At a Glance
Governments seeking to attract private investments in downstream processes have several options to consider. These include consulting with investors to identify and remedy obstacles to downstream integration, providing economic incentives for downstream investment, or banning the export of unprocessed products.
The most commonly employed economic incentive is a tax on the export of unprocessed material.
Government measures to enhance downstream production may form part of an agreement in the awarding of mineral rights.
Some countries may use mineral development agreements with individual companies that cover in combination with other aspects of local content.
This Highgrade interview features Olle Östensson discussing beneficiation, or forward linkages, in both the mining and oil and gas ...
Governments seeking to influence private investors’ decisions regarding downstream processes may utilize one or more of the following options:
- Consult with potential investors in order to identify and remedy obstacles to downstream integration.
- Provide economic incentives for investments downstream by setting:
- Export taxes on unprocessed products.
- Favorable tax treatment and incentives for downstream investments.
- Subsidies supporting the provision of cheap inputs to downstream production.
- Ban the export of unprocessed products.
Consulting with potential investors to identify obstacles, and jointly determine plans to address these obstacles, is a common strategy for assessing realistic opportunities for downstream beneficiation. Consultation processes also allow potential investors to understand the government’s position, and the resources it is prepared to commit toward downstream production.
Economic incentives are often used to encourage firms to invest downstream, the most common being a tax on the export of unprocessed materials. Outright bans of unprocessed exports are not common.
Government measures to enhance downstream production may form part of an agreement that awards mineral rights. Agreements that define the rights and obligations of the government and companies are almost universal in the oil and gas sectors. Agreements are less common and often more restricted in scope for nonfuel minerals, and are usually defined by law. Some countries may make mineral development agreements with individual companies that cover downstream processing and other aspects of local content.
It is far more common for oil and gas companies than for mineral developers to be involved in the entire value chain. Shell, for example, carries out activities all the way from exploration to the retail sale of gas to consumers, while, in the mining industry, De Beers’ involvement in both diamond mining and retail is a rare exception.