Resource nationalism can be the scourge of miners and oil and gas companies as governments look to secure a bigger slice of their hydrocarbons, minerals or metals wealth.
This phenomenon tends to be cyclical – when commodity prices are high and rising governments know they can attract investment even if they act aggressively but when commodity prices collapse they have to be more pragmatic. This pragmatism is evident in two announcements on 7 January – one from President Energy (PPC:AIM) and one from JKX Oil & Gas (JKX).
The companies reveal improved fiscal terms in Argentina and Ukraine respectively, two countries which have form for resource nationalism in the past.
President – down 1.9% to 6.25p – reports positive results from a workover programme on its Puesto Guardian concession but also reveals Argentina is setting its local benchmark for crude oil in 2016 at $67.50 per barrel – substantially higher than global crude prices – and relaxes restrictions on the amount of US dollars which can be paid out by companies operating in the country to repay foreign loans.
These changes reflect the friendly attitude to the oil industry of the newly elected Macri administration. In April 2012 the previous administration under president Cristina Kirchner alienated the industry by seizing hydrocarbon assets from Spanish giant Repsol (REP:BME).
JKX - down 1.4% to 26.1p - announces it may restart its Ukrainian operations after a reduction in the gas production tax from 55% to 29%. This effectively reverses the doubling of the tax on private gas producers introduced by president Petro Poroshenko in August 2014.
The £41 million cap notes the reduction does not have any effect on its $270 million international arbitration claim for damages for the recovery of overpayment of production taxes, subject of a full hearing in July this year. It warns the proposals made by activist investor Proxima Capital Group, including the removal of all of JKX's executive directors, could prejudice the ability of JKX to pursue this claim.
A general meeting to vote on Proxima's proposals is set to be held on 28 January.