The Political Risk of Oil and Gas Mega Projects: A Descriptive Empirical Analysis

Abstract

Two elements can be seen to evolve progressively with globalization: political risk and mega projects. Although a fair amount of research has been carried out in regards to political risk and mega projects as separate units of investigation, few studies have attempted to combine the two. This thesis fills a void in the existing literature by providing a specialized approach to political risk, focusing on political risk of oil and gas mega projects in particular. Drawing on a comprehensive dataset of political risk in developing countries, the investigation consists of three constituent parts: a descriptive empirical analysis of 90 cases of political risk between 1998 and 2005; a comparative analysis with 240 cases of political risk across all affected industries within that same period; and three case studies. My intention is to illustrate the conceptual framework and to establish the causal mechanism at play. The findings of this text highlight the need for a more thorough and current political risk- and mega project theory, one which incorporates the important aspect of globalization and consequently sees political risk as a multidimensional phenomenon. The findings support the relevance of the obsolescing bargain mechanism, challenge the proposed significance of non-governmental activism and environmental issues, and, perhaps most decisively, accentuate the importance of the need of a social license to operate.