Tenth Meeting of the PD-NR, 25-26 June 2018
Under the co-chairmanship of Chile, Kazakhstan, Liberia, Nigeria, Norway, and United Kingdom, 31 government delegations from Africa, Asia, Europe, Latin America and Oceania, as well as representatives from 6 partner international organisations and institutions, and 36 major firms, industry associations, civil society organisations, academia, law firms and think tanks, convened at the OECD on 25-26 June 2018 for the Tenth Plenary Meeting of the Policy Dialogue on Natural Resource-based Development. International organisations and institutions represented included the Commonwealth Secretariat, European Union, Extractive Industries Transparency Initiative, UN Conference on Trade and Development and World Bank. H.E. Mónica Aspe, Ambassador and Permanent Representative of the Republic of Mexico to the OECD, and Chair of the Governing Board of the Development Centre delivered welcoming remarks. Mr. Ibrahim Coulibaly, Director General of Mining and Geology, Ministry of Industry and Mines, Republic of Côte d’Ivoire, gave a keynote address on behalf of H.E. Souleymane Diarrassouba, Minister of Industry and Mines, Côte d’Ivoire. H.E. Dr. Emmanuel Ibe Kachikwu, Minister of State, Petroleum Resources, Federal Republic of Nigeria co-chaired the Thematic Dialogue on Commodity Trading Transparency, together with the United Kingdom.
Work Stream 1 – Shared Value Creation and Local Development
When discussing the integration of renewables into mining companies’ energy mix, participants noted the crucial importance of understanding the levelised cost of electricity incurred by individual mines, and the drivers associated, which may accelerate (e.g. low maintenance and increasing fuel costs, declining cost of technology) or impede (e.g. reliability, technology complexity, risks of debt financing and uncertainty around life of mine) the uptake of renewable energy technology. Further, participants highlighted the potential benefits of mining sector’s transition to clean power generation for improving energy access of remote off-grid communities by selling excess power generated, noting however that there should be, foremost, a compelling business case for the shared use of renewable energy infrastructure.
Three new examples, from South Africa and Western Australia, were validated for inclusion in the online Compendium of Practices, focusing on mobilising innovation to reduce environmental impacts of extractive operations, and developing green supply chains, while exploring options for shifting away from the export-led growth model, in addition to facilitating uptake of clean technologies. Participants noted that addressing risks and challenges associated with new technologies, such as ensuring secure supply of key minerals and impactful R&D initiatives, requires alignment across all levels of government to promote effective policies, including paying proper attention to the consequences for local communities. Further, as the “environmental hotspot” for green technologies differs from conventional ones – shifting from use, to extraction and production – both effective regulation and shared value creation around these minerals will be paramount. Participants further discussed efficiency gains linked to automation – in safety, productivity and emissions – and associated trade-offs, in particular jobs, further problematising approaches to local participation through employment quotas and targets. As technologies continue to evolve, determining which skills to prioritise is a further challenge for countries and industry alike, with consensus among participants on the need for reskilling initiatives focusing on transferable skills across multiple sectors, and the need to rethink benefits from mining beyond employment creation. Change, however, presents an opportunity to avoid mistakes of the past, and participants converged on the need for further work to support host countries in ensuring shared value creation in this new context.
Work Stream 2 – Revenue Management and Spending
Participants welcomed the new focus of this Work Stream on how extractive revenues can contribute to the financing of resource-rich countries’ energy transition. The discussion recognised that international action to combat climate change is already rapidly reshaping the economic context of natural resource-based development, aiming to decouple economic growth from greenhouse gas emissions. Participants noted however that uncertainty around the pace of the transition persists. Given that access to finance is one of the key challenges in facilitating the economic shift, helping developing countries manage their extractives revenues effectively in preparation for the transition is crucial. Participants emphasised the pressing need to reform fossil fuel subsidies; to create new low-carbon industries; and to diversify the energy mix and invest in clean energy infrastructure in order to improve security of supply, hedge carbon risks and address risk multipliers entrenched in emission-intensive economic growth. Importantly, the discussion also identified the need to scale up just transition policies to ensure that the new economic model would leave no-one behind. When considering the different revenue spending tools available to resource-rich countries to finance their transition, participants emphasised the importance of remaining flexible and country specific, given countries’ varying development level, institutional capacity and fossil fuel production stage.
Work Stream 3 – Getting Better Deals
A Workshop on the Guiding Principles for Durable Extractive Contracts took place in conjunction with the Tenth Plenary Meeting of the Policy Dialogue on Natural Resource-based Development, to follow up on the mandate received by the OECD Development Centre’s 52 member countries in October 2017 to further develop guiding principles so that host governments and investors can have a common reference to shape durable, equitable and mutually beneficial relationships. Participants recognised that there is always a level of risk and uncertainty associated with long-term extractive contracts, and while it is not possible to eliminate every potential driver for renegotiation, it is possible to minimise them. Participants focused on Guiding Principle VII and converged around a workable approach whereby costs of compliance associated with the introduction of non-fiscal laws, and wholly and necessarily incurred in the pursuit of the specific operations, would be deductible as operational costs, triggering adjustments under Guiding VIII, with the exclusion of egregious behaviours and the expected use of available new technological advances to improve operations. Participants agreed to reconvene to finalise the text of the Guiding Principles and present them at the next Plenary Meeting.
