aimed  at  securing  future  supplies  of  energy  and  minerals.    

1