Energy and Human

Resource Development
in Developing Countries

Towards Effective
Localization

William Hickey
Energy and Human Resource Development in
Developing Countries
 William Hickey

Energy and Human

Resource
Development in
Developing Countries
Towards Effective Localization
William Hickey
Senior Consultant
Toplis Energy (Toplis and Associates)
Jakarta, Indonesia

ISBN 978-1-137-57630-9    ISBN 978-1-137-57082-6 (eBook)

DOI 10.1057/978-1-137-57082-6

Library of Congress Control Number: 2016959273

© The Editor(s) (if applicable) and The Author(s) 2017

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To AA, it’s his future...
With special thanks to Mr. William Hickey Sr. for financing this research
 Preface

Big, Small, Far, and Near

When one considers a picture of planet Earth taken 1 billion miles away
from a NASA probe orbiting Saturn, it appears as a very  tiny blue dot
amid an oceanic abyss of blackness. That is it. That is the earth, where we
all live. Nothing more, nothing less, pondering a tiny blue speck where
humanity has lived, died, and aspired for the last 15,000 some odd years of
its existence. It is finite, it is limited, it appears very much alone.
When standing in the Australian Outback, hiking the high desert of
southern Arizona, adrift in the straits of Cuba, or flying over the vast
expanses of eastern Siberia, it would seem the boundaries of earth are
unlimited, uninhabited, and with far more land or sea than anyone could
possibly imagine. Wide-open terrain that needs to be filled with some-
thing, anything, yet very empty, very quiet, also very alone.
One can fly the entire distance from New York to Los Angeles in less
than five hours on a nonstop flight, a distance of well over 5000 kilome-
ters, conversely, living in Sri Lanka, a small island nation the size of the
US State of Vermont, a journey from the capital city of Colombo to the
east coast via its narrow, winding, congested roads can take a full day, a
straight-line distance of less than 100 miles.
Energy, fossil fuels in particular, has given mankind the ability to travel
long distances unencumbered, but the fact remains humanity is still very
fragile, very alone, and highly dependent on each other to thrive, live, and
succeed. Proximity and nearness, size and magnitude, are all relative. Two
opposite truisms thus emerge: The world is a very big place, difficult to

ix
x  PREFACE

transverse, yet at the same time, it is also a very tiny planet, where getting
from point to point can be reached quickly with the energy we have on
hand and the right logistical framework.
---
In 1996, I began working as a trainer for Motorola in the Chinese
manufacturing megacity of Tianjin. At that time, Motorola was at its apex
as cell phone king in China, with a very large market share. It was a hyper-
competitive business, with Nokia and Ericsson also gaining on Motorola.
The nature of this business required Motorola’s engineers to be at the top
of their game. I administered such trainings with titles such as ‘Cycle Time
Reduction’, ‘Benchmarking’, and ‘Six Sigma’, all operations management
based to keep Motorola’s people ahead of the competition. This was the
realm of hi-tech retail manufacturing. In my view, it was what nations
had to do to remain competitive in the world we lived. More skills were
required to keep ever-thin profit margins intact. It was the way it was.
Most Chinese and managers in this competitive environment became used
to it. Today, few know about Motorola cell phones, it is a market of Apple
and Android with touch screens that didn’t exist in 1996. Fierce competi-
tion forces quick change and disruptive technology. Those that cannot
change or adapt to the fast pace are quickly left behind and go bankrupt,
or are financially crippled.
In 2003, I was the recipient of a Fulbright professorship to go to
Kazakhstan, with my proposal being written on introducing the human
resources (HR) mindset required to create competitive economic  condi-
tions there. I knew nothing about Kazakhstan or the CIS (Commonwealth
of Independent States) legacy countries of the former Soviet Union, as
they were referred to by the US State Department. I had heard rumors
before about oil and gas economies being non-competitive, but didn’t
clearly understand what this meant, and thought it may be some type of mis-
givings generated by people who didn’t understand those businesses. In my
world view at the time, competitive factors were the rule. There was no free
lunch, if the skills were not learned and applied toward building competitive
industry, countries could not succeed. It was as simple as that. End of story.
Kazakhstan was the first country I had ever lived in whose economy was
largely oil and gas (Nefte v Gaz in Russian) exports. Practically, 90 % of its
foreign investment was directed to such projects. Competitive manufac-
turing to these oil and gas economies was an unknown; things that were
needed were imported, mostly from next door China. Labor costs were
high as was housing. There were jobs, but many seemed underemployed.
In many ways, while Kazakhstan was the best economically perform-
 PREFACE  xi

