International Business Transactions
Regional Integrative Trends In International Trade Relations - Is The Wto Under Threat?
Oluseye Arowolo
Seye_arowolo@yahoo.com
ABSTRACT: Regional trading arrangements have been on the increase since the 1990s. However, their implications for the multilateral trade system are uncertain. The collapse of the Cancun Round of trade talks and the threat by developed member countries to resort to regional and or bilateral arrangements as an alternative to the multilateral process has revived the debate over the 'real' implications of RTAs for the global trade system. This paper argues that the threat to the multilateral process is not the proliferation of RTAs but political-economic undercurrents provoking their formation. The paper therefore, examines the driving factors in the resurgence of RTAs and the regulatory framework for their formation. The paper also reviews their impact on the multilateral trade system and demonstrates that the way forward in international trade relations is an open and multilateral process. Thereafter, the paper proffers appropriate recommendations to enable the WTO to remain relevant despite divergent aspirations of its members.
How can developing countries maximize their chances for success when negotiating with multinationals? A closer look at the latest KJH-MCC negotiation exercise.
Aime Emmanuel Yoka
ay9@columbia.edu
ABSTRACT: In recent years, the bargaining power of developing nations has been considerably improved to the dismay of once mighty multinationals. Issues such as human rights, environmental concerns, or international law can now be made an integral part of the negotiating agenda. Unfortunately, far too many nations are still unaware of the tools available to them when facing multinationals especially very rich ones. The first part of this paper looks at some of the instruments capable of establishing an equilibrium between parties with seemingly insurmountable disparities. The second part of the paper examines the latest negotiation simulation exercise between KHJ and MCC. It is the conclusion of this paper that governments must always give a higher priority to the welfare of their people.
Compulsory Licensing Under Article 31 of TRIPS Agreement and the Doha Development Agenda
Adenike O. Esan
nikeesan@yahoo.com
ABSTRACT: The TRIPS Agreement was introduced into the World Trade Organisation Multilateral Trade System to afford protection to intellectual property rights holders in member countries. Compulsory licensing vitiates this monopolistic right by allowing member countries to issue licenses to others to produce patented products without the patent holder's consent. Compulsory licensing and parallel importation are two flexibilities which developing countries and least developed countries have compelling need of, in order to have access to cheap and available generic versions of patented drugs to deal with national emergencies, life threatening diseases or other public health cases. The benefit to developing countries and the perceived loss to developed countries cannot be over emphasised. Compulsory licensing is provided for in Article 31 of the TRIPS Agreement whilst parallel importation is expressly prohibited by virtue of Article 31(f). By virtue of the on-going trade round, known as the Doha Development Agenda, the issue of the legality and propriety of both compulsory licensing and parallel importing has been laid to rest. The combined effect of a November 2001 Declaration and the August 2003 Decision emanating from the Doha trade round, has now made it possible for developing countries without manufacturing capacity to import cheap generic drugs produced under compulsory licenses. This paper examines the intellectual property regime under the WTO trading system with particular emphasis on Patent provisions. It also reviews WTO guaranteed patent rights vis-à-vis the public health debate and concludes that the August 2003 Decision is a step in the right direction for developing countries but its implementation is potentially subject to abuse.
What are the principal risks to foreign investment in oil and gas projects in developing countries?
Orighoye Rewane
o.o.rewane@dundee.ac.uk
ABSTRACT: Multinational corporations see a need for expansion into developing country markets, as the globalisation of markets has made it necessary for them to locate in places where the cost of production is low and markets are available. Hence, there is a need for them to search for host states that provide a cornucopia of resources, cheap labour, large markets, political stability and low risk.
However, while in turn, there is a need for foreign investment by developing countries, as all OPEC countries, excluding the United Arab Emirates, experience financial strains, the ending of colonialism, the consequent emergence of economic nationalism and the absence of protection through the exercise of military power has meant that in the modern world, states, as sovereigns, now possess significant control over their natural resources, giving them, inter alia , the right to change their laws, policies and regulatory systems for developing these resources, thereby increasing the risks to foreign investment. While analysing these principal risks, this paper will also highlight some strategies which could serve to encourage foreign investment.
