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Trends in Financing Mining and Oil and Gas Projects

Nabil Khodadad, International Mining and Oil & Gas Law, Development and Investment (2009)

This paper explores the impact of (i) the recent global financial crisis, (ii) the fall of commodity prices, (iii) the growing importance of sustainability and transparency, and (iv) the resurgence of resource nationalism on the availability, structure and terms and conditions of debt financing1 for oil and gas and mining projects.

I Global Financial Crisis

We are currently in the depths of a global financial and economic crisis. The World Bank projects global growth of-1.7% for 2009.2 The picture for the developed world is even more bleak: the OECD has recently projected growth of -4.3% for 2009.3 Most analysts believe that the world is unlikely to emerge from recession until 2010 at the earliest.

The global financial crisis has besieged the world financial and economic system in four waves.4 The first wave started in the summer of 2007, with the growing [23-2] recognition that sub-prime mortgages were going into default at a higher than expected rate, and led to what became known as the “Credit Crunch”. Since many mortgages were repackaged and securitized, the lack of transparency made these assets “toxic” and hard to value or sell at any price. Although the volume of syndicated lending was somewhat down after mid-2007, it was still very active until September 2008.5 In the first half of 2008, many analysts were optimistic that the financial crisi