Work Stream 4 – Domestic Resource Mobilisation (tackling corruption in commodity trading and BEPS in mining)
Participants recognised that interrelated mechanisms of corruption and rent diversion in commodity trading are both multifaceted and global in nature, requiring producer countries, trade hubs and OECD countries home to companies active in trading to drive collective global action. Participants noted the role of the Thematic Dialogue on Commodity Trading Transparency in providing a platform for collaboration on how these challenges can be addressed from both the supply and demand side. Companies acknowledged the importance of transparency of trade-related payments and shared emerging disclosure practices around oil sales. At the same time, they also called for an assessment of the critical need for such information and the assurance that it would indeed translate into effective demand for accountability by end-users. Participants welcomed the peer-learning exercise on the procedures and criteria used to select buyers of publicly owned oil, gas and minerals and encouraged further exchanges within the dedicated SOE Working Group to identify best practices and inform the development of specific guidance. A protocol of collaboration between the OECD Development Centre and the OECD Directorate for Financial and Enterprise Affairs is being developed to clarify how to advance work on due diligence in commodity trading.
Regarding progress on on-going efforts to address tax base erosion and profit shifting in the mining sector in developing countries, the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) and the OECD Centre for Tax Policy and Administration presented a new draft toolkit titled 'The Hidden Cost of Tax Incentives in Mining'. The toolkit aims to help countries identify and cost the potential behavioural responses by mining investors to tax incentives. Preliminary work on stabilisation clauses; specifically, the challenges relating to countries applying new legal measures to address base erosion and profit shifting to existing mining investment agreements was also discussed.
Session 1 - Mobilising Resource Revenues from the Mining Sector: IGF-OECD Programme Tackling Base Erosion and Profit Shifting, building on the OECD/G20 BEPS Process
IGF/OECD Program on Tax Base Erosion and Profit Shifting in the Mining Sector, by Mr Howard Mann, Senior International Law Advisor and Ms Alexandra Readhead, BEPS Technical Advisor, Inter-Governmental Forum on Mining (IGF)
Session 2 - How can the extractives sector contribute to financing the global energy transition?
Government Revenues and Subsidies Related to Fossil Fuel Production and Comsumption, by Dr Ivetta Gerasimchuk, Lead, Sustainable Energy Supplies, International Institute for Sustainable Development (IISD)
Session 3 - Key drivers, obstacles and possible approaches to accelerating the uptake of renewables in extractives
Renewables in Extractives, by Mr Luc Tanoh, Head of West Africa, Cronimet Mining Power Solutions
Accelerating Uptake of Renewables: lessons from concrete projects, by John Okoro, Business Development Manager and Global Sector Lead, Mining and Metals, Vergnet Group
Session 4 - Compendium of Practices on the Framework on Collaborative Strategies for In‑Country Shared Value Creation
Minerals and Metals for a Low-Carbon Futre: The Need for 'Climate Smart Mining', by Ms Kirsten Lori Hund and Ms Daniele La Porta, Senior Mining Specialists, World Bank
Automation in African Mining: A Legislative View, Ms Nneoma Veronica Nwogu, Senior Counsel, World Bank
Fuel Cells Collaboration in South Africa, by Ms Fahmida Smith, Market Development Manager, Impala Platinum
Session 5 – Experience sharing and lessons from the disclosure of oil purchase payments by companies active in commodity trading
LUKOIL: Trading Iraqi Oil, by Mr. Gati Al-Jebouri, LUKOIL Mid-East Managing Director, Chairman of the International Oil Companies Forum in Iraq
EITI and Commodity Trading Transparency, by Mr Bady Baldé, Regional Director Francophone Africa, Extractive Industries Transparency Initiative’s (EITI) international Secretariat
Advancing Trade: Trafigura and Transparency, by Mr James Nicholson, Head of Corporate Responsibility, Trafigura
Session 6 - How do State-owned Enterprises select the buyers of publicly-owned commodities?
Selection of Buyers for State-Owned Commodity Trading Transparency, by Mr. Mele Kyari, Group General Manager, Crude oil Marketting Division,Nigerian National Petroleum Corporation (NNPC)
GNPC Buyer Selection Process, by Mr. Denis Baidoo, Marketing Manager, Ghana National Petroleum Corporation (GNPC)
Session 7 - What are the risks of corruption and rent diversion in commodity trading and how can companies identify and address them?
Vitol's Compliance Systems Against Bribery and Corruption, by Ms Odile Roy de Puyfontaine, Head of Compliance EMEA & Asia, Vitol
Evidence and Mitigation Measures for Corruption in the Trading of Oil and Minerals, by Mr Andreas Missbach, Head of Commodities, Trade and Finance and Joint Managing Director, Public Eye
Illicit Financial Flows and Development: Addressing the Risks of IFFS in Commodity Trading, by Ms Catherine Anderson, Team Lead – Effective, Inclusive and Accountable Institutions, Global Partnerships and Policy Division, Development Co-operation Directorate, OECD
18-19 Dec 2013: Inaugural Meeting | 3-4 June 2014: Second Meeting | 17-18 Nov 2014: Third Meeting | 29-30 June 2015: Fourth Meeting | 2-3-4 December 2015: Fifth Meeting | 22-23 June 2016: Sixth Meeting | 30 Nov-1 Dec 2016 : Seventh Meeting | 15-16 June 2017 : Eighth Meeting | 31 Jan – 1 Feb 2018 : Ninth Meeting | 25-26 June 2018: Tenth Meeting