Does Bolivia have sufficient bargaining power against the multinational Pacific LNG in order to obtain a substantial share of the economic rent from the LNG Project?
Alvin Anaya
alvin@clhboper.com
ABSTRACT: A country, such as Bolivia , with so many difficulties is in an urgent need of significant financial resources to be invested in health, education and infrastructure. The latest discovery of huge gas reserves has been seen as an opportunity for the government to increase its revenues. However, these reserves are so large that not even neighbouring countries are able to absorb it, at least in the short term and possible even in the medium term. Given the LNG technology, Bolivia now has a feasible opportunity to monetize its reserves of natural gas exporting it to more distant markets in the USA and Mexico . How much Bolivia can gain from this business will depend not only on the market conditions but also on her negotiation capability to obtain favourable conditions for export with the multinational company which is going to be engaged in this LNG enterprise. Hence, this paper analyses the issue as to whether or not Bolivia has adequate bargaining power to achieve this objective.
"End-Use" as a Criterion in the Determination of "Like" and "Directly Competitive or Substitutable" Products under Article III:2 of GATT 1994.
Marcus Clinch
m.s.clinch@dundee.ac.uk
ABSTRACT: End-Use within the context of "Like" and "Directly Competitive or Substitutable" Products under Article III: 2 of GATT 1994 presents some questions when latent competition is introduced. Will products targeting two different end-uses find that the "accordion" of "likeness" squeezes a little too tight? The Michiu or rice wine debate in Taiwan provides a good and timely context on which to conclude the analysis.
Competition Law
To What Extent Is The Concept Of Collective Dominance Applicable Under The ECMR?
Arua Kalu Onuma
aruako1@yahoo.com
ABSTRACT: The ECMR upon its enactment in 1990 filled a lacuna in European Merger Regulation. Prior to the Regulation, Articles 81 and 82 had been employed as instruments of merger control with varying success. One of the key objectives behind the ECMR is the prevention of a concentration leading to the creation or strengthening of a dominant position which may lead to the prohibition in Article 2 (3). The reference by Article 2 (3) to a single undertaking has raised some debate as to the applicability of the concept of collective dominance under the Regulation. Even where it is conceded that the concept is applicable, uncertainties remain as to the extent of applicability. Therein lies the concern of this paper. The paper attempts a discharge of this burden by adopting an analytical approach. The concept and pre -ECMR regulation of mergers are reviewed to provide a workable background. The scheme of the Regulation is considered next with particular emphasis on the appraisal of concentrations. The paper then analyses the concept of collective law under European competition law and the ECMR. It concludes with an outline of its findings and appropriate recommendations.
The Legality of OPEC under US Antitrust Law and EC Competition Law
Adenike O. Esan
nikeesan@yahoo.com
ABSTRACT: The US and EC have well developed antitrust laws which have been used over the years to regulate both conducts occurring within and outside their respective territories. The extraterritorial application of both laws is not in doubt considering the avalanche of decided cases. One common denominator shared by these two competition regimes is their aversion and dislike for cartel practices, which are considered the worst kind of anticompetitive practices. Whilst OPEC prides itself as an intergovernmental organisation, it is trite that OPEC is considered an international cartel that wields so much power and influence globally. Particular conducts of OPEC are infringements under both the US antitrust law and the EC competition law and have been condemned from time to time. Incessantly the media is rife with calls and demands for OPEC to be sued but no such suit has ever been instituted within the framework of the US antitrust law or the EC competition law by the respective competition authorities. Meanwhile OPEC takes the view that its activities are justified and appropriate for the protection of its members' inalienable right over their exhaustible natural resources and for the purpose of effecting stabilisation in the global oil market. Tackling these irreconcilable differences of sovereign states with the instrumentality of competition law is the issue for discussion in this paper. This paper analyses the position of the US and EC competition regimes and concludes that there are indeed legal, jurisprudential and political limitations inhibiting the prosecution of OPEC and recognition of this has dissuaded the US and EC from embarking on an exercise in futility. Internationalisation of competition laws is one viable means that should be explored with a view to resolving this very controversial issue.