ing economy in the CIS (former Soviet ‘Commonwealth of Independent

States’), it seemed devoid of opportunities. The Soviet Union had been
out of existence a good 12 years, but while the titles and nameplates had
changed, it was as if the Soviet system of rules, regulations, administration,
and education was still very much intact.
The best jobs for pay and stability were in the oil and gas business,
but few in the general population had or could get such jobs. They were
reserved for those with connections, no matter what your degree or exper-
tise, or how hard you wanted to work. A true patronage system, as indica-
tive of many national oil companies in developing countries. Kazakhstan
wanted desperately to adjust its economy to other venues, but didn’t seem
to know how. In 2004, I was standing at my office window of the educa-
tional arm for the national oil and gas company, Kazmunaigaz, and looking
out at the parking lot. It was filled with new BMWs, Audis, Mercedes-
Benzes, and even a Bentley (with its bumblebee insignia). I remember
being baffled how in the world workers for a state-owned company, on
essentially meager government salaries, could afford such expensive cars. I
had also heard many of these same employees, depending on rank, owned
two or three or more apartments, some in distant lands with Russian-
speaking diaspora, such as Turkey. The fact was Kazakhstan was an oil and
gas economy, through and through. The disconnect between this eco-
nomic paradigm and one based on competitive manufacturing was striking
to say the least.
The profits in this business were staggering and consistently ensured. A
barrel of oil, unlike a cell phone that has to compete with other cell phones
in a boutique or kiosk, is already sold once it comes out of the ground! It
is sold based on a world demand commodity price, or law of ‘one price’.
Essentially, a barrel of oil is currency in itself. No marketing is necessary,
even though oil companies do  have marketing sections for their down-
stream products. I slowly changed my research focus from competitive
manufacturing, where the competition was cutthroat with many players
involved, to the energy business, where with government protections or
permission, there was no competition, and in many cases, no tenders or
even bids for supplies or services. Contracts were awarded based on if you
were liked or not politically, not on what you actually produced, or even
how good you were. When the oil price was high, all types of aberrant,
non-competitive behaviors were tolerated. Conversely, when the oil price
was low, employees were released en masse. Later, I learned that host gov-
ernments, under the contracts investing entities signed with them, guar-
anteed their production costs via reimbursables (paybacks for outlays).
xii  PREFACE

It defied the standard business school textbook courses of how business

runs, without relevant training, marketing, or even financial sections, as
reimbursements introduced a phenomena called ‘overspend’.
Coming from a background of HR and training for skills, I was quite
surprised to see how insiders and favorites maintained their place in the
hierarchy despite poor performance, or silo behaviors (departments not
conversing with each other  or outright hostile to each other). In com-
petitive manufacturing, such behavior brought about the quick demise
of cell phone companies, fast-moving consumer products, apparel, food-
stuffs, and light manufacturing, but the oil business seemed to defy grav-
ity. In those aforementioned businesses, profits were never ‘assured’ by
any government entity via a reimbursable format. If the company failed to
produce or live up to customer expectations, it was down and out, quickly.
The companies’ risks and production costs were on their own money, not
on any governments tab.
The bigger picture to all of this is that this type of behavior was rob-
bing many of these countries the resources their people needed to des-
perately develop  and by extension, their futures. Good paying jobs for
most outside this business were scarce, as were opportunities. I quickly
learned all about the ‘resource curse’ and oil, gas, mining ores being so-­
called lootable assets by elites in a given society. The ‘resource curse’ states
that countries blessed with natural resources are also the most underde-
veloped, namely as the leaders and elites become addicted to invested for-
eign  money, in turn  invest this money outside the country  themselves,
and are not directly accountable to their own people. Without an electoral
accountability, the population at large suffers and is condemned to lower
living standards, even though there is more than enough money to go
around to develop them if it was appropriated better.
What I also noticed in this business was that HR is used as a conduit to
perpetuate and calcify these malbehaviors. Training in many cases was not
given to increase skills, but to enlarge the corporate bottom line, as under
the contracts, companies would be reimbursed by the host government
the full retail costs of the training, with an overhead administrative cost
added on. One very youthful expat who had just graduated from a US
university in California had been hired and sent by the company to teach
‘Project Management 101’ to local workforce with a Russian-speaking
translator. He told me over dinner, he had ‘no idea’ what he was doing,
but that the training was being costed  back to the government at full
freight, that is, a retail price tag. Later, an outside oil contractor told me,
 PREFACE  xiii

