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Energy

Oil exporters must shift capital stock to renewables

Håvard Halland's picture
Oil pumps, in southern Russia. Photo: Gennadiy Kolodkin / World Bank

As the Financial Times pointed out recently, oil companies such as Exxon Mobil and Shell would, under measures considered for the global climate pact to be sealed in Paris next year, cease to exist in their current forms in 35 years. The proposal of phasing out global carbon dioxide emissions as early as 2050 was not resolved in the UN climate talks in Lima last December.

However, the adoption of even a watered-down version in Paris or in later rounds of climate negotiations would mean that the amount of oil and gas produced by these companies, and the quantity of coal mined by enterprises such as Rio Tinto, would need to be greatly reduced by mid-century. Such long-term concerns might over the next years trump current worries about an oil price slump that could be on the wane as soon as marginal projects and producers are shaken out from the bottom of the market.

Investing in the Poor through Extractives Industries

Shilpa Banerji's picture
 © Jonathan Ernst/World Bank

 
As newly resource-rich countries grapple with how to manage their resources well, questions arise on how governments can channel natural resource revenues into smart investments, as well as lessons learned from past experiences. At a Flagship event preceding the Annual Meetings, panelists came together to discuss “Making Extractives Industries’ Wealth Work for the Poor.”

If managed well, revenue from resources such as oil and gas in Tanzania and Mozambique, iron ore in Guinea, copper in Mongolia, gas and gold in Latin America, oil, gas, bauxite and gold in Central Asia, can contribute to sustainable development. When poorly handled they can present long-term challenges for governments, communities and the environment.

The panelists included Marinke Van Riet, International Director, Publish What You Pay; Ombeni Sefue, Chief Secretary of Government, Tanzania; Samuel Walsh, Chief Executive Officer, Rio Tinto; and Tan Sri Nor Mohamed Yakcop, Deputy Chairman, Nasional Berhad, Malaysia. The session was moderated by renowned energy expert Daniel Yergin, Vice-Chairman, IHS, and bestselling author of The Quest: Energy, Security, and the Remaking of the Modern World.

Can “Resource Financed Infrastructure” Fix the Natural Resource Curse?

Håvard Halland's picture
Resource Financed Infrastructure
Source: Getty Images/Sam Edwards.
 

In Africa, estimates indicate that an annual investment of $93 billion is required to address the continent’s basic infrastructure needs – more than double the current level of investment.

The lack of productive investment of resource revenues, with spending of these revenues often heavily tilted towards consumption, is a critical component of the so-called resource curse, the observation that countries rich in natural resources frequently have slow long-term growth. Following oil or mineral discoveries, as the expectation of increased wealth spreads, pressures to spend typically become hard for politicians to resist, public sector salaries go through the roof, wasteful spending increases, corruption may flourish, hidden foreign bank accounts may be established, and the number of unproductive “white elephant” projects grows.

How can resource-rich countries ensure that a large share of oil, gas, and mining revenues are used for productive investment rather than excessive or wasteful consumption?

Manna from heaven: Rich or poor?

Onno Ruhl's picture

When I first went to Nigeria, I had a picture in my mind of an oil country with a struggling non-oil economy. This picture came from two statistics I knew: 95 percent of Nigeria’s exports are oil and 85 percent of Government revenues come from oil. What I did not know was that oil is only the fourth largest sector in the economy, with the wholesale and retail sectors being larger.