Application Of The Concept Of Barriers To Entry Under Article 82 Of EC Treaty: Is There A Case For Review?
Oluseye Arowolo
Seye_arowolo@yahoo.com
ABSTRACT: At the heart of Article 82 antitrust analysis is the concept of market power. The approach of the EC competition authorities is to define the relevant antitrust market and assess the degree of market power held by a dominant undertaking thereon. In making this assessment, EC competition authorities have focused on the market shares of the undertaking in the relevant market without any rigorous inquiry into the relevance of entry and exit barriers. A firm can, however, only exercise market power for a significant time if there are barriers to entry to that market. The direct thrust of this paper, therefore, is to examine the application of the concept of barriers to entry under Article 82 with a view to determining whether there is a case for EC competition authorities to re-appraise their approach to entry issues in the determination of dominance. Towards this end, this paper provides a synoptic and conceptual analysis of entry barriers and their forms; reviews the present approach of EC authorities, the policy considerations and scheme, which underpin this approach under Article 82. Thereafter, the paper forays into the concerns, which the present application of the concept of barriers to entry has generated, and considers its implications for efficiency, new industries and consumer welfare. The approach of this paper is clearly analytic.
Mineral and Petroleum Taxation
How Should Environmental Tax on Sulfur Stocks be Levied in Kazakhstan?
Klara Nurgaziyeva
klaran23@yahoo.com
ABSTRACT: Despite the existing diversity of policy instruments that state authorities may use in pursuing their environmental protection policy, by the end of last century in most countries, preference was given to environmental taxes that make a polluter but not the society pay the costs of environmental pollution. However, while imposing environmental taxes state authorities need to comply with certain rules that could prevent a conflict with business players, particularly, foreign investors. On the basis of a recent legal case in Kazakhstan connected with imposition of the environmental tax on sulfur stocks, this paper reviews criteria for designing environmental tax and suggests an alternative approach that could be used by the Kazakh state authorities.
How Can Tax Allowances Promote Investment In The Nigerian Petroleum Industry?
Bede O.N Nwete
bon_law@yahoo.co.uk
ABSTRACTThe problem of promoting investment in the Nigerian Petroleum Industry seems to grow with its importance in the Nation's economy. This paper analyses the reason behind this by examining the need for a special fiscal regime for the industry. It also takes a look at the objectives of petroleum taxation, highlighting the role and importance of tax allowances in the industry. In examining the Nigerian Fiscal Regime for Petroleum especially with the Petroleum Profit Tax Act (cap.354 Laws of the Federation of Nigeria, 1990), the Deep Offshore and Inland Basin Production Sharing Contract Decree (No. 9 of 1999 as amended), and other legislations, it shows why the tax allowances and incentives have failed to make the desired impact in the Industry, highlighting the constraints and limitations to their workability. In suggesting the way forward, it reviews the global trend and shows how tax allowances can be made to promote investment in the Nigerian Petroleum Industry .
How attractive are the fiscal regimes of the deepwater areas offshore West Africa to foreign investment?
Eigbe Odianosen
o.s.eigbe@dundee.ac.uk
[Link to full article]
Are there economic limits to efficient taxation in mineral and petroleum fiscal regimes?
Anaghara Obiageli Phina
phinaferd@yahoo.com
ABSTRACT: Every government strives to put in place a fiscal regime that is attractive to investors and at the same time secures a flow of revenue for the government. Government should seek therefore, to take more of the economic rent by the use of certain fiscal tools geared towards achieving this. The concept of economic rent is central to any discussion on efficient taxation of natural resources. The host government is entitled to a considerable portion of rent generated from the mines and oil fields by virtue of the ownership rights which are vested in the state. However taxation of these resources may prove to be economically inefficient where due to the wrong use of tax instruments, development of the resources results in a waste. The intention of this paper is to examine the limitations of certain tax systems in efficiently targeting the rent, thereby making the system tough from the investor's perspective.
[Link to full article]
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Mineral Law and Policy
Structuring A Social Licence: An Oxymoron?