oil companies don’t make much of the oil itself, but out of the services
provided. As a professor of HR, I was astounded at both admissions.
These contracts also allowed the free flow of expatriate labor without
any enforced mandate to develop locals. This meant that locals were effec-
tively paying the company already to use foreign workers, not to develop
them, under the reimbursable contracts terms. This was the same for local
content and capacity building. All these areas were ‘billed back’ to the host
country out of the first production oil under the reimbursable scheme.
HR deliverables were always kept murky and non-transparent in order not
to transfer any proprietary and competitive skills to locals for them to be
able to run the operations on their own. As one irate production manager
told me at length when I questioned this, ‘we are here to make money, not
feed the poor’. The energy business due to the large profits derived, seemed
to mimic ‘quasi-business’ that was not anchored to the same competitive
factors (or business textbooks) as customer-oriented businesses were, but
was instead well protected by monopolistic and government practices.
A few years later, in 2009, I won another Fulbright to India and
South Asia. It is an area sorely in need of electrification, but most are
poor and unskilled. Governments there have opened up to investment
in power projects, mostly Chinese coal-fired electricity-generating plants,
with some hydropower (dams) via Japanese investment. On a visit to one
such Chinese-invested coal-fired power plant in Puttalam, Sri Lanka, the
contrast of poor Sri Lankans digging potatos set against a backdrop of
an emerging coal-fired plant was noteworthy. Practically, all the work-
ers (including loaders and diggers), engineers, and equipment  content,
used were Chinese. The standards used were Chinese. In essence, the Sri
Lankans were by and large uninvolved parties in the creation of this new
turnkey  coal-fired electric plant that would provide them stable electric
and eventually be costed back to them. 
The Sri Lankan leaders, in their search for foreign investment had
allowed a Chinese state-owned company to come into their country, and
set up a turnkey electrification plant, without any obligation or mandate
to use local workers or transfer any critical skills to the host country. The
investment was on all Chinese terms with Chinese leaders and their coun-
terpart elites in Sri Lanka setting all  the  contractual terms. The largely
unskilled and underemployed Sri Lankans got little from the project except
a few truck driver jobs and the chance to pay a higher tariff for a more
stable electricity supply in the future. I soon realized that this project was
not so much about earning money for China but rather employing Chinese
workers from Chinese state-owned companies while expanding the Chinese
xiv  PREFACE

construction footprint abroad. The Chinese Communist Party  (CCP) is

hell-bent on keeping political stability; they realized a long time ago that a
significant way to maintain this is to provide their people jobs, whether or
not the venture realizes a profit is of some secondary concern.
The story told is simple: we live on a tiny, overcrowded planet beset with
problems related mostly to human development and with very finite and
dwindling natural resources. These natural resources create energy and the
employment they can generate must be used to promote human resource
development  (HRD) in that host country. There are simply too many
mouths to feed and the lack of jobs contributes to many of the social ills
the world now faces. The old ‘business as usual’ metrics rooted in Western
nation colonial practices of raw resource extraction in developing coun-
tries, and shipping it abroad for processing in developed nations (the so
called North-South phenomena) must be ended. An energy elite dictating
the world’s development and controlling all the profits (and value-added
jobs, such as an Organization of the Petroleum Exporting Countries )
must be changed. It simply cannot be business as usual. From a small
picture, HRD perspective, the world simply cannot afford this business
model any longer. From a bigger picture, existential perspective, we are
facing a calamity with global warming and carbon emissions that will fun-
damentally change human existence as we know it if not dealt with. The
key is to get people involved with the resources in their countries. This
promotes responsibility, husbandry, stewardship, and value-added behav-
ior. Strategic education is at the core of this initiative. It can be done.
This is not idealism; it is necessity. A handful of countries and regions
have successfully done this by focusing on different aspects of their natu-
ral and energy resources to develop certain economic and human capital
sectors. Yes, they are in the developed world, but that alone should not
preempt or preclude these solutions from being utilized in the develop-
ing one. Energy and its availability have made a big world very small, and
have brought millions out of poverty with all the amenities the modern
world has to offer. Nonetheless, millions still remain in poverty, particu-
larly in war-torn areas where the fight in many cases is again about natu-
ral resources and who ultimately controls them.
Today, mankind’s very survival may depend on how energy is devel-
oped, utilized, and transmitted into the future. The only way to do this
sustainably is through HR and empowering people to take control of their
destiny in their own resources, with their own stewardship.  In the 21st
century, the Information Age philosophy needs to be applied, it is not
merely a talking point.
 Contents

