Sector Reform

Reforming the oil and gas sector for poverty reduction

Reform is a cornerstone of the World Bank Group's involvement in the oil and gas sector.
Sector reforms emphasize the need for government policies which maximize the positive impact that the oil and gas sector can have on overall economic development, as well as on poverty reduction. These concepts are translated into petroleum laws, regulations, contracts and institutions that promote both foreign and domestic investment as well as transparent competition.

The World Bank’s Oil, Gas, and Mining Policy division is actively engaged in oil and gas sector reforms linked to investment lending operations and/or technical assistance loans or grants in various countries, including Russia, Ukraine, Bolivia, Peru, Argentina, Ghana, Chad, Cote d'Ivoire, China, Viet Nam, Ecuador, Nigeria, Indonesia, Pakistan and Bangladesh. Our involvement includes assistance in the preparation of new laws, regulations and model contracts, and the development of institutions to implement sector reforms.

Downstream Deregulation, Pricing and Taxation Policies

Of key importance to the success of the reforms is the deregulation of prices, the adoption of appropriate taxes and the elimination of across the board subsidies. Our assistance focuses on:

• Design of pricing and taxation policies to stimulate exploration and production and to facilitate the deregulation of prices and the elimination of cross subsidies
• Development of appropriate tariffs of the services of, and access conditions for, monopoly elements of the oil and gas supply chain, in particular pipelines
• Tax reform to encourage investment while safeguarding reasonable government revenue share
• Design of social safety nets for lower- income consumers faced with potential rising energy bills as the result of sector reforms

Improving Access of the Poor to Clean and Affordable Energy

Enabling developing countries to design and implement reforms themselves through their government institutions is a common and critical component of our sector reform programs.
Another important objective of the sector reform is the improvement of the access of the poor to clean and affordable fuels.

The elimination of subsidies, for instance, is evaluated together with various options for improving the supply of better quality energy at affordable prices to the poorer segments of the population. In this respect, promotion of LPG for household, commercial and industrial uses with appropriate pricing and taxation policies, offers opportunities for developing a local private sector.

Relevant Publications

• Petroleum Markets in Sub-Saharan Africa: Analysis and Assessment of 12 Countries by Masami Kojima with William Matthews andFred Sexsmith, Extractive Industries for Development #16, June 2010
• Changing Patterns of Household Expenditures on Energy: A Case Study of Indonesia and Pakistan by Robert Bacon, Soma Bhattacharya, and Masami Kojima, Extractive Industries for Development #6, July 2009
• Extractive Industries Value Chain: A Comprehensive Integrated Approach to Developing Extractive Industries by Eleodoro Mayorga Alba, Extractive Industries for Development #3, July 2009
• Changes in End-User Petroleum Product Prices: A Comparison of 48 Countries by Masami Kojima. Extractive Industries for Development #2, June 2009
• Phasing Out Subsidies: Recent Experiences with Fuel in Developing Countries, Masami Kojima and Robert Bacon, Public Policy for the Private Sector, ViewPoint Note No. 310