World Bank affirms oil, gas investment in developing nations

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Aug. 4 -- The World Bank Group (WBG) Tuesday formally agreed with a June internal recommendation by its managers to continue oil, natural gas, and mining investments in developing nations.

"The harsh reality is that some 1.6 billion people in the developing nations still do not have electricity, and some 2.3 billion people still depend on biomass fuels that are harmful to their health and the environment," said James Wolfensohn, WBG chairman. "That underscores the need for our continued but selective engagement in oil, gas, and coal investments."

Wolfensohn pledged that the bank would continue its effort to be more respectful of local views regarding proposed development; further, he suggested that any project backed by WBG financing would be subject to rigorous transparency guidelines to retard corruption. The board also plans to conduct yearly reviews of its investments in the sector.

WBG's extractive industries section June 18 told World Bank shareholders that it planned to dramatically change the way it lends money to developing nations looking to expand oil, gas, and mineral production. But bank officials rejected calls by some environmentalists, human rights groups, and an independent WBG auditor to stop funding oil projects by 2008.

Although it has no plans to abandon oil projects, WBG said it would focus more on gas projects and give serious consideration to expanding its alternative fuel portfolio to include more solar and wind projects (OGJ, June 28, 2004, p. 30).

WBG officials plan to widen environmentally-friendly activity by initially increasing renewable energy and energy efficiency portfolios by 20%/year over the next 5 years. Officials estimate that will increase the level of investments in the sector to more than $400 million/year—an amount similar to what is now spent on new oil and gas projects.

Unfinished business
Board members asked staff to fine-tune the way WBG plans to coordinate development schedules with local governments. Staff anticipated that a final report that incorporates a more-specific good governance policy would be presented to the board before fall.

"The central message of the reviews was that while extractive industries investments can contribute to sustainable development, the Bank Group should further enhance its efforts in several areas: more explicitly identifying and tracking poverty reduction associated with its projects, the overall quality of governance in host countries, broader inclusion of local stakeholders, transparency of revenue management and project documents, and the promotion of renewable energy and cleaner fuel alternatives," WBG said.

Contact Maureen Lorenzetti at [email protected].