The energy sector requires large capital investments. This is apparent from the information available on oil and power investments in developing countries. Capital and exploration expenditures in the petroleum industry in developing countries were estimated to be $14.4 billion in 1976 (see table 1). Production activities accounted for the largest part of the total investment (44 per cent), followed by transportation and refining. If this is compared with the breakdown in developed market economies, it is apparent that refinery and transportation accounted for a relatively higher share in developing countries than in developed market economy countries, and that the reverse was true of production.
The financing of these expenditures in the oil producing developing countries has been met mainly through the cash flow of the transnational and State companies operating in the oil industry. The picture is quite different for oil importing countries, where the financing of oil exploration is a serious constraint. The risks involved in petroleum exploration are very high and the costs of exploration activities have risen quite considerably, especially in offshore operations. Given the limited mobilization of internal resources and the inadequacy of international bilateral or multilateral sources of funds for financing exploration, oil importing developing countries have no alternative but to negotiate for the participation of the transnational oil companies in these activities.
Although many developing countries have tried to follow the____________________