Disputes between international companies and national governments commonly arise in the extractive industry where high expectations from producer countries often run alongside emotive issues of ‘ownership’ and ‘exploitation’. In 2013, Chatham House published the report Conflict and Coexistence in the Extractives Industries, examining the rising occurrence of long-running and expensive company-government disputes. Continuing the conversation, the speakers will share their personal insights regarding doing business in Africa's oil and gas sector and preparing for crisis situations. They will outline why they believe the effective management of any crisis is critical to achieving an early settlement and why arbitration is the best formal mechanism for resolving disputes in Africa. They will also discuss what the preconditions of success are, and how companies must adjust to new commercial and political realities when engaging with national companies. 

Attendance at this event is by invitation only.

This meeting will focus on standards for NGOs wishing to submit 'substantiated concerns' in the EUTR context, and best practice in cooperation with enforcement agents in forest producer countries. The workshop will be attended by representatives from EU member states as well as officials from the US and Australia.  

This workshop is the next in a series of EUTR/Lacey/Australian ILPA enforcement workshops co-organized by Chatham House and Forest Trends. Please note this event will be held in Rome.

Attendance at this event is by invitation only.

Disputes over resources are a persistent challenge to international peace and security. Natural resources (such as oil, natural gas, minerals, timber and water) are a major source of national income for many countries and, alongside land, are essential to the livelihoods of many millions of people. There is a growing recognition among researchers and decision-makers that in many fragile states disputes over these resources have fed into, and underpinned, violent conflict and instability. 

Although international engagement in national resource disputes is not always desirable or feasible, where it is necessary and possible to support, supplement (or even substitute) national dispute resolution processes it is important to think through the parameters of such action: Who gets involved? With what financial resources? When does an intervention begin? How do they act? 

This one-day roundtable will bring together around 30 experts from policy, academia and business to discuss these questions and more.

The event will be held under the Chatham House Rule. Attendance is by invitation only.

In 2012, Kenya joined the swathe of East African countries with recent significant oil and gas discoveries. Long-established as a regional leader in terms of economic growth, foreign investment and technological innovation, Kenya's leaders are now assessing how to establish an effective policy framework to manage oil revenues while at the same time managing the expectations of its citizens.  

At this event, the panel will discuss how transparency and accountability can be strengthened as Kenya moves to become an oil-producing nation. This event will mark the UK launch of a report by the Kenyan Civil Society Platform on Oil and Gas, entitled Setting the Agenda for the Development of Kenya's Oil and Gas Resources.

LIVE STREAM: This event will be live streamed. The live stream will be made available at 12:00 BST on Wednesday 8 October 2014.

THIS EVENT IS NOW FULL AND REGISTRATION IS CLOSED.

This paper accompanies a series of Chatham House assessments on China, France, Japan, the Netherlands, the UK, the US and Vietnam and provides details on how the estimates of the level of illegality of imports of wood-based products into those countries were derived. The assessments are part of a research project that monitored levels of illegal logging and related trade in selected consumer, producer and processing countries in order to evaluate the effectiveness of efforts to tackle this problem.

The paper describes the methodology for estimating the levels of wood-based products at high risk of illegality that are being imported into consumer and processing countries. The methodology was developed in order to provide quantitative estimates of the scale of such imports and to assess how they have changed over time. The figures adopted for the assessments are based on the best available evidence; but, given the challenges of quantifying levels of illegal logging and the limited information available for some countries, they should not be regarded as definitive. Rather, they indicate the likely levels of illegality and, perhaps more important, how they may have changed over time.

At the end of November amidst much speculation, OPEC kept its formal production level of 30 million barrels per day in what appears to be an oversupplied market. This controversial decision was taken because cutting production would cede market share to the growing production flooding out of the US. The immediate result was a significant fall in oil prices.

The 'official' logic behind the decision was twofold. First, it was contended that weak demand was temporary because of slow economic growth and would recover next year. Second, the argument went, lower prices would close high-cost production from the shale technology revolution. In other words, current prices were too low and the market, allowed to operate, would rectify this.  Many (rightly) saw this decision as a significant landmark in global oil markets. In effect, OPEC had ceded any semblance of control over the market and prices, instead launching the oil price onto a sea governed by market forces.

