A study of project finance banking: with a special reference to determinants of investment strategies for major petroleum projects located in less developed countries

The study investigates the motives and objectives of borrowers, lenders andhost developing countries in adopting the strategy of Project Finance (PF) whenfinancing a major petroleum project. The overall aim of the study is to develop theempirical basis for a PF theory and to assess its relevance for the less developedcountries.The methods of investigation include literature review, desk research,development of case studies and field survey. The study analysed data relating toa large sample of LDC petroleum projects and organised direct interviews with majorinternational institutions. It also organised a mail questionnaire survey which wasdesigned to test its assertions and hypotheses relating to PF strategies.It is shown that project finance can be explained in terms of an eclectic theorywhich draws its premises from innovations on proven investment, financial and riskconcepts. It is also shown that project finance theory represents a system which hasits own causes, mechanisms of risk hedging, predictive functions and strategicadvantages.In the future, the market for project finance is expected to continue its growthand be strengthened through further financial innovations. The subject is expected togrow even more important both as a proven tool for the investment and financingstrategies of host developing countries and as a theory of direct bank participation inmajor projects located in less developed countries.This study addressed the needs of bankers and industrialists who wish todiversify their business internationally through PF participation in major LDC projects.The study should also be of interest to students of international investment and financewho wish to advance the subject through further research.