Luis Felipe Huertas Del Pino
felipehpc@hotmail.com
ABSTRACT: In the light of the debate addressing whether mining operations require, alongside regulatory licences, a social license to operate, the paper tries to answer if the latter -an extra-legal, abstract, and ethereal concept, often identified outside the mining core business- can be structured in the same way regulatory licenses are. Should a structure be possible, then the process for obtaining a social license may be guided by a sort of "road map", thus giving mine planning the option to incorporate since early stages crucial analysis of the social environment. Attempt will be made to answer the question by examining, in first place, the importance in the role the social dimension may play in the future of the mining industry. In second place, we will visit some concepts associated with "good" corporate practices within this dimension, such as the instruments that foster compliance beyond regulatory requirements, good reputation, and avoidance of liability, social risk management, and costs. In the final chapter, we try to structure a social licence with all the available tools .
Should developing countries promote mineral activity to achieve economic development?
Barbara Vons
barbaravons@yahoo.com.ar
ABSTRACT: In the nineteenth and twentieth century mining was considered an important creator of wealth that enabled the generation of economic rents and facilitated economic development. The notion that mining per se created wealth was regarded as self evident until the 1980's when several studies reported an inverse correlation between a country's dependence on minerals and economic growth. These studies showed that the per capita income of mineral rich countries was likely to grow more slowly than those of resource poor countries and concluded that as a group, mineral rich countries showed the slowest growth. Although the validity of the conclusions has been challenged, serious doubts concerning the potential benefits of mining for developing countries have arisen. In this paper the objective is to examine whether developing countries should promote mineral activity to achieve economic development and to identify whether mining disadvantages, either perceived or real, prevail over mining potential benefits. The conclusions suggest that the possession of mineral deposits alone is not a guarantee of economic development. The extent to which most of the potential benefits of mining are realised entirely depends on the quality of the countries administrative, judicial and legislative institutions. They have the power to support or hinder economic development. Ultimately the final question should be: Which are the appropriate policies to be implemented in the developing world in order to ensure economic development? In that answer lies the essence of the development process.
Petroleum Economics
What are the constraints on associated gas utilization?
Kristine Petrosyan
k.petrosyan@ftnetwork.com
ABSTRACT: With the growing share of natural gas in global energy consumption there is increasingly higher interest in associated gas utilization issues. For a long time, oil producers have simply flared this unwanted by-product of oil, citing various reasons that constrained its utilization. The share of flared gas in total gas output varies among main oil-producing regions and nations. This paper looks at several country cases with different situation of associated gas utilization and available options for associated gas development to define constraints still reining in associated gas utilization.
Is it fair to measure the efficiency of state owned enterprises by the economic criteria developed for private enterprise? Examples from the energy sector
Helena Inniss
hinniss@energy.gov.tt
ABSTRACT: State owned industries have been categorised as inefficient since the 1980s when there was a shift in the value system. The proof presented in support of the inefficiency has been in large measure superficial. The state owned industry may very well be inefficient but what matters is that they should not be compared to a type of enterprise that was established for an entirely different purpose. This skews the data and helps to support prejudice. The state owned company has its place in the society as an agent of distribution where this cannot be directly done by the State. Efficiency measurements should therefore focus on how well it carries out its mandate.
Energy Economics
Liberalisation in the Venezuelan Power Sector: What is it stalling it?
Patricia Ventura Nicolas
PLVentura@mail.com
ABSTRACT: For the period 2003-2013, Venezuelan electricity sector requires a total investment of US$13.3 billion in order to attain high demand growth (from 3.6% to 4.5% in the next years) and solve problems of service reliability. In view of this, Venezuelan power sector decided to start a liberalization process which has not achieved much success for the past eight. The first step was made by the "Decree 1558" in 1996. The second step, legally stronger and better received from different electricity players, has shown no sign of advancement after five years. Hence the aim of this research paper is to identify what factors are constraining the liberalisation in the Venezuelan power sector. This research paper concludes that the lack of consensus of the government about the nature of the reform, the lack of a regulator in terms of the absence of autonomy in its formal structure, as well as the non-liberalization of the gas market are just some of the reasons that are constraining the liberalization in the Venezuelan power sector.