Those with knowledge of oil market history will see this as a very dangerous gamble based on two serious misconceptions. After the oil shocks of the 1970s, the market was in a similar position as now. Demand was falling and non-OPEC supply was rising. In response, to defend prices, OPEC (but effectively Saudi Arabia) cut production because the fall in demand was seen as temporary as a result of global recession and would shortly recover. It did not. Then when the oil price eventually collapsed in 1986, the OPEC view was that lower prices would quickly reverse as they would shut in high-cost production, specifically in the North Sea. These views in the 1980s were conceptual mistakes, still relevant today and likely to undermine OPEC’s current strategy. The mistakes are a failure to understand the difference between an income effect and a price effect on demand and the failure to understand the difference between a break-even price (what investors consider when deciding whether to invest in new producing capacity) and a shut-in price (what existing operators consider will cover variable costs and if not, will stop production from existing wells.).

While some of the fall in demand in the 1980s was because of the recession (an income effect), some was due to genuine demand destruction as the result of much higher prices (a price effect). Recession-induced lower demand reverses itself when the global economy recovers, but demand destruction is permanent. Today, part of the fall in oil demand is because oil prices have inexorably risen (from $32.40 in 2002 to $108.66 in constant 2013 dollars). Furthermore, many sources of recent oil demand growth, notably China and India, have been moving from subsidized domestic oil prices to higher border-based prices. OPEC’s expectations of quickly recovering demand may be optimistic as they were in the early 1980s.

OPEC is hoping lower break-even prices will reduce shale production.  Various estimates for the US shale break-even price have been bandied around (usually in the realm of $60-$80 per barrel). Most are far too high, because they ignore the fact that the recent boom in shale operations has grossly inflated project costs. If investment in new capacity slows, then project costs − and hence the break-even price − will fall.

However, in terms of OPEC’s current strategy, the break-even price is the wrong metric. What matters in the next few years is the shut-in price.  After the 1986 price collapse, a number of stripper wells in US (with high variable costs) did close, but the loss of production was minimal. North Sea production, which had been OPEC’s prime target, was hardly affected and actually increased in 1987. The current level of shut-in price for shale oil is again debatable, but almost certainly is well below $40 per barrel. Thus it will be some time before existing shale oil production falls, even if prices stay low.

Should the oil price fall towards variable costs, threatening shale supply, it will be the OPEC producers who must blink first. They will then try to take back control of the market, if they can.

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Recommendations

Enhanced dialogue and intensified international cooperation in four areas could significantly improve the functioning of global mineral markets:

1. Deal with the last remnants of producer-country cartels 
   Consumer countries should make a publicly visible case that in an age of interdependence and global supply chains, any remaining forms of producer-country cartels are an anachronism. Given limited means to coerce governments to stop supporting the last remaining mineral cartels in potash, a ‘naming and shaming’ approach in key forums such as the Group of Twenty (G20) and the Organization for Economic Cooperation and Development (OECD) is likely to be most effective. Such action could be initiated by the three largest potash importers China, India and Brazil, and should seek support from others such as the EU and Japan.
    
2. Prevent damaging export restrictions through win-win arrangements
   WTO litigation against export restrictions is unlikely to be a silver bullet and in the short term cooperative policy dialogues, such as those pursued by the OECD, offer the best prospects for concrete results. Such dialogues should also be initiated by major emerging economies and could focus on providing incentives such as investment packages or technology-sharing to entice producer countries to abstain from imposing restrictions. Consumers should continue to push for more specific and stricter WTO rules on export restrictions. Japan, the EU and the US should seek to include similar measures in regional trade negotiations.
    
3. Strengthen cooperation among regulators on clandestine private cartels and other anti-competitive practices 
   Concerted action will be required by governments to tackle anti-competitive practices such as clandestine cartels, price-fixing and territorial agreements. Key regulators, such as those in the EU and China, should expand collection and sharing of data and best practice on anti-trust enforcement in minerals markets. In key cases they could also coordinate prosecution. Sustained investment in institutional capacity is required in many emerging economies; this should be supported through bilateral cooperation and via regional forums. Governments should also resuscitate the stalled negotiations on the WTO’s role in competition policy.
    
4. Enhance governance for transnational market platforms and pricing mechanisms
   The responsibility to regulate key nodes in global minerals markets will remain in the hands of national bodies, but coordination is vital given interconnected global markets. International organizations and regulators should strengthen structural cooperation and exchange in the area of physical markets and with greater involvement of emerging economies. An informal high-level forum on regulating physical markets could reinvigorate debate, foster new perspectives and stimulate new partnerships. Governments in key consumer countries should also give their national regulators a clear mandate in minerals markets.

