Slide 3

-element or material occuring in nature

A resource, therefore, is both a socio-cultural and a political construction.
It is given meaning by its socio-cultural context and given differential
priorities through political choices
non-renewable.They are fixed in overall quantity, at least under known
technological conditions.The more we use today, the less will be available for
tomorrow.
Quite apart from their finiteness, a key characteristic of extractive resources is that
they are locationally specific. They are where they are. They have to be
exploited, at least initially, where they occur, although later stages of refining
might well be located elsewhere. In either case, their use involves vast investment
and expenditure, not only on exploration, extraction and processing but also on
transportation infrastructures.
A basic argument of this book is that the state plays a major role in all global
production networks. However, nowhere is the degree of state involvement as
deep or as pervasive as in the extractive industries. In these industries, the state is
absolutely central. The reason, of course, lies in the unique territorial
embeddedness of resources. Access to such resources is controlled, ultimately,
by the national state in which they are located.
The dilemma facing all extractive industry producers, whether state owned or
privately owned, is that as extractors of non-renewable resources they
necessarily consume their resource base during production. Hence, there is a
continuous search for new sources of supply and for new techniques that enable the
extraction of materials from less and less pure deposits. The big question, of course,
is the extent to which the world is running out of viable resources. On this issue,
views are highly polarized.
On the one hand there is the Malthusian view that resource exhaustion is
inevitable; the only question is the time-scale over which such exhaustion will
occur. On the other hand, there is the view that new technologies of exploration
leading to discoveries of new reserves, better means of exploitation leading
to more efficient use of the resource (including recycling), and the development
of appropriate substitutes will put off the dreadful day. Such polarization of
views is reflected clearly in the current arguments about peak oil the assertion
that oil production is about to peak and then move into inexorable
decline. The problem is that there are so many variables at work that it is
extraordinarily difficult to assess the extent of future reserves of minerals. All the
estimates of future reserves are based on assumptions. A small change in one of
the variables, whether on the demand or the supply side, can drastically change
the predictions.

As Figure 8.3 shows, the state operates within an extractive GPN as both a
regulator (of access, taxation, and health, safety and environmental issues) and an
operator (an actual producer). This situation gives states potentially enormous
power over how such resources are exploited. How effective that power is and how
it is exercised, of course, depend very much on the nature of the state in question,
notably its strength (both domestically and internationally) and its political
orientation. This, of course, brings the state into sharp confrontation with private
companies, especially TNCs, as well as with other states. The history of the resource
extractive industries, therefore, is one of continuously shifting power struggles
between firms and states, states and states, and firms and firms. Again, although this
is true of virtually all industries, it is most evident in the extractive industries.
However, its precise form varies between different extractive industries, especially
between oil on the one hand and the metal mining industries on the other
Extractive cycle long, costly
The time and investment needed to develop a new resource can be long
Exploration, processing and distribution involve high sunk costs
Transience of resource booms
Rise in the influence of specialist services firms
Both exploration and extraction/processing, therefore, involve very high
sunk costs.27 The same is also true of the distribution stage. Again, all industries
face problems in getting their products to market. But the particular characteristics
of the extractive industries especially their bulk and remoteness
from markets generate the need for a massive scale of transportation
infrastructure
that is virtually unique. The trade-off between increasing the scale of
production and being able to transport the outputs is a central problem in
these industries. Massive investments in pipelines, supertankers, port facilities
and the like are a prerequisite. Not only are they costly but also they have a
long gestation period. They represent a very high sunk cost indeed, not least
because many of these facilities are highly specialized and not easily transferred
to alternative uses.
Challenges for firms:
Finding new sources of supply
Extracting the highest yield from these sources
Getting them to the market
-faced by all firms however here managing a depleting asset
Once an oil well dries up or a
copper mine becomes exhausted it cannot be regenerated, although in some cases
technological innovation enables some further extraction to occur