Operational Vertical Integration in the Gas Industry, with emphasis on LNG: Is it necessary to ensure viability?
Helena Iniss
hinniss@energy.gov.tt
ABSTRACT: LNG has been used for the transport of gas since the early 1960s but was never the project of choice for gas commercialisation because all the infrastructural elements of the project were too costly and the markets were limited and regional in nature. The LNG business is now in its second incarnation; the market is expanding and it is now the project of choice for gas monetisation. An LNG project is still very capital intensive and requires investors with have deep pockets. All the major petroleum companies are investing through the chain to ensure the security of their investment and to jump-start the globalisation of LNG trading. They have moved out of their traditional areas and are investing all the way into the market. The reciprocal has also happened. This paper attempted to establish whether this spreading of effort is necessary to ensure viability but did not succeed in its attempt to do so.
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Downstream Energy Law and Policy
What is the current status of Russian electricity sector in the light of restructuring laws and RAO UES breakup strategy?
Kristine Petrosyan
k.petrosyan@ftnetwork.com
ABSTRACT: Russia has been restructuring its electricity sector since the breakup of the Soviet Union , first as part of general economic reforms, and, more recently, as electricity sector-specific deregulation efforts. The pace of change slowed down considerably in mid-1990s, but it has accelerated with the approval of reform legislation in 2003. A significant part of the reform concerns the country's biggest electricity company, RAO UES' breakup into transmission, generation, and other service provider companies. Yet, the fact that the sector is set to experience significant changes does not mean that it starts from a state-owned monopoly status, as many outside observers believe. This paper tries to define the current status of Russian electricity sector to create background for future research.
The Independence And Efficacy Of European Community (Ec) Energy Regulators: How Possible?
Ifunanya C. Nwajagu
Ifunanya_c_nwajagu@hotmail.com
ABSTRACT: This paper studies the evolution of the emerging common energy market in the EU with particular reference to energy regulations. The trend of the Directives and the regulations is towards creating independent regulators in member states to achieve the objectives of the common energy market.
This paper aims to show the relevance of independent regulators in the scheme of things, particularly, whether in practice, there could be effective, Independent Regulators. It provides a discussion of three key issues: first, the historical emergence of Independent Regulators through the single European Act of 1987 to the new Directives and Regulations; second, the functions of regulatory frameworks and the independence of regulators and third, the performance of Independent Regulators. In general the paper demonstrates that it is possible to have independent and effective energy regulators if the requisite indices discussed are put in place.
Internal European Electricity Market - Dream or Reality?
Jan Nicolai Hennemann
jnhennemann@gmx.de
ABSTRACT: Almost two decades ago European Union policy-makers started the ambitious project of creating an internal market for electricity. The spirit of this undertaking is to establish an open, competitive and interconnected Europe-wide trading-forum to which all potential marketers have non-discriminatory access under the same basic conditions. Therefore, some apparently insurmountable obstacles must be mastered either on a national or European level. As this process is flawed by the interests of national governments and those of monopolistic companies, the European Commission has been continuously calling for more harmony among the Member States' electricity markets. In this relationship, three synchronising tools can be identified: Firstly, national monopolies must be abolished, notably those intrinsic to essential facilities. Secondly, uniform conditions of competition throughout Europe have to be corroborated and last but not least, barriers to cross border supplies of electricity need to be removed. To verify the likeliness of national interests prevailing over "subsidiary" EU Community law, this research paper will examine the attempts and achievements to prevent further abuse of the existing natural monopoly in the three strongest European market-economies: the U.K. , France and Germany . Taking into account these evaluations and the potential future commitments of the Member States, the capability of this European long-term project shall be assessed.
What has been the impact of liberalization on UK Security of Supply?
