Emerging Nations - Energy PPP




Many of the emerging nations of the Global East, Global Middle and Global South are rich to very rich in energy natural resources. The current resources exploitation business model still has the old-fashion colonial structure: exploration of them for almost free and exporting them. The nations and their governments have only small benefits of this neo-colonial model: as the value adding take place in other parts of the world. Simply because there’s no alternative for it.

This is what we want to change: delivering nations an alternative for the neo-colonial model. As it’s really time to abolish this neo-colonial model. Abolishing it gradually by replacing it wisely by a new model that’s more beneficiary to nations and its population and businesses. A model where the natural resources are processed (upgraded in value chain) in the nations of origin. Delivering an income boost for the governments (making them able to provide public goods/services) and delivering a natural resources driven economic boost to the national economies.

What would the alternative for the old neo-colonial model look like? Or better said: what should the ideal new national focused model look like? Let’s first determine some important facets. We think that the state should stay state and not become a mining corporation. We think the states should focus on improving governing. This include a wide scoop of resources revenue legislation, environment protecting legislation and labour protecting legislation. We think corporations should focus on improving mining (doing it the most profitable way and the most environmental friendly way). As long the state gets 50% of the revenues of the mining corporation (and has the power to enforce such) the problem is solved instantly. But this will make national governments still the subject of huge multinational corporations who can play around governments by cartel agreements with their competitors. So there a new model needed.

These lines above are certainly not a plea for a wave of nationalization of existing energy exploration foreign corporations. We think nationalization damages the imago of a nation abroad and by this damages the nation in its progress process. Therefore we think that existing operations should continue producing in the way they do. Although we promote the concept that any government should have/demand 50% of the real (in OECD language called ‘arm’s length distance’) revenues (resources revenue legislation). As the governments of the nations of Africa otherwise never will be able to build/provide enough public goods/services: they need this income flow resources income. Although we also promote the concepts of both environment protecting legislation and labour protecting legislation too. But most of all we also promote the concept of developing a national energy exploration and facilitating industry. There are too much benefits/advantages in this that nations in the old neo-colonial only energy explorating and raw exporting model don’t get. To name them: there are sector attached ‘internalities’ and general economic/fiscal/monetary ‘externalities’.

Regarding the energy processing delivered ‘internalities’ effects: 1) getting global market access without the multinationals, 2) being able to make bilateral deals with other nations, 3) being able to use also lower grades energy types (that now are worthless: they have now no commercial value on the international market) by molecule to electron (power generation) technology, 4) significant up-cycling in the energy value chain (just crude has no value added, processed cude has a huge value added), 5) being able to operate inland (non-coastal), etc, etc. This list of positive sector ‘internalities’ could go on and on. It opens perspectives that otherwise would stay closed.

Regarding the energy processing delivered ‘externalities’ effects (economic/fiscal/monetary): a) emerging nations needs a lot of energy fuels themselves, energy fuels that they now must buy more expensive with foreign added value and unnecessary double transport costs, b) importing foreign processed energy fuels burdens the national trade balance, c) burdening the national trade balance is creating monetary instability, d) importing processed energy fuels doesn’t have the same thriving drive to economies as processing nationally has, e) the quality imago of a nation rises by development of own energy processing technology, f) delivering diversification of the economy, g) delivering extra growth to the economy, h) delivering more jobs (and addressing unemployment), i) around energy exploration and energy refining/processing whole service sectors will emerge, j) energy processing has been always a huge drive in industrialization everywhere in the world, k) cleaner environment due more own environmental demand, l) less dependency of abroad (more autarky), m) better monetary health, n) possibility of barter deals, o) possibility of BCS (bilateral currency swaps), p) stopping ‘brain drains’ (as university graduates have more future possibilities in their own nations), etc, etc. This list of positive ‘externalities’ could go on and on. It opens perspectives that otherwise would stay closed.

So once again: What would the alternative for the old neo-colonial model look like? Or better said: what should the ideal new national economy focused model look like? It should be a PPP public private partnership). It should be focused on both energy exploration and energy processing (up-cycling in the value chain). Why? The state should have 50% ownership in this entity. The PPP should be good in both exploration, infrastructure and processing. The PPP should sell the processed (in the value chain up-cycled) commodities in open contracts. The PPP should organize all finance demand. Placing the nation and it progress central and no longer a central place for the interests of those multinational mineral corporations who has not real binding with any nation they operate in.

The PPP should divide it's function in two devisions: Underground and overground. These two are quite different in nature. Underground is about exploring and exploration and depends heavy on right geological knowledge. We have science teams that could map/deliver the best exploration locations. Drilling and producing could be done by third party companies based on tenders. Overground is about mainly infrastructure and processing. So overground is about high capacity and safe pipelines (oil, gas and sometimes seawater too, with attached power infra, pumps and metering), power plants that uses excess gas to convert them from molecules to electrons (to feed the national power grid, to export electrons too), high capacity powerlines, LNG plants, GTL plants, fertilizer plants, rail roads, rail tanks, sea terminals, deep sea harbours, an oil trading bourse, oil company listings on the stock exchange, etc. The better the overground facilities are, the more profitable and atrractive the energy exploration/processing becomes. Pipeline infrastructure should be in the hands of the State (and also being protected by the State too).

Together with the IDB (Islamic Development Bank) we offer nations an instant full package PPP solution for energy exploration, infrastructures and processing. The only thing needed is a signature on an one page ‘energy exploration PPP contact’ delivering the national state 50% ownership in the PPP. The IDB is owned by and serves 56 nations worldwide. The IDB operates by Islamic finance principles where finance is done not by debt models (as the Quran forbids debt and interest), but by equity based models. We use the other 50% for achieving the equity based finance of all the large/huge investments needed. We arrange the construction, the operation and the sales organization. We‘ll do as much of the manufacturing/constructing of the investments in the nation (for example: we install a truck factory, a pipe factory, an iron mill, etc). We hire as much as possible national workforce. We use as much as possible national businesses.

(the same as for energy resources at large could be said for mineral resources exploration at large: see http://www.planck.org/publications/Emerging-Nations-Minerals-PPP)

(see also the 'Emerging Nations - Electricity PPP' model: http://www.planck.org/downloads/Power-For-Africa.pdf)

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See also Money Creation
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See also Productive Capitalism Perspectives
See also Emerging Nations - Electricity PPP
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See also Global West Enters Economic Adulthood
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See also Immigrants and Trade
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See also National Solar Fund Model
See also Secular Islamic Finance
See also Open Energy Finance Platform

Gijs Graafland | Planck Foundation | Amsterdam | 2015



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