Shared Use of Extractive Infrastructure and Resource Corridors

These infrastructure requirements are usually already available in relatively developed countries. In the remote regions of developed countries like Canada or Australia, though, and in many resource-rich developing countries, natural resource companies typically finance and develop various infrastructure components themselves. Company-developed infrastructure has often been available solely for the use of a specific project, with no connection to the rest of the economy. These investments can be leveraged for the benefit of host countries through the shared use of the mining and oil and gas-related infrastructure. This may take two forms:

1. In a “multi-user” approach , service users from the same industry share the infrastructure (such as coal mines sharing a railway in the same region or gas producers sharing the same pipeline).
2. In a “multi-purpose” approach , the infrastructure is designed to serve multiple purposes or industries, such as both mining and agriculture.

Recent experience shows that shared use can foster parallel development of both the extractive sector and  wider host country industries, by enabling both to take advantage of economies of scale and economies of scope (figure 1).

In particular, economies of scope are key to turning a logistics resource corridor into a spatial development corridor, in which the infrastructure needs of the extractive sector help to enable the development of infrastructure that other economic sectors need but generally cannot afford. For example, a company’s demand for infrastructure and financial capacity can be leveraged to develop trunk roads, which can be made open access to other users, who can build feeder roads to more remote areas where other activities such as agriculture, tourism, and forestry can then thrive.

Different commodities also present different opportunities. Gold mines, for example, are water intensive and thus require a substantial water infrastructure solution. However, gold projects typically do not require railway transport infrastructure.

Therefore, a blanket policy that doesn’t take into account specific project economics is likely to fail. Additionally, a government will improve its chances of negotiating and implementing a shared use policy if the company receives all policy information before making capital budgeting decisions regarding infrastructure and submitting its feasibility study to financiers.

If shared use is implemented correctly, the developmental impacts can be tremendous. Shared use of infrastructure can support community access to services, economic diversification, regional development, and linkages . Shared use may also contribute to sustainability as it reduces the environmental footprint of infrastructure development. The multi-user approach can also facilitate the development of relatively small extractive projects that could not on their own afford the infrastructure they require, thus avoiding stranded resource deposits. Lastly, shared infrastructure can contribute to fairer bids in cases where incumbent extractive companies would otherwise have a monopoly on infrastructure. This is an important consideration given that infrastructure deployment can make up the majority of the capital expenditure on extractive projects.

Of course, the case for shared infrastructure is nuanced. The costs and benefits of sharing can vary substantially from project to project and country to country, and any analysis must take the specific costs and benefits into account. In addition, certain types of shared infrastructure tend to yield greater benefits than others. Water and power can be good opportunities, for example, as the benefits for both parties are high, and the coordination costs are low. Sharing a railway line, on the other hand, may increase demand at the port, be harder to coordinate, and cause bottlenecks.