Marcus Clinch
m.s.clinch@dundee.ac.uk
ABSTRACT: The energy sector in the United Kingdom has been liberalized. The liberalized energy policy seeks security of supply through the forces of the market. Competition will provide security. This represents a new stage in the UK 's interesting security of supply history. The post-war nationalized energy sector was driven by the pursuit of economic prosperity and domestic security of supply but this had soured by the 1970's. Labour unrest in the coal industry and an oil crisis threatened the nation. Domestic system risk had posed a greater threat than anyone had imagined. By examining the history of security of supply during the nationalized period and then at liberalization, the challenges that the UK will face in the future can be seen
Oil and Gas Law
Is there a Legal and Functional value for the Stabilisation Clause in International Petroleum Agreements?
Amaechi David Nwokolo
anwokolo@hotmail.com
ABSTRACT: Stabilisation Clauses in International Petroleum Agreements are an attempt by the International Oil Company (IOC) to neutralise the Host State 's power to unilaterally change the terms of an already concluded agreement. The shift in the balance of power from the side of the IOC to that of the Host State after investment has been made, demands that IOCs insist that contractual terms remain constant through-out the life of a project, or that any change would require agreement between both parties before it may be effected. There are conflicting views about the legal and functional value of stabilisation clauses in international petroleum agreements; however what cannot be escaped from is that they serve a useful function in such agreements as one of the best means utilised by the IOC to manage the political risk that petroleum projects face. This paper analyses the legal and functional value of stabilisation clauses in international petroleum agreements and concludes that their use is dependent on the confidence that the IOC has in conducting business with the Host State in question and how desperately it wants to access its petroleum resources.
Human Rights and the International Natural Resources Industry
What Is The Role Of Corporate Social Responsibility Norms In Facilitating Respect For Human Rights By Mining Multinational Corporations Operating In Developing Countries?
Ahmed Mohammed Yabo
amyabo2003@yahoo.co.uk
Abstract: It is recognised that Multinational Corporations engaged in mining and operating in developing countries, as elsewhere, are business entities primarily set up for profit motives. However, it is equally true that they exist and operate for the benefit of people. It therefore follows that they have a duty to strive and attain a reasonable balance between profits, on the one hand; and human and environmental sustainability, on the other. It can be argued, for example, that MNCs could create employment and that the host country could earn revenue. However, this must not be at the expense of human and environmental abuses. Corporate responsibility, in general, and corporate social responsibility, in particular, must be distinguished from corporate philanthropy and even outright public relations by MNCs. Human Rights norms can facilitate the attainment of CSR through several mechanisms. Current trends, however, appear to favour voluntary and co-operative initiatives by all stakeholders as well as moral suasions and sanctions, in addition to the force of law
Multinational Corporations and the BTC Pipeline Project: Any Hope for Human Rights and Sustainable Development?
Bede O N Nwete
bon_law@yahoo.co.uk
Abstract: Respect for human rights and sustainable development ought to be the basic tenets upon which any country rich in natural resources especially oil must base any investment in its extraction. This however does not seem to be the case, instead of sustainable development and respect for human rights, investments associated with oil exploitation have rather come to be a curse to the people depriving them of their basic rights and unleashing abuses and deprivation on them. This paper critically examines the BTC Pipeline project in the light of the above issues. It assesses the role of the Multinational Corporations involved in the project as well as the host governments, the IFC and other multilateral agencies with a view to ascertaining whether these roles conform to international human rights and sustainable development standards. It also suggests ways by which these issues can be improved upon.
International Project Finance
What Effect does the Emerging Spot Market for LNG have on the Financing of Gas Projects?
Osadebe Uzoma Chidinma
uzoosadebe@yahoo.co.uk
ABSTRACT: The prospects for gas are enormous, primarily as a result of its environmental credits, decline in production costs, EU security of supply issues, as well as the emergence of new fields and markets. In the past few decades the LNG trade had matured to the extent that most associated risks had become reasonably well understood by the international finance community. A fundamental paradigm shift is occurring with the emergence of a spot market for LNG. This shift tests the traditional project financing theories and assumptions. This paper therefore seeks to examine this paradigm shift Vis a Vis the traditional methods of financing gas projects. Where pertinent, examples will be used as a means of illustration .An attempt will be made at highlighting the new and enhanced risks impacting on the project financing of gas projects. This paper will conclude with suggestions project financiers can seek to cushion these new risks.