1  Introduction to Energy and HRD: Toward Effective

Localization1

2  Types of Energy and Usage35

3  Energy as the ‘Non-Devaluing’ Currency: A Store

of Wealth in Today’s World71

4  The Climate Change Conundrum101

5  Human Resource Development: The Means Are There115

6  Energy Ownership139

7 Localization163

8 China219

9  Corruption and the Client Driven Energy Model241

xv
xvi  Contents

10  The Interface253

Bibliography283

Index299
 List of Figures

Fig. 1.1 Macro, meso, and micro viewpoints of HRD from various
scholar and practitioners (Hickey) 12
Fig. 1.2 Interlinkages of competency for extractive resource development 23
Fig. 1.3 Hickey diamond of HRD and localization for natural resources 26
Fig. 2.1 The fossil fuel use spectra 37
Fig. 2.2 Graph of electricity generation by fuel type in the AEO 2015 37
Fig. 2.3 Worldwide energy use sources 38
Fig. 2.4 Worldwide energy profile and emissions, HSBC
global research report, ‘Stranded Assets, What’s Next?
(Used with permission) 43
Fig. 2.5 Selected country coal use in their overall electricity generation 46
Fig. 2.6 Energy production in China, 2015 52
Fig. 2.7 Types of renewable energy used in developing countries 53
Fig. 2.8 Sudan power plan forecast with nuclear option 59
Fig. 2.9 A knowledge map of methods for explicit, implicit, and tactical
knowledge building 62
Fig. 2.10 Growing global energy demand with breakout for
China and India 64
Fig. 3.1 Derivatives and risk management in the petroleum, natural
gas, and electricity industries 90
Fig. 4.1 Life cycle of greenhouse gas emissions based on
electricity generation source 103
Fig. 4.2 Climate change policies since 2005 110
Fig. 5.1 The apex of human capital development is ideas, not
finance or technological black boxes 116
Fig. 5.2 A simplified HRD training cycle  119
Fig. 5.3 Gap assessment derived from Rothwell, 2005 (Hickey) 120

xvii
xviii  LIST OF FIGURES

Fig. 5.4 ‘KSA’ (Knowledge, Skills, Attitude) competency conceptual

with technical terms (Hickey) 131
Fig. 6.1 3-D of the X, Y, Z, ‘Spectrum viewpoints of Globalization’
(Adapted from Scholte [Hickey]) 144
Fig. 7.1 Example of a typical Western energy company’s localization
development schema in a host developing country 171
Fig. 7.2 Cultural training evaluation of HRD deficiencies by
design, precisely, and corybantically 173
Fig. 7.3 The five stages of Norway’s localization planning 189
Fig. 7.4 Actual figure of localization of positions in major central
Asian energy company workforce, 2005 where:
expatriate, contractors, locals 201
Fig. 7.5 UK Oil and gas industry Jobs (OPITO 2011) from their
own Home webpage 206
Fig. 8.1 China’s crude oil imports by source (EIA, 2013) 221
Fig. 8.2 OBOR, One-Belt One-Road (一带一路): Across Asia into
Africa and Europe (red lines) with Ocean Trade Routes
(blue line)226
Fig. 9.1 Ringfencing to mitigate opportunities for corruption in energy 247
Fig. 10.1 Fossil fuel investment paradigms neo-colonial versus
information age (Hickey) 278
 List of Tables