Slide 4
Copper, on the other hand, like most of the base and ferrous
metals, is overwhelmingly a producer commodity.
Electrical uses of copper, including power transmission
and generation, building wiring, telecommunication, and electrical and
electronic products, account for about three quarters of total copper use
By far the biggest producer is Chile, with 36 per cent of
the world total.
CHINA
e pattern of refined copper production reflects the fact that it incorporates about
20 per cent of copper scrap in its production, such scrap being generated by major
copper users. This explains, for example, the presence of countries like Japan and
Germany as major producers of refined copper only.
Slide 5In 2007, a mere 12 countries accounted for 68 per cent of the world total, of
which two Saudi Arabia and the Russian Federation produced one-quarter
of
the total. However, major changes have occurred in the global map of oil
production
since 1975 (immediately after the first oil shock). Important new producers
have emerged, the most significant being the Russian Federation, China, Mexico,
Canada, Nigeria, Norway and the UK, together with new production centres in
former Soviet states like Kazakhstan and Azerbaijan as well as in some African
countries such as Angola. So, although the Middle East still accounts for 31 per
cent of world oil production, the world production map is much more complex
than it was 30 years ago.
In the early 1990s, China was the biggest exporter of oil in Asia;
today it is the fastest-growing importer of oil in the world. Much of that shift
has involved Chinas sourcing of oil from Africa
fact, nationalization in the extractive industries the complete transfer of
ownership from a private firm to the state has a long history. This is especially
true in the case of the oil industry.31
Outright nationalization of oil and gas first took place in the context of the
Russian Revolution in 1917. This was followed by nationalizations in Bolivia
(1937, 1969), Mexico (1938), Venezuela (1943), Iran (1951), and Argentina,
Burma, Egypt, Indonesia and Peru in the 1960s In the 1970s, nationalizations
occurred in Algeria, Iraq, Kuwait, Libya and Nigeria and there was a
gradual increase in Saudi ownership of Aramco [Such nationalizations]
have changed the global landscape of petroleum extraction and contributed
to the emergence and subsequent strengthening of State-owned firms.32

A clear indication of such a change in the global landscape is provided by the

prominent position of state-owned firms among the worlds largest oil companies
The nationalization of oil production makes possible (though far from inevitable)
collaboration between oil producing countries to control production levels and,
therefore, prices. The clearest example, of course, is that of OPEC: the
Organization
of the Petroleum Exporting Countries. OPEC was set up in 1960 as a reaction to
the cut in the oil price made unilaterally by Standard Oil. Its aim was
to defend the price of oil more precisely, to restore it to its [1960] level.
From
here on, the member countries could insist that the companies consult them
on the pricing matters that so centrally affected their national revenues.33
The original OPEC membership consisted of five oil producing countries: Iran,
Iraq, Kuwait, Saudi Arabia and Venezuela. A further seven countries
subsequently
joined: Qatar (1961), Libya (1962), United Arab Emirates (1967), Algeria
(1969),
Nigeria (1971), Ecuador (1973; left and rejoined 2007) and Angola (2007).
OPECs influence was limited until the outbreak of the 1973 ArabIsraeli
War when it was the oil weapon, wielded in the form of an embargo
production cutbacks and restrictions on exports that altered irrevocably
the world as it had
grown up in the postwar period The embargo signalled a new era for world
oil The international order had been turned upside down. OPECs members
were courted, flattered, railed against, and denounced. There was good
reason.
Oil was at the heart of world commerce, and those who seemed to control
oil prices were regarded as the new masters of the global economy.
secure fair and stable prices for petroleum producers; an efficient, economic and
regular supply of petroleum to consuming nations; and a fair return on capital to
those investing in the industry
goal is to secure a steady income to the member states and to collude in influencing
world oil prices through economic means

Extractive Industries
The Philippines is one of the highly mineralized
countries in the world with 9 million hectares
considered to have high mineral potential.

According to the Mines and Geosciences Bureau

(MGB), the country is ranked top five in the world for
overall mineral reserves, second in gold and third
in copper resources

The mining industry in the Philippines accounts for a small share of the economy
even thoughminerals such as gold have been mined for a long time. Mining
production accounts for about 1.5% of GDP and mineral exports have averaged
3.7% of total exports since 2007. The main minerals mined in the Philippines are
gold, copper and nickel, with gold contributing about 50% of total value of mining
industrys production.
The Philippines is developing a sizeable natural gas reserve at Malampaya, which in
2012 represented US $1.1 billion in government revenue. Petroleum production is
still modest: in 2011, the daily level of production was about 6,000 barrels of crude
oil, 14,000 barrels of condensate, and 70,000 barrels of oil equivalent of natural gas.
Total oil production is expected to rise from an estimate of 31,900 bpd in 2012 to hit
a peak of 42,800 bpd by 2017.