World Bank Goes for Gas: Lender to Shift Investments Away From Oil in an Effort To Better Help Poor Regions
The World Bank plans to shift more of its investment focus to natural-gas projects that better fit its poverty-fighting mission, reports news media according to the World Bank press review.
During the next three to five years, the bank aims to increase spending on gas projects to between 30 and 50 percent of all equity investments, loans and guarantees for the oil-and-gas sector, up from 10 percent now, said Rashad Kaldany, director of oil, gas, mining and chemicals for the global lender. The investment budget could reach 200 million dollar a year on gas projects alone, he said.
A shift to natural-gas projects by the bank could help spur investment in the sector. The bank currently invests 350 million dollar a year on oil and gas projects. The bank says gas projects fit its mandate of poverty reduction better than oil projects because they have more-immediate positive impacts on local and regional economies.
Unlike oil, natural gas is hard to export and needs long-term local customers for projects to make money—the sort of projects that improve the local economy by providing jobs and electricity.
The bank will announce new natural-gas projects within weeks, Kaldany said. Under consideration are pipelines, gas fields, gas-to-liquids plants and liquefied-natural-gas facilities. The bank is also considering involvement in a gas project in the Middle East, Kaldany said.
The focus on gas could have implications for oil projects, especially in developing countries where international companies seek partnerships with local state-owned oil companies that have sometimes shaky finances. One example is the two billion dollar pipeline project from Baku, Azerbaijan, to the Turkish port of Ceyhan. The project was financed by a consortium including BP PLC, State Oil Co. of Azerbaijan, Unocal Corp. of the US and Norways Statoil ASA. The World Bank contributed 125 million dollar to the project.
One priority is reduction of gas flaring, the practice of releasing and burning high pressure gas released from oil wells instead of harnessing it for power or petrochemical plants. Nigeria, the biggest oil producer in Africa, flares enough gas to power that continents electricity needs, Kaldany said.
The bank is looking at a gas pipeline from Nigeria to Ghana to harness the natural gas flared off from oil wells for use in power plants and industry. The project has long been delayed because of concerns about downstream demand.
The Financial Times further notes, that the Banks management report is a response to an independent review of the banks role in extractive industries, commissioned by the bank and conducted by Emil Salim, the former Indonesian environment minister.
The review called for withdrawal from all investment in oil and coal projects within five years. – Our future investments in extractive industries will be more selective, with greater focus on the needs of poor people and a stronger emphasis on good governance and on promoting environmentally and socially sustainable development, the report says.
– For many developing countries, oil, gas and mining are important assets that will have to play a role if these countries are to achieve the Millennium Development Goals, added it. The staff recommendations will be sent to the World Banks board for approval after a 30-day comment period.
In addition to rejecting the recommendation on ending oil and mining investment, critics accuse bank staff of backsliding on a requirement that governance standards be met before the bank invests in energy projects and on a pledge to raise renewable energy investments to 20 percent of the banks energy lending.
However, Jeremy Hobbs, director of Oxfam International, welcomed the reports statement that the bank should only support extractive industry projects that have the broad support of affected communities and urged the board to accept the recommendation.
The World Banks drive to promote fossil fuel-generated power for 1,6 billion people lacking electricity will drive developing countries deeper into debt, a report meanwhile by a development think-tank claimed. Fossil fuels, such as oil, gas and coal, will never provide enough power for developing nations because of the cost of connecting remote communities to a national grid, whereas renewable forms of electricity generation could provide a cheaper solution, the New Economics Foundation said.
Kilde: www.worldbank.org