Table 1.1 Sample of HRD competencies needed (outside

of raw extraction) for energy localization 22
Table 2.1 Actual costs of electricity (US cents/kWh) 55
Table 2.2 A 2 × 2 of conventional versus non-conventional/
renewable versus non-renewable energy (Hickey) 56
Table 2.3 Total energy consumption in selected developing
countries by type of energy 64
Table 3.1 SWF standards matrix where green is strong, yellow
is weak, red is non-existent (By W. Hickey) 81
Table 3.2 Fossil fuel divestment trends by various institutional investors 93
Table 5.1 Various instructional systems design methods for designing
curricula/instruction (Hickey) 123
Table 5.2 Various training facilitation methods 126
Table 5.3 Kirkpatrick’s four levels of training evaluation with
ROI at fifth level with interpretation 127
Table 6.1 Discrete social issues groupings of today’s issues
facing sovereign identity 148
Table 6.2 Types of producer subsidies.  148
Table 6.3 Constitutional Articles of five countries and US State
of Alaska regarding natural resources ownership 152
Table 6.4 Using the GTZ (Gesellschaft für Technische
Zusammenarbeit, 2009) and IEA (2011) studies on
economic aspects developing nations with fuel subsidies,
Canada as control 158
Table 7.1 Matrix of localization competency drivers (both
educational and policy) 174

xix
xx  List of Tables

Table 7.2 Skills levels required for various types of energy

production projects 204
Table 7.3 Meso, Macro, and Micro levels of empowerment in a
‘best practices’ localization scenario 207
Table 8.1 Chinese investment in sub-Saharan Africa 232
Table 10.1 HRD integration conceptual roadmap 3 × 3 at all
levels of energy economics for developing countries
(Hickey 2015) 265
Table 10.2 Tycoons who could influence energy policy and
development via an investment perspective 267
 CHAPTER 1

Introduction to Energy and HRD: Toward

Effective Localization

With 7.1 billion people, over 40 % of whom live in Asia alone, we live
on a tiny and crowded planet; to put one main thing in perspective, the
planet is finite and too small to tolerate today’s business as usual attitude
toward preservation of the planet for future generations. Much of the
world’s economic growth is projected for Asia in the twenty-first cen-
tury and much of the equatorial developing world, sub-Saharan Africa
and South America. Simply, there are many hungry mouths to feed and
demands on the Earth’s finite resources continue to grow exponentially
every year. Yet, the internet, social media, and global financial liquidity
have changed the paradigms of what is the developed, middle-income,
emerging, and ­ developing world. What constitutes poverty and even
development may need new definitions. Is the World Bank’s (WB) $2 a
day a good poverty threshold measure? It may depend on, for example, if
the US dollar is strong or weak at any given time, or if the culture, such
as in Thailand or Bali, values community more than money, or if no other
employment opportunities exist, such as with nomadic peoples in Saharan
Africa or Central Asia or in extremely impoverished societies such as in
Eastern India. Many old indicators are in flux today, and being challenged
by information intensity in the twenty-first century.

© The Editor(s) (if applicable) and The Author(s) 2017 1

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_1
2  W. HICKEY

What Is ‘Energy’?
Energy has been simply described as ‘the ability to do work’, or in this
case, kinetically, as a ‘heat source’1 either to sustain combustion such as
boiling water at extreme temperatures in a coal-fired thermal power plant
to turn an electricity-generating turbine or to create combustion, as in
a kerosene-fueled jet engine to create propulsion. There are many types
of energy. But mostly today, our world of mobility, transport, and com-
merce runs on fossil and carbon-based fuels: oil, gas, coal, biomass (wood
and palm oils), and most of our modern economic development has been
predicated on availability of such cheap energy supplies. Despite the pres-
sures arising from global warming on governments to ‘do something’ via
a Kyoto protocol, Copenhagen, Lima, or Paris climate change conference,
national governments, their economies and their elites are far too inter-
connected and complicit to automatically change this anytime soon.

What Is HRD?
Human resource development (HRD), by academic design, is a perfor-
mance system which consists of skills transfer, instructional design, training
needs assessment, organization development (OD), succession planning
(SP), and career development projects. It encompasses all the human soft-
ware of an organization. The HRD system can be utilized by any large or
small organization (business, public, or non-governmental) to enhance
strategy, structure, and efficiency in that system to improve individual,
group, and organizational effectiveness. In short, HRD has field specific
interventions (both instructional and non-instructional, such as compen-
sation and rewards systems) that can be brought together to solve human
performance problems, while also identifying improvement opportunities.
HRD also encompasses a longer-term effort to prepare individuals to suc-
ceed each other for work in a global context. HRD is inter-discipline and
draws from the fields of business, education, economics, and communi-
cations (social sciences). It is not unique to any of these fields however,
and is best utilized in environments where there is considerable organiza-
tional, economic, or social change at a fast pace. Sometimes, HRD can be
inside an HRM, or human resource management, plan for either business
or public administration. Firstly, though, HRD needs to be clearly com-
municated and understood in order to be utilized and implemented for
maximum and thorough effectiveness.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  3

Today’s HRD practitioners… must be aware of interventions other than

training that support human performance improvement and learning.
[Thus] it is necessary to identify the roles, competencies, and expected out-
puts of those who do human performance improvement [HRD] work.2

In short, HRD is about aligning human inputs for the best organizational
outputs.

