The Carter administration will make a proposal at the May 7-8 London economic summit to create a new fund in the World Bank that could unleash energy-producing potential in less-developed countries.
The fund, which could eventually amounts to $1 billion, represents a major shifts in U.S. policty from a quiet opposition to using World Bank funds for financing energy development in poor countries.
The proposal, citing no specific funding level, was approved at a recent meeting of the Cabinet-level Economic Policy Group, chaired by Treasury Secretary W. Michael Blumenthal.
The U.S. share in the energy development fund could be from $200 million to $300 million, administration sources said.
The proposed energy development fund, if approved by the major industrialized countries at the economic summit, would be presented at the ministerial meeting of the 27-nation Conference on International Economic Cooperation - the North-South talks - which are to begin in Paris May 31.
Administration sources expect that members of the Organization of Petroleum Exporting Countries, including Saudi Arabi, Kuwait and Iran, may, also contribute to the World Bank fund. Saudi Arabia and Iran are members of the North-South talks.
The energy fund would provide loans, at near market interest rates, to developing countries such as Pakistan, Zaire, Angola and Brazil which have a potential for energy development.
The purpose of the fund is to assist non-OPEC developing countries to reduce their balance-of-payments burden, and to increase non-OPEC energy production. The developing countries have been severely affected by the rise in oil prices since OPEC quadrupled oil prices in 1973. According to Treasury estimates, these countries paid $18 billion for oil imports last year.
A 1976 World Bank study concluded that the non-OPEC developing countries "are well-endowed with energy resources, and could increase oil production by about 2 million barrels a day by 1980." Federal Energy Administration and State Department officials say that potential oil production could be higher.
The non-OPEC developing countries account for less than 10 per cent of world energy consumption, despite the fact they have almost half the world's population.
In recent years demand for oil in non-OPEC developing countries has increased at a rate of 7.5 per cent a year, higher than the rate of growth in industrialized countries.
The World Bank study estimated that these countries would have to attract $2.7 billion a year (in 1973 dollars) through 1980 to increase oil output to 2 million barrels a day by that year.
Administration, industry and economic officials say the World Bank energy development fund would be used in conjunction with funds provided by multinational oil companies.
Gulf Oil, for example, is said to be interested in negotiating an oil agreement with Pakistan to develop known oil resources in that country. World Bank participation, sources said, would reduce the political risk of expropriation without recompense.
The World Bank's role would also provide any implicit assurance, sources said, that host countries and companies would live up to terms of contracts signed with multinational oil companies.
In recent weeks officials from British Petroleum, Gulf and Mobil Oil have had informal discussions with World Bank and administration officials to discuss a wider role for the World Bank in financing energy development.
The proposal, which was drafted by the Treasury and State departments, has been under discussion since last fall. It is a sharply modified version of a proposal for an International Resources Bank by Charles W. Robinson, a former deputy secretary of state. Robinson's scheme would have set up an international bank that would reduce the political risk of expropriation for multinational mining and energy corporations, while insulating host countries from political influence from the companies.
If approved by the United Nations after then-Secretary of State Henry A. Kissinger proposed it last year, the IRB would have benefited companies such as Marcona Corp., which Robinson headed before joining the State Department.
The World Bank study estimated that if non-OPEC developing countries attract the necessary capital, they could meet 88 to 94 per cent of their domestic energy needs by 1980.
Oil Industry and World Bank officials said that significant increases in oil production could come from India, Brazil, Egypt, Malaysia, Brunei, Mexico and Peru.
Mexico offers the greatest potential as a net exporter.
In recent years Mexico has sharply revised upward estimates of proven reserves, running as high as 60 billion barrels, though the Central Intelligence Agency published estimates last month that Mexico's proven reserves were 20 billion barrels. Mexico is now a net in exporter.
In most instances the World Bank fund would assist developing countries to supplant imported oil with domestic production, to ease balance of payment's difficulties.
Some developing countries, including Algeria, which is a member of the North-South talks, have called for debt rescheduling or a debt moratorium for financially troubled developing countries. The United States to date has opposed such a proposal, though establishment of the energy financing fund could lead to improving some countries' ability to repay debts.
Other countries which could be potential borrowers from the fund include Burma, Argentina, Cameroon, Chile, Angola and Vietnam.
India and South Korea also have a great potential for increased coal development that could be realized with increased funding.