As part of the international dialogue on Valuing Vital Resources, this seminar will convene policy-makers, scholars, technical practitioners, NGOs, multilateral agencies and the media to discuss recommendations for new policy approaches in India to reorient energy and water use in agriculture. The aim is to gain input to practical policy proposals and identify the work now needed to make them robust. 

Attendance is by invitation only. Please note this event is held in New Delhi, all times are local. 

This event is organized together with the CUTS Institute for Regulation & Competition (CIRC).

Katanga Province in the Democratic Republic of Congo (DRC) is immensely wealthy in minerals such as copper, uranium and gold, and is home to around fifty per cent of the world’s cobalt reserves. Rising outputs from the province’s copper and cobalt mines have contributed to the DRC’s average GDP growth of 8.5 per cent over the past two years. However, despite visible infrastructure developments in the province to service the industry, few Congolese are benefiting from the revenues and the economy is yet to diversify.

Moïse Katumbi Chapwe, the governor of Katanga Province, will discuss his approach to resource governance and will examine how regional governments can capitalise on resource revenues to improve livelihoods. 

Attendance at this event is by invitation only.

This transatlantic dialogue will bring together a number of stakeholders, focused on options for reducing deforestation in agricultural supply chains. Key questions will be asked such as: What are the current and projected patterns of supply and demand for key commodities, and their impacts on forests? Who are the key producers and what is their relative impact on forests? How are these patterns likely to change in the future? What are the key points of leverage in these supply chains? What is the scope of potential action by the US, the EU, and its member states?

The current status and future trends in the global production and trade in major agricultural commodities will also be examined, along with the key leverage points for influence. Global forest footprint of major agricultural commodities and deforestation hotspots will be discussed and key drivers of deforestation will be examined. Finally, the potential roles of government in reducing commodity-driven deforestation will be analysed to gain a better understanding of the potential for state action in the EU and the US contexts.

Attendance at this event is by invitation only.

While there is much anecdotal information about the impact of mining on forests, no comprehensive review of minerals as a forest risk commodity has yet been undertaken. Indications are that mining activities are an important driver of deforestation in many countries, and that the impact of mineral extraction on forest resources is likely to increase with growing global demand for minerals. 

This event will discuss the state of knowledge on the impact of mining on forests, identify the available policy tools aimed at supporting sustainable supply chains, and determine the data needs to facilitate improved monitoring, control and regulation of the sector. 

Attendance at this event is by invitation only.

Summary

• Procurement policy has been used effectively to exclude illegal and unsustainable timber from consumer-country markets.
• As the public sector is a major purchaser of food and catering services for schools, nurseries, hospitals, care homes, canteens, prisons and the military, public procurement policies in this area clearly have the potential to promote the uptake of sustainable products not associated with deforestation.
• Many public authorities, particularly at local and regional level, already have a procurement policy for food; in principle, criteria for sustainable production could be incorporated relatively easily.
• Some products – particularly palm oil, cocoa, coffee and tea – are better suited than others to this approach; for all these products, voluntary certification initiatives currently under way could provide identification mechanisms on which procurement policies could rest.
• Other commodities may not be as suited to procurement policy, and it may be more effective to use other regulations; this applies particularly to soy, for which biofuel regulations are likely to have a bigger impact.
• In cases in which private-sector initiatives are under way to achieve 100 per cent sustainable imports (such a target has been set for palm oil in several countries), procurement policy may be unnecessary. In other cases, the adoption of a new procurement policy could serve as the spur to a private-sector initiative. 

The aim of the meeting is to identify ways to improve monitoring of illegal logging and the trade in illegal timber. Building on the experiences of Chatham House’s project Indicators of Illegal Logging, the discussions will focus on the data needs of particular end users and methodological challenges for estimating levels of illegality. The potential for improved coordination and collaboration between global efforts to monitor trade flows will also be considered.

Attendance at this event is by invitation only.

Executive summary

China’s new role in the global governance of natural resources is coming to the fore against a backdrop of profound uncertainty, driven by the convergence of three interlinked trends. At home, China’s leaders are navigating the structural shift to slower but higher-quality growth, a phase of development referred to as the ‘new normal’, while facing considerable environmental and resource security challenges. Globally, the slowdown in China’s economy has sent reverberations through commodity markets, pulling the plug on the decade-long commodities ‘super cycle’. Meanwhile, China is taking on a growing role in global governance, from the G20 and multilateral development banks, to its regional partnerships in Latin America and Africa.