Why Is HRD Important?

A very simple example may suffice: In the USA and much of the Western
world, when encountering a problem, employees will, on their own initia-
tive, try to solve it either alone or with the assistance of others, including
their bosses. In many parts of the developing world, another work culture
has developed based on conforming to and obeying the needs and motiva-
tions of either specific personalities or the collective3 and which often leads
an unusual dependence on direct supervision. In HRD, the value of the
initiative or performance variable is recognized and is developed partly in
anticipation that it can replace the need to wait for direction from above.
Countries such India, China, Indonesia, Angola, and Kazakhstan,
despite extraordinary economic gains in the past few years, are still lagging
behind today’s accepted Western ‘human development’ standards even
though these countries oftentimes have highly educated people and access
to world events, capital markets, and communications.
For example, Indonesia and Sri Lanka create a plethora of engineers each
year in their premier schools of Indonesia’s Technology Institute of Bandung
and at Sri Lanka’s Peredeniya University near Kandy, yet, there is still heavy
reliance on foreign engineering to service its vast coal and oil reserves in the
former, and a brain drain of engineering talent going abroad in the latter.
Therefore, international HRD today is still in its infancy and relies on cutting-
edge research with people actively in the field to develop accepted competen-
cies of learning and performance. These competencies encompass more than
rote cognitive learning: they promulgate behaviors, attitudes, and the mindset
required for ‘high performance’. The ‘how to’ behind these skills transfers is
even more profound in predominately agrarian, developing countries. The
HRD competency base in developing countries is not the same as in Western
countries. Former communist countries and ‘new market economies’ are fer-
tile areas for HRD, as they desire to develop their citizenry as quickly as pos-
sible to world standards and its stage.
4  W. HICKEY

Traditional training and development methods that would be the

k­ obvious solution in the West may not translate effectively or efficiently
across cultural and language differences.4 Identification of learning needs
and the why behind them is a given in order to train local workers to new
global production standards. In short, the goal is to develop the occupational
skills base of local workers, in order to develop the local workforce to glob-
ally accepted standards.5 In HRD jargon, this is known as ‘assessing the gap’
between what is actually happening and what should be happening.6 These
human performance gaps can be positive, negative, or neutral, yet generally,
in many developing countries, they are seen as negative.7 Essentially then,
HRD is about closing these performance gaps in knowledge, skills, and atti-
tudes to get to internationally accepted human performance standards, of
which developing countries, especially with resources lagging.
However, all countries  now seeking to compete for a share of the
world’s stage for high skills/high-wage production must invest in the
skills of their people. One explanation of poverty and unemployment then
is that they result from insufficient amounts of human capital investment
(or as economists would say, ‘misallocation of resources’).8 In order to
avoid the impoverishment of this new country, Indonesia must develop its
many people resources to add significant value to its abundance of natu-
ral resources in areas that will ultimately give it a comparative advantage
regionally (ASEAN) and in the world’s economy. Much of this can be
assisted in economically focused educational initiatives.
The bottom line with HRD is that the relationship between a highly
skilled workforce and prosperity has always existed. Consideration of local
employees as valued corporate assets and not merely labor ‘costs’ are the
key. Yet, traditional business seeks a commoditized labor cost, which by its
philosophy, is indirectly opposed to the human capital investment theory.9

Our Fossil-Fueled Reality

We start with the pretext that the industrialized world today runs mostly
on fossil fuels. In short, oil for transport and mobility, and coal for electric
power generation. Large dam projects, or hydropower, in many African
countries such as Tanzania and Egypt, and China, along with nuclear
power plants (NPPs) in Korea, the UK, and France, do in fact supply a
large majority of the electricity generated for the nations power baseload
(or energy on demand), but those countries are in the minority