A series of recent non-governmental reports have stoked controversy surrounding World Bank financing of oil and gas projects.

According to analysis carried out by the Washington-based Bank Information Center (BIC), financing for fossil fuel projects from the International Finance Corporation, an arm of the World Bank, increased over 90% between 2005 and 2006.

As financing has increased, so has criticism aimed at the World Bank's involvement in oil and gas projects. Last month the Washington-based Environmental Defence, a non-profit, panned the Bank's involvement in the massive Chad-Cameroon Oil & Pipeline Project. According to its report, A Project Non-Completion Report, conditions for the poor in both countries has not improved, and in some cases has deteriorated. This is despite the fact that the Bank touted the project as "an unprecedented frame-work to transform oil wealth into direct benefits for the poor."

Meanwhile, a coalition of non-governmental organizations called World Bank Campaign Europe, is lobbying European governments to use their influence to reform the World Bank and encourage it to phase out fossil fuel development projects.

World Bank Campaign Europe accuses the World Bank of being one of "the main public financiers of fossil fuel development which contributes massively to global warming and is destined largely for Northern consumption and multinational profits." The statement was signed by some 69 NGOs, including Greenpeace International, World Vision and Friends of the Earth.

Dr. Cees van Beer, Professor of Economics at the Delft University of Technology Economics of Innovation, says IFC funding for oil and gas projects is a form of subsidy since it lowers the costs for producers and because measures taken by the IFC, being a part of an inter-governmental organization, are government measures.

For its part, the World Bank Group contends that financing large fossil fuel projects helps to ensure that they are carried out transparently, that government profits are used for public goods, and that the local work force is used.

An official with the IFC attributes the rise in financing to high energy prices, which have fuelled an increased number of requests for the financing of large oil and gas projects.

For the companies involved, the principle advantage of IFC financing is not better terms than private lenders, but rather that it comes with the reputation and clout of the Bank, said an IFC official. The Bank's influence with host countries can mitigate some of the dangers of operating in unstable regions, resulting in lowered risk for the private lenders involved and in turn for the companies.

Indeed, Bank involvement can lower financing costs by as much as 15%. The benefits are so important that often oil companies make Bank financing a requirement before they join large projects in developing countries.

In response to some of the criticism, in 2004 the Bank undertook an Extractive Industries Review. Following the review, the Bank concluded that "there is still a role for the World Bank Group in the oil, gas and mining sectors - but only if its interventions allow extractive industries to contribute to poverty alleviation through sustainable development."