Natural Resources and Violent Conflict - WaterWiki.net

attracting reputable companies 311The physical impact of exploration is limited, but the quality of theexploration company’s relationships with other interest groups has acritical impact on the future success of any project that may result.This issue is discussed in greater detail in the next section.ConstructionThis is the time when the company decides whether to commit itself ornot. It decides whether or not to go ahead on the basis of a feasibilityreport. The feasibility report also serves as a basis for negotiationswith potential joint venture partners and financial backers. The reportassesses the geological prospects, the commercial viability, and thepolitical environment.The company’s environmental impact becomes more apparentduring construction. At this stage, it is often necessary to build furtherroads and a camp for the construction force, and these need tobe protected. The operators have to provide processing and wastedisposalfacilities. They also need to consider how the product isgoing to be transported either to a smelter (in the case of metals) or toarefinery.Companies look for predictability and security of tenure. If they cannotfind these, they seek commercial agreements that provide greatercompensation for what they regard as higher risks. The overall principleapplies whether the company is paid through tax, royalties, or—asis becoming more common—a production-sharing agreement. Importantconsiderations include the possibilities for arbitration in case ofdispute.This is the point at which risk assessment and planning are mostimportant. The full impact of future operations is not yet apparent: itis still possible to take preemptive action to mitigate risks. Risk assessmenttherefore needs to take account not only of the current situationbut also of how the project will change it.Political and social analysis is often seen as a “soft” topic because itdoes not lend itself to precise measurement. The engineers who dominatethe senior levels of the extractive industries tend to prefer dealingwith objects that are—sometimes literally—more concrete. However,there is a general trend toward more systematic analysis, partly in thelight of painful experience. Looking back at an earlier, uninformeddecision to enter a conflict zone, a senior executive in a middle-sizecompany recently commented: “Let’s be honest. We just jumped intoit.” 21 The decision was taken on the basis of an overall assessment ofthe geological prospects combined with a misplaced confidence thatthe company’s project partner would manage the political and socialrisks. He was not keen to repeat the experience.