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Forward Linkages (Supplying Extractives’ Downstream Sectors)

  • The processing or refining of extractive industry-produced raw material, as well as value addition and/or beneficiation of the raw material, fall under the category of forward or ‘downstream’ linkages.
  • Many downstream products serve as important inputs into other products and processes, particularly in the chemicals, energy, and transport sectors.
  • While costs and constraints, as well as potential benefits, vary considerably between different opportunities for beneficiation, in general, the further downstream production takes place, the greater are the potential risks and rewards; caution is therefore advised in weighing cost/constraint considerations.

Key Resources

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Examining Beneficiation

This resource discusses beneficiation in light of country context, to show that forward linkages should not always be the policy focus. ...

Extractive Resources for Development: Trade, Fiscal and Industrial Considerations

This paper discusses the capacity to translate high growth rates and increased industrial development from extractive resources into ...

Topic Briefing

Forward or “downstream” linkages entail the processing or refining of extractive industry-produced raw material and the further value addition or beneficiation of the raw material.

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For oil and gas, after extraction, this means being refined into various products such as methane, propylene, diesel and other fuels, and a large variety of other products. Many of these products are important inputs into other products and processes, particularly in the chemicals, energy, and transport sectors.

For mineral resources the ore is separated from the rock such that the separated ore can now be refined into a form that enables them to be used as inputs into other processes – generally termed semi fabrication – and then into a variety of other products.

For both oil and gas, and mineral products, decisions need to be made first regarding processing and refining, and then, regarding the production or beneficiation of further downstream products.

The costs and constraints, as well as the potential benefits, vary considerably between different opportunities for beneficiation. In general, the further downstream production is, the greater are the potential benefits. At the same time, so too are the costs and constraints. The further downstream the activity that is being considered, the higher the risk of failure and hence greater caution needs to be taken in carefully weighing the costs and constraints.

The purpose of this topic of the ELLED Framework is to describe the opportunities, challenges, and risks associated with the pursuit of downstream beneficiation of mineral and oil and gas outputs. Policymakers and regulators need to fully understand the potential benefits, real constraints and obstacles, and the policy options available by exploring all the subtopics.