Resource Nationalism, Expropriation, and Creeping Expropriation Affecting the Extractives Sector

When an international oil company (IOC) decides to invest in a foreign country, it must assess the commercial feasibility and the expected return from a project while considering both the investment environment and political regime.1 All investments come with some degree of risk, and there is usually a positive correlation between this and an investment's potential return.2

Aside from the more usual investment or market risks, investors in international energy projects must take into account those that are unique to specific investments and those that are particular to the sector as a whole.3 Energy projects commonly lack certainty due to the economic, financial and political risks that are encountered.4 These investments are usually based on a separate negotiated corporate-host investment agreement that enables investors to address their needs, which are often particular to each project.5 The real concern of investors when using such contracts is [4-15] not so much the possibility of host governments leveraging their strong bargaining positions to lead to unfavourable terms, as the possibility of being subject to political risks - that is to say, political processes and current events - which may hinder the achievement of their goals and operations. Unfavourable terms may be rather unpalatable, but are at least able to be factored into investment decisions and dealt