| The Bank Group’s assistance to the oil and gas sector is premised on the belief that, properly managed, the development and use of oil and gas can provide substantial benefits to its client countries. Strategies for assistance to countries are based on the approach that in the long run the private sector should finance, own, and manage most oil and gas activities, while governments should concentrate on protecting the public interest. The Oil, Gas, Mining, and Chemicals Global Product Group provides an integrated set of services in the sector, ranging from the financing activities of the International Finance Corporation to World Bank Loans, Technical Assistance, Guarantees, and dissemination of knowledge through its own publications.
The Oil and Gas Division provides advice on legal, fiscal and contractual issues, regulation, sector restructuring, and privatization to encourage the entry of the private sector. The commercialization/privatization of state-owned enterprises can reduce a the drain on the public sector, lower costs of production, and provide a level playing field that encourages entry of the private sector and competition. Regulation ensures that monopolistic abuses are avoided.
The production of oil and, to a lesser extent, gas raises profound developmental issues for the countries where these activities take place. It is important to establish contracts for extraction which benefit the host governments and support future exploration and production. It is also crucial to ensure that the money received from taxation of these upstream rents is used for the maximum benefit of the country. This requires transparency in transferring the money to the government and in spending it. The Bank group works with several governments to improve their governance of oil revenues and, where appropriate, to design the operating conditions for any oil fund which the country establishes for the use of such revenues. To support these efforts, the Bank has endorsed the Extractive Industries Transparency Initiative, which was launched in by Tony Blair, UK Prime Minister, and piloted by the UK's Development for International Development (DFID) department.
Production of oil and gas can have adverse environmental and social impacts when badly managed. The Bank is active in working with interested parties to design best practice procedures and with local governments and communities to implement these procedures. Environment-related activities, such as working to improve fuel quality (including the phasing out of leaded gasoline), are important for public health, especially in large cities.
Related publications:
Biofuels: Big potential for some...but big risks too, Masami Kojima and Irina I. Klytchnikova. Development Outreach
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