Academic journal article Journal of International Affairs

Multinationals and the New World of Energy Development: A Corporate Perspective

Academic journal article Journal of International Affairs

Multinationals and the New World of Energy Development: A Corporate Perspective

Article excerpt

As the century draws to a close, multinational energy companies have entered a new and challenging period in their relatively brief but dramatic history. Technical advances and the end of the Cold War have made it possible for these companies to develop and obtain access to energy resources virtually anywhere on the planet. They are poised to respond to the world's growing energy needs, providing the power that is essential to global economic development.

At the same time, these multinational companies face a series of unexpected and complex challenges for which the scientists and engineers who lead these enterprises have not been trained to manage. They work in a world of near instantaneous communication, where public scrutiny can be intense and business investments are sometimes seen as political acts. Today many of these companies stand accused of complicity in human rights violations, of supporting undesirable political regimes and of indifference to the environmental impacts of their operations. Hundreds of nongovernmental organizations (NGOs), representing newly articulated expectations of certain segments of society, are particularly critical of multinational activities and policies.

In truth, these global energy companies can be powerful instruments of change and modernization. Directly and indirectly, their actions can improve the lives of people and encourage the spread of democratic values. Often they are at the forefront of Western influence in developing nations. Their activities can be profoundly beneficial to both the countries in which they invest and to the people who live in them.

The challenge now is to find ways to maximize the positive impact of multinational energy companies in the developing world. Major energy projects create relatively high paying jobs, provide valuable education and training, and develop needed infrastructure--all of which support economic growth and industrial development. Some of these projects have begun to cross international boundaries, fostering cooperation on a business level that creates opportunities on political and social levels. If poorly managed, however, these activities can seriously disrupt local communities, degrade the environment and cause other problems. In some cases, multinational investments could also be viewed as providing financial support or "lending validity" to repressive governments. Public attention has helped senior executives of multinational energy companies to focus on the economic, social and political issues surrounding their foreign investments and operations.

Since their first overseas projects, many global energy companies have supported the outlying communities where they work. On the corporate level, this is good business. For those company employees working in-country, it is a natural and welcome opportunity to support their local communities. However, it is time to broaden and invigorate trans-societal dialogue about the changing role of multinational energy companies and how their activities can be further shaped and channeled for the benefit of people in all parts of the world. The goal of this article is to help stimulate that dialogue.

ENERGY INVESTMENT: ENGINE OF GROWTH

From 1990 to 1997 net long-term flow of private capital from industrial nations to developing countries grew by more than 600 percent, from $42 billion to $256 billion. Of the 1997 total, almost half--about $120 billion--represented investment by multinational corporations in their own overseas operations.(1)

Energy investment followed the same trend. In the late 1980s more than half of all exploration and production (E&P) spending by the 82 largest oil companies (not state-owned) was in North America.(2) By 1995 nearly two-thirds of all E&-P spending--$33 billion--was focused outside of this region.(3)

There are several reasons why North American energy companies have concentrated their operations outside of the continent. …

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