How Does A Syndication Agreement Deal With The Conflicting Interests Of Lenders?
Eigbe Odianosen
o.s.eigbe@dundee.ac.uk
ABSTRACT: In a world of high costs and high risk investments, the importance of project finance has never been underestimated. This however becomes even more crucial when approached from the point of view of the project lender, who would clearly appreciate the need to share the costs and risks associated with high cost project financing. Syndicated loans have been known to provide the avenue through which large amounts of finance can be raised, while at the same time reducing the risks to each of the project lenders. In line with such an arrangement, a syndicated loan agreement would usually be entered into by a consortium of lenders; each having its needs and objectives peculiar to itself. This paper examines the way in which the individual rights, duties, obligations, powers, liabilities and limitations of lenders may be designed within the loan agreement to avoid or minimise any conflicts of interests or objectives which may arise.
[Link to full article]
Abolition Of Long-Term Contracts: What Are The Implications And Options For Bankability In Energy Projects Financing?
Oluseye Arowolo
Seye_arowolo@yahoo.com
ABSTRACT: Liberalisation of energy markets has made a re-examination of the role of long-term take or pay contracts in the financing structures of energy projects inevitable. Abolition of such contracts had been contemplated post-liberalisation in notable energy markets. Although long-term take or pay contracts may yet be viable mechanisms in energy project financing, the prospect of their abolition is a potential but extreme incident in the context of this paper. This therefore provokes an inquiry into the implications of abolition and to determine whether real, flexible and market-based mechanisms exist for assuring predictable cash flows to support the economics of energy project financing in the absence of long-term contracts.
In addressing this issue, this paper adopts an analytic approach. It reviews the rationale and functions of long-term contracts, their relevance in the economics of energy projects - pipeline, oil, gas/LNG, and power with specific emphasis on the peculiarities of each project's financing structure/arrangements. The paper reviews the case for abolition and considers the implications for bankability of such abolition for energy financing purposes. Thereafter, the paper reviews and evaluates the possible options for enhancing revenue earning potential of energy projects in the absence of long-term contractual arrangements.
What do Derivative Instruments Offer By Way Of Risk Management in Oil and Gas Project Financing?
Chiemezie Ejinimma
c.u.j.ejinimma@dundee.ac.uk
Abstract: The evolution of derivatives is one of the great achievements of modern finance, and it has become an essential tool in risk management, basically offering organisations the possibility to reduce risk within the larger financial system, which they do not have direct control over, thereby allowing them to focus on the risk they are better able to manage. However the concern has been on the application of these derivative instruments especially among end users, with respect to specific projects. Recognising the need for proper risk management strategies in attracting debt finance for projects, this paper tries to analyse how derivatives can be used to mitigate key risk components capable of adversely affecting the viability of oil and gas projects. The conclusion highlights the necessary conditions for effectively extracting the best out of the use of derivative instruments for risk mitigation.
The Ilisu Dam
Selma Stern
selma_stern@yahoo.com
This article previously appeared in the Spring Issue of The Journal of Structured and Project Finance and is reprinted with permission from the Institutional Investor, Inc.
ABSTRACT: One of the largest water resources development projects in the world is the projected GAP or Southeastern Anatolian Project, consisting of 22 irrigation dams and 19 hydroelectric power plants. The GAP covers developments in several areas: electricity, agriculture, social, economic, and environmental development. The total financing of the GAP project requires $32 billions. With its focus on human dimension and sustainability, the project aroused international interest. US, Japanease, German, UK , French and further European export credit agencies are supporting the GAP financially. However, one of the projected dams - called Ilisu Dam - is controversial, mainly because of the land that would need to be flooded and the Kurdish people who would need to be resettled. The paper shall provide an overview of the GAP and the Ilisu Dam Project. It shall outline existing opinions on the Project and its finance. The paper will therefore evaluate assessment reports considering the Project. Finally, the paper will independently examine the Ilisu Dam Project and its compliance with international standards.