During the resources boom of the last decade, policy-makers and businesses in consumer countries were focused on high and volatile resource prices. The risks posed by resource nationalism in producer countries were seen in the proliferation of export restrictions and the increase in investment disputes. Today, the tables have turned, leaving producer countries facing economic pressure from falling revenues and investments. Many organizations have called on governments to phase out subsidies for fossil fuels and other natural resources while prices are low. The international policy debate is shifting to the immediate challenges presented by a massive oversupply of many energy and mineral commodities, and the longer-term risk of ‘stranded assets’.

These new resource realities will provide the context for China’s growing global role, as well as setting the tenor of its relations with producer countries. Over the past decade, narratives around China often focused on its real or perceived impacts from resource production overseas and consumption at home. In the next, China’s approach to resource security and sustainability will help define its reputation, and whether it is perceived as a responsible actor on the world stage and as a development partner. The collection of international narratives, norms, rules and organizations that currently guides resource production, trade and consumption – what we call ‘global resource governance' in this report – will provide the framework.

Much political leadership will be required to overcome the barriers to China assuming a more active role in global resource governance. On the one hand, there has been slow progress in expanding China’s role in organizations from the World Bank to the International Energy Agency (IEA). On the other, new instruments or processes initiated by China can be seen as a challenge to the existing rules-based order, as the US reaction to the establishment of the Asian Infrastructure Investment Bank (AIIB) demonstrated. Yet developments such as the US–China Joint Presidential Statement on Climate Change in September 2015, ahead of the Paris Climate Conference, show that it is possible to forge cooperation and boost the prospects for progress on public goods at the multilateral level, even in politically fraught areas.

China’s international role on natural resources is also closely tied to ongoing reforms at home. The introduction of ‘ecological civilization’ as a guiding principle for China’s development at the Communist Party’s 17th Congress in 2007 marked a recognition of the need not only to address China’s domestic challenges such as air quality and water scarcity but also shift to an environmentally sustainable model of economic development. In 2015 China’s leaders set out the key incentives, accountability and mechanisms to deliver the ecological civilization in China’s 13th Five-Year Plan. Central elements of this vision, such as building sustainable cities, pursuing environmentally-friendly economic growth and developing the circular economy will have major impacts on China’s future resource consumption and import needs.

Globally, the speed and scale of the economic realignments have taken most experts and policy-makers by surprise – in many respects, China’s new normal is the world’s new normal. The greatest challenge that China’s government faces is managing a shift to slower but higher-quality growth. It is clear that the ramifications of this reach far beyond the confines of the Chinese economy or global commodity markets; yet the situation remains fluid and the nature of a new equilibrium is difficult to predict. This only makes it more urgent to consider the strategic and practical options available to policy-makers, both in China and around the world.

This report is the result of two years of joint research between Chatham House and the Development Research Center of the State Council (DRC), including six expert workshops in China and conversations with international organizations. It discusses key policy areas in global resource governance as they relate to China – in light of recent falls in commodity prices, China’s shifting economic situation, and its growing global role in the ‘new normal’. The scope of the research is limited to non-renewable energy, metals and mineral resources; throughout this report, the term ‘resources’ refers to these commodities. Other traded commodities such as agricultural goods are not included, and land, water and air are discussed only in the context of their important linkages with energy and metals. 

The report considers the costs and benefits of a more active role for China in global resources governance. It recognizes that different commodities face different challenges and require different governance frameworks, and that different regions require context-specific responses. The report also considers the risks of more limited engagement of China and other new actors, which could mean declining relevance for existing processes and institutions that govern resource production, trade and consumption, and a diminished capacity to tackle longer-term challenges like climate change.

• Clearance of forests for agriculture is a major cause of deforestation worldwide; the three most significant commodities in this regard are palm oil, soy and beef, which between them accounted for an estimated 76 per cent of the deforestation associated with agriculture in 1990–2008. International markets are an important driver of demand, particularly for palm oil and soy.
• Global production of palm oil has grown strongly for several decades, more than doubling over the period 2000–13. Indonesia and Malaysia between them account for more than 80 per cent of palm oil production, and are likely to continue to dominate world exports. The European Union (EU), India and China are the main consumers, importing almost 60 per cent of the market; EU demand is driven significantly by biofuel policy, while India and China use palm oil mainly as a cooking oil and in processed foods.
• Global production of soybeans has roughly doubled since 2000, and the expansion of output has been particularly rapid in South America; Brazil and Argentina accounted for almost 50 per cent of global production in 2013. Overwhelmingly the main importer is China (which took 43 per cent of all soy imports in 2014), mainly for animal feed for its growing meat industry. The EU is the second largest importer, using soy for animal feed and biofuel.
• In contrast, consumption and production of beef has grown only slowly. Major producers are the US, Brazil, the EU and China; principal exporters are Brazil, India, Australia and the US. The US and the EU are still major consumers, although – as in most developed countries – consumption is falling slightly; other significant consumers include Brazil, India, Pakistan and China. Russia and Japan are also significant importers.
• Three main factors underlie the growth in both consumption and production of palm oil and soy: population growth; changing dietary preferences; and policy support for biofuels. The first two are just as relevant to beef. Continued growth in world population and the expansion of the global middle class, with accompanying higher consumption levels of processed food and meat, will continue to drive demand upwards – strongly for palm oil and soy, more weakly for beef. Given the difficulty of increasing yields, particularly in developing countries, the further expansion of agricultural land into forest areas is inevitable. None the less, three other factors may restrict this growth: the private-sector commitments and government policies that are being developed with the aim of decoupling agricultural production from deforestation; a loss of support for biofuels, most notably in the EU; and health concerns, particularly over the consumption of palm oil and beef.

