Direct term supply vs resource-for-infrastructure: which G2G structure fits your commodity?

What is the difference between a G2G supply contract and a barter deal?

A direct term supply contract exchanges commodities for currency at a benchmarked price; a resource-for-infrastructure deal exchanges resource production rights for built assets. The distinction is not cosmetic. It determines whose balance sheet carries the financing, how prices are set, who bears completion risk and what happens when the commodity price moves. The International Institute for Sustainable Development has documented how resource-for-infrastructure deals often embed opaque pricing that the buyer must disaggregate to understand the value of what it has given up.

These differences are not theoretical. They shape which structure a government should pursue given its reserves, its commodity exposure and its infrastructure priorities.

When does a direct term supply contract make more sense?

A direct term supply contract is the cleaner choice when the buyer has foreign-exchange reserves and needs a reliable flow of priced commodities. The structure works well when the buyer's priority is securing supply—crude oil, refined products, LNG or critical minerals—at a price linked to a published benchmark with an agreed differential. It suits governments that:

• Hold adequate reserves or can access trade finance to meet payment obligations
• Have no undeveloped resource assets that the counterparty values
• Prefer pricing transparency and a straightforward governance record
• Want to separate the supply transaction from any infrastructure programme

In this structure, the buyer pays for what it receives, the price is auditable against public indices, and the governance record is comparatively simple. The trade-off is that the buyer must fund the purchase, typically within a credit window that may be shorter than the delivery timeline of an infrastructure project.

When does a resource-for-infrastructure structure work better?

Resource-for-infrastructure deals are pragmatic when the buyer holds undeveloped resource assets and cannot or will not fund infrastructure from its own balance sheet. The structure is not inherently worse than direct supply; it is appropriate for a different set of conditions. It tends to suit governments that:

• Hold resource concessions that are proven but undeveloped, and which a counterparty values
• Face foreign-exchange constraints that make large upfront infrastructure payments impractical
• Need infrastructure—ports, railways, power generation, processing facilities—that is operationally linked to resource extraction
• Are willing to trade some pricing transparency for infrastructure delivery without a direct fiscal outlay

The Natural Resource Governance Institute has noted that these deals work best when the resource is well-understood, the infrastructure scope is defined before signature and the exchange ratio includes a periodic true-up mechanism. Without those conditions, one party can end up with a bargain and the other with a liability.

How are the two structures priced differently?

Direct term supply pricing is explicit and benchmarked. Resource-for-infrastructure pricing is implicit and must be reconstructed. In a term supply contract, the price formula is usually stated in the agreement: a published index (such as Brent, JKM or LME) plus or minus a differential for quality, logistics and credit terms. The buyer can verify the price against the market on any given day.

In a resource-for-infrastructure deal, pricing is indirect. The buyer grants extraction rights over a defined volume or period, and the counterparty delivers infrastructure of an agreed scope. The effective commodity price—what each barrel or tonne is worth in infrastructure terms—can only be calculated by:

1. Estimating the market value of the resource being exchanged
2. Estimating the cost of the infrastructure being delivered
3. Comparing the two over the life of the agreement, including financing costs and timing

This is the valuation discipline explored in detail in resource-for-infrastructure deals: what the valuation mechanics decide. Without it, neither side can be confident the exchange is fair.

What governance does each structure demand?

Supply contracts need price, delivery and payment governance. Resource-for-infrastructure deals need all of that plus construction governance and a true-up mechanism. The governance burden rises with the number of moving parts. A direct term supply contract typically requires:

• A pricing formula with defined reference indices, publication windows and fallback provisions
• Delivery schedules with quality specifications, nomination procedures and demurrage rules
• Payment terms, credit support and default remedies
• An audit trail that links each invoice to the published benchmark

A resource-for-infrastructure deal adds:

• Construction milestones with completion tests, liquidated damages and retention
• Resource extraction reporting, independent verification of volumes and quality
• A periodic true-up mechanism that adjusts the exchange ratio when commodity prices or infrastructure costs diverge beyond an agreed band
• Separate governance of the resource leg and the infrastructure leg, each with its own reporting to parliament and the audit office

The governance structure should match the deal structure. A supply contract governed like a barter deal creates unnecessary complexity; a barter deal governed like a supply contract leaves the infrastructure leg unmonitored.

How does a government choose between the two models?

The decision turns on three variables: foreign-exchange capacity, resource-asset readiness and whether the priority is commodity flow or infrastructure. A structured comparison against these variables prevents a deal form from being chosen because it is familiar rather than because it fits. The sequence is:

1. Assess reserves and payment capacity: can the government fund a term supply contract without strain on other obligations?
2. Inventory resource assets: does the government hold proven, undeveloped concessions that a counterparty would accept as consideration?
3. Define the primary objective: is the government securing commodity flow, building infrastructure, or both?
4. Model both structures: estimate the net benefit under each form, including financing costs, pricing transparency and governance burden
5. Present the comparison: a side-by-side analysis that ministers and parliament can interrogate before authorising one structure over the other

The choice is not binary for its own sake. Many governments run both structures in parallel—a term supply contract for one commodity and a resource-for-infrastructure deal for another. The discipline is matching the deal form to the exposure it is meant to manage, and the deal architecture section of the homepage sets out how those choices connect price, risk, governance and delivery.