22
2 The Study Context
development of the country’s key infrastructure, such as roads and ports (Taranaki,
2011).
International organisations responsible for financing O&G projects worldwide
also support O&G Upstream and Midstream activities based on the claim that they
promote poverty alleviation in resource-rich countries. For instance, institutions
within the World Bank Group like the International Finance Corporation (IFC) are
responsible for investing in major O&G Upstream and Midstream projects within
socially vulnerable countries. (For example, such as those in sub-Saharan Africa
where the majority of the population live under authoritarian regimes, below the
poverty line, and in constant civil war.) The funding of O&G activities in such
nations is often justified by the claim that O&G exploration and production will
promote local development (Pegg, 2006; Smith, Shepherd, & Dorward, 2012).
Examples of oil-reliant economies that have demonstrated economic growth due
to the O&G activity and revenue are Russia (Sabitova & Shavaleyeva, 2015) and
Nigeria (Ogbonna & Ebimobowei, 2012). Russia has been extremely reliant on
the Oil export and over the last ten years demonstrated economic growth due to
the O&G industry sector, which, according to Sabitova and Shavaleyeva (2015),
could potentially promote local development. Nigeria petroleum revenue has also
affected the gross domestic product and per-capita income of Nigeria positively,
according to Ogbonna and Ebimobowei (2012). This coupled with an efficient governance approach may spur Nigeria’s “long-run growth and development” (Ogbonna
& Ebimobowei, 2012, p. 11).
The 2004 World Bank Group report Striking a Better Balance: The World Bank
Group and Extractive Industries emphasises poverty reduction through incorporating
O&G revenues and social investment into a country’s social fabric. According to the
World Bank Group, the O&G industry’s investments are important for promoting
human development in host countries, as follows:
For many developing countries, oil, gas, and mining are important assets that should play
a role in supporting economic growth if these countries are to achieve the [Millennium
Development Goals] MDGs. They can be a source of employment, raw materials and energy,
revenues, infrastructure and demand for local services and goods. (WBG, 2004, p. vii)
The World Bank Group expresses the view that the revenue generated by the extractive industries in host countries makes a direct contribution to poverty alleviation.
This is because governments may use these financial earnings, such as the petroleum
royalties and taxes, to fund poverty reduction programmes. Additionally, according
to the World Bank Group rationale, extractive activities create jobs locally and the
income generated enables families to overcome poverty. Another view shared by
the World Bank Group is that resource extraction and production spur the growth of
downstream industries and/or other niche industries, for example aircraft, transportation, chemical, computer, catering and clothing industries. In turn, these industries
generate jobs, increase families’ income, strengthen the local economy, and consequently, reduce poverty. Figure 2.2 briefly summarises the poverty reduction impacts
O&G activities may have in resource-rich countries, as postulated by the World Bank
Group and O&G industry.
2 The Study Context
development of the country’s key infrastructure, such as roads and ports (Taranaki,
2011).
International organisations responsible for financing O&G projects worldwide
also support O&G Upstream and Midstream activities based on the claim that they
promote poverty alleviation in resource-rich countries. For instance, institutions
within the World Bank Group like the International Finance Corporation (IFC) are
responsible for investing in major O&G Upstream and Midstream projects within
socially vulnerable countries. (For example, such as those in sub-Saharan Africa
where the majority of the population live under authoritarian regimes, below the
poverty line, and in constant civil war.) The funding of O&G activities in such
nations is often justified by the claim that O&G exploration and production will
promote local development (Pegg, 2006; Smith, Shepherd, & Dorward, 2012).
Examples of oil-reliant economies that have demonstrated economic growth due
to the O&G activity and revenue are Russia (Sabitova & Shavaleyeva, 2015) and
Nigeria (Ogbonna & Ebimobowei, 2012). Russia has been extremely reliant on
the Oil export and over the last ten years demonstrated economic growth due to
the O&G industry sector, which, according to Sabitova and Shavaleyeva (2015),
could potentially promote local development. Nigeria petroleum revenue has also
affected the gross domestic product and per-capita income of Nigeria positively,
according to Ogbonna and Ebimobowei (2012). This coupled with an efficient governance approach may spur Nigeria’s “long-run growth and development” (Ogbonna
& Ebimobowei, 2012, p. 11).
The 2004 World Bank Group report Striking a Better Balance: The World Bank
Group and Extractive Industries emphasises poverty reduction through incorporating
O&G revenues and social investment into a country’s social fabric. According to the
World Bank Group, the O&G industry’s investments are important for promoting
human development in host countries, as follows:
For many developing countries, oil, gas, and mining are important assets that should play
a role in supporting economic growth if these countries are to achieve the [Millennium
Development Goals] MDGs. They can be a source of employment, raw materials and energy,
revenues, infrastructure and demand for local services and goods. (WBG, 2004, p. vii)
The World Bank Group expresses the view that the revenue generated by the extractive industries in host countries makes a direct contribution to poverty alleviation.
This is because governments may use these financial earnings, such as the petroleum
royalties and taxes, to fund poverty reduction programmes. Additionally, according
to the World Bank Group rationale, extractive activities create jobs locally and the
income generated enables families to overcome poverty. Another view shared by
the World Bank Group is that resource extraction and production spur the growth of
downstream industries and/or other niche industries, for example aircraft, transportation, chemical, computer, catering and clothing industries. In turn, these industries
generate jobs, increase families’ income, strengthen the local economy, and consequently, reduce poverty. Figure 2.2 briefly summarises the poverty reduction impacts
O&G activities may have in resource-rich countries, as postulated by the World Bank
Group and O&G industry.