Will higher oil revenue always guarantee
Types of risk in oil and gas industry
In most cases, contracts with oil companies are not made available to the general public, and there is a tendency for the hydrocarbons sector to be managed with relatively low transparency. This paper will analyze the effect of higher oil revenue in Nigeria, Oman, and Saudi Arabia and the correlation it has to the quality of life in those countries. Arbitrary behavior in producing regions may sometimes reproduce non-transparent practices evidenced at the national level, in what some authors have explained as a new form of resource curse that transfers inefficiencies from central to local governments Arellano-Yanguas, ; a; b. Ponce, A. Idemudia, U. Others concluded that in the case of mining, it provides positive backward linkages to the local economy Lippert, that may actually be more beneficial than if the government was responsible for spending the windfall revenues Aragon and Rud, Peru is perhaps the most advanced in adopting full implementation of the consultation process with Indigenous Peoples affected by extractive processes. In , Turkana DACs and Tullow Oil discussed investments of Ksh50 million roughly USD , for secondary school scholarships; heath center improvements; a water project; and the installation of solar panels in a secondary school Lutta, Economically recoverable resources are those that can be produced profitably under current market conditions and this depends on three factors: costs of drilling and completing wells; the amount of oil and natural gas produced from an average well over its lifetime; and the price receive for the oil and gas production EIA,
The vague wording of article 6. Backward linkages are thought to work during the initial phase of building the extractive facility, but they diminish afterwards because local labor skills and services do not meet the higher standards demanded by the industry Bebbington, Haggard and E.
Manson, K. The lack of linkages with the local economy limits the chances for producing regions to enjoy sustainable long-term economic development generated by the oil or gas developments.
The main contribution of the oil and gas industry to the local economy and the population at large is through the efficient investment of revenue flows and through productive linkages with the local economy. If the sub-national government wants to spend more, it needs to increase taxes but this may cause opposition because citizens are usually reluctant to pay more without a clear understanding on how the increased tax will benefit them.
Impact of oil price on inflation
Similarly, another tool --used by the World Bank-- the Strategic Environmental and Social Assessment SESA , can give a comprehensive diagnostics of vulnerable populations in producing areas, with baseline data on poverty, skills levels, and education. Thus, Tullow may fund a drinking water facility for meeting the needs of the particular community living in that particular area, while those living a few miles away will have to continue their struggle in demand of their right to water. Besides secrecy, two other common challenges that often get in the way of effective transparency and consultation in oil developments are: 1 The extent of representation of participating community leaders, and 2 The quality of the process of consultation in relation to investment programs. In addition, a World Bank-funded five-year project —the Albertine Region Sustainable Development Project 14 -- was launched in to upgrade rural roads in the oil region, in order to facilitate access to markets for small local producers. Lippert, A. Some of the constraints to an effective EITI sub-national implementation include: low administrative capacity; limited local financial resources for implementing the costly EITI framework; limitations in accounting for informal or unaccounted-for revenues, such as those generated by artisanal mining; and sometimes lack of political will to fully commit to the EITI principles Aguilar et al. Masters and M. Higher quality of life has a positive correlation with developed countries. In this centrally managed model, which was adopted by Ecuador in the decade, the central government holds more influence on how oil revenues will be distributed in local jurisdictions Garman et al. At the same tine, transparency alone is not sufficient for reducing corruption, and other elements need to be present to make it effective, such as institutional and human capacity to process the information gathered and the ability to punish corrupt officials Kolstad and Wiig, In Oman Observer. The Convention calls for free, prior and informed consent FPIC with Indigenous and Tribal Peoples through a process of consultation with them prior to developments that may affect their livelihoods ILO, Such was the transfer system adopted by Kenya through the process of devolution that started in , which requires that the producing county develop its own institutional framework and management system to administer its own resources World Bank, Challenges for the adoption of transparency and consultation in oil projects. Moreno Encancing the subnational benefits of the oil, gas and mining sectors New York: Revenue Watch.
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