A LARGE GAS FIELD lies under the shallow waters of the Gulf of Siam and, if the gas were brought ashore, it would make a huge contribution to Thailand's economy. It would also reduce Thailand's imports of foreign oil and diminish, in a small but useful degree, the present excessive demand on an overstrained and instable able worldwide oil market. That makes this gas field a matter of sharp interest not only to the Thais but to every other importer of oil, of which the largest is the United States.
But Thailand doesn't have the technical ability for offshore gas production, and it distrusts the international oil companies. The companies, which have the ability, fear that any successful investment might tempt nationalization. Before the gas can be recovered, these suspicions have to be resolved.
In this case, the solution comes from the World Bank. It occupies a special status throughout the developing world, for small countries and inexperienced governments have learned that they can rely on its financial and technical expertise. It gives them assurance that the oil companies are reporting their revenues accurately and paying equitable taxes and royalties. Conversely, no country has ever defaulted on a World Bank loan and the bank's participation in the deal is assurance to the companies that, after they sink their money into the ground, it is not going to be seized by the local government.
The project in Thailand will cost something over $1 billion. Up to $400 million of it will beput up by the two American companies that are doing the work. About $700 million will be Thailand's money, including $100 million borrowed from the World Bank. The interesting point here is that the bank's participation, although small in relation to the cost of the project, acts as a mutual guarantee, protecting the government and the companies from each other. The bank likes to describe itself as a catalyst, and the result in this example is the development of an important source of energy in a region where, for political reasons, it would not otherwise have been very likely.
The World Bank had avoided oil and gas projects until recently, for the oil industry does not lack capital. But it has become apparent that the world's consumers, rich and poor alike, would be served by increased exploration. Many parts of the world have been effectively closed to drilling by companies' and governments' fears of what each might do to the other.
Two years ago, the bank made its first oil and gas loan to India for the expansion of a major offshore field in the Arabian Sea near Bombay. Currently the bank is supporting projects in Egypt, Pakistan and Zaire, with another in the design stage in Turkey. Next year, several small South American countries will join the list. Since new production anywhere improves supply everywhere, these loans illustrate the truth that intelligent development policy benefits not only the poor who are borrowers, but the rich who put up the money.