The study investigates the motives and objectives of borrowers, lenders and
host developing countries in adopting the strategy of Project Finance (PF) when
financing a major petroleum project. The overall aim of the study is to develop the
empirical basis for a PF theory and to assess its relevance for the less developed
The methods of investigation include literature review, desk research,
development of case studies and field survey. The study analysed data relating to
a large sample of LDC petroleum projects and organised direct interviews with major
international institutions. It also organised a mail questionnaire survey which was
designed to test its assertions and hypotheses relating to PF strategies.
It is shown that project finance can be explained in terms of an eclectic theory
which draws its premises from innovations on proven investment, financial and risk
concepts. It is also shown that project finance theory represents a system which has
its own causes, mechanisms of risk hedging, predictive functions and strategic
In the future, the market for project finance is expected to continue its growth
and be strengthened through further financial innovations. The subject is expected to
grow even more important both as a proven tool for the investment and financing
strategies of host developing countries and as a theory of direct bank participation in
major projects located in less developed countries.
This study addressed the needs of bankers and industrialists who wish to
diversify their business internationally through PF participation in major LDC projects.
The study should also be of interest to students of international investment and finance
who wish to advance the subject through further research.
A Doctoral Thesis. Submitted in partial fulfillment of the requirements for the award of Doctor of Philosophy of Loughborough University.