Promoting Economic Development through the Oil and Gas sector

1
Promoting Economic Development through the Oil
and Gas sector

• Professor Paul Stevens
• Good Governance in Oil and Gas Producing
  Countries
• Chatham house
• London 24-25 February 2005

2
Outline

• How to optimize linkages
• What role can the IOCs play?
• How to harmonize IOCs social programmes and
  NOCs national mission?
• Key questions

3
How to optimize oil and gas linkages to society?
Government- Fiscal
Environment
Industry -Procurement
Social, Political Cultural
Industry Energy/feedstock
Individual - Consumption

• National versus cluster (i.e.localized) effects

4
Consumption linkages Income from the project
to the owners of the factors of production (land,
labour, capital and entrepreneurship) generated
by operations

• Spending by the domestic owners of factors of
  production from factor income
• Consumption versus saving propensities
• Multiplier effects
• Impact on trade and domestic production patterns
  positive or negative?

5
Fiscal linkages Capture of the rent by
government ( taxes paid from factor income)

• What does an optimal fiscal regime look like?
• Inter-generational equity money in the bank
  versus oil in the ground?
• Progressivity of the fiscal system and impact on
  operations
• Revenue acquisition - central versus regional
  versus local versus the individual
• What happens to the revenue?

6
Production linkages - forward The provision of
energy and feedstock

• Energy inputs
• pricing policy
• temptation to subsidize
• oil market price takers versus price makers and
  border pricing?
• Feedstock
• pricing policy
• resource based industrialization is it a good
  idea?

7
Production linkages - backward Creation of
inputs into the operation

• Types of input created infrastructure
• the supply chain
• labour inputs
• financial capital inputs
• institutional inputs
• Defining local content
• Multiplier effects in terms of other inputs
• The role of technological strangeness i.e. can
  the economy provide the needed technology?

8
Social, political and cultural linkages
impact of the project on the social, political
and cultural context

• Impact on conflict
• Domestic conflicts
• Local vs. regional vs. national interactions
• Impact on the political system
• Political representation
• Public policy processes
• Expenditure allocation decisions
• Civil society
• Impact on the social system
• Labour migration
• Community support
• Impact on the culture

9
What role for the IOC?

• IOC versus NOC?
• Types of impact
• a effects direct company control direct spend,
  job creation and direct tax payments
• b effects indirect company control indirect
  impact of linkages
• c effects little company control
  macro-economic changes
• Demonstration effects
• Local content clauses
• Capacity building
• local content
• policy making
• Good governance clauses in contracts

10
How to harmonize IOC and NOC social programmes?

• What is a social programme
• Do NOCs have social programmes or national
  missions?
• IOC versus NOC, is the criteria the same?
• Should commercial companies being doing social
  programmes or national missions?

11
Key questions

• What role should be done by governments and what
  role left to markets?
• Is the IOC role different from NOC role?
• How important is the link between technological
  strangeness and local content?
• How can spending by companies and governments
  best promote development?
• How effective are local content policies?