At this session, the speaker will argue that our future hinges on a set of elements that receive scant attention even from those whose fortunes rely upon them. The speaker will outline why our electronic gadgets, the most powerful armies and indeed the fate of our planet depend on producing sustainable supplies of rare metals. He will outline some of the  new environmental, economic, and geopolitical consequences of supply chains and discuss the dynamics of the rare metal markets which are vastly different than traditional commodities traded on open exchanges. The speaker will also address some of the security of supply issues arising from China's role as the dominant consumer and producer of most of the world’s minor metals. Finally, the discussion will also include what countries and companies can do to ensure resilient supply lines.

Attendance at this event is by invitation only. 

As Nigeria seeks to diversify its economy, the federal government is prioritizing the development of the solid minerals sector, in order to enhance foreign investment, create local job opportunities and build technological capacity and expertise in mining.

At this event, Minister for Solid Minerals Development HE Dr Kayode Fayemi, will discuss plans and priorities for the solid minerals sector including the strengthening of regulatory frameworks and opportunities for investment. Following this, HE Aminu Bello Masari, governor of Katsina State, will discuss state initiatives for solid minerals sector development in northern Nigeria.

This event is now full and registration is closed.

Summary

The Guidelines for Good Governance in Emerging Oil and Gas Producers 2016, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. The following are the Guidelines’ broad recommendations for addressing these challenges.

• International best practice may not be appropriate in the case of emerging producers in the oil and gas sector. Instead, the aim should be for more appropriate practice, taking account of the national context; more effective practice, in the interests of achieving rapid results; and better practice, allowing incremental improvements to governance.
• Government policy should be guided by a clear vision for the development of the country and a strategic view of how the petroleum sector will deliver that vision. 
• In order to attract the most qualified oil company to a country with an unproven resource base, the host government can invest in geological data, strengthen its prequalification criteria and ensure transparency. It should also plan for success and anticipate the implications of hydrocarbon discoveries in its tax code, and be robust through declining oil and gas prices.
• Licensing is a key mechanism whereby government can reap early revenues and maximize long-term national benefits. Government must ensure that it simplifies both negotiations and tax structures to mitigate knowledge asymmetries with oil companies.
• Government and industry must engage and share information with affected communities to manage local expectations regarding the petroleum sector and build trust. 
• In emerging producers, budgets for local content may be small and timelines for building capacity short. In this context, the focus should be on the potential for repeat use of any local capacity developed. 
• Meaningful participation of national organizations in resource development is a central objective of many emerging producers. Capacity is needed to enable this, and the Guidelines examine where and how best to develop that capacity.
• Incremental improvements to the governance of the national petroleum sector will allow emerging producers to increase accountability. The focus in this regard should be on building up capacity in checks and balances as resources become proven.

Presenting latest thinking from our senior research fellows on the dynamics that will affect fossil fuels investment and markets in the year ahead and promoting high-level discussion amongst experts.

The first session examines the oil price market which faces great uncertainty in 2017 with the OPEC agreement in Algiers raising questions about  compliance, supply and impact on the industry's future. It will also assess how US production may alter given the new administration; the state of the nuclear agreement with Iran; and future events in the Middle East.

The second session looks at what Brexit and the election of President Trump means for energy and climate policy in the UK and globally, investigating the major challenges, areas of contention, and areas of opportunity for the UK’s climate and energy policy in light of Brexit.

The second speaker in this session will outline what the appointment of President Trump will mean for global energy and climate policy.

Attendance at this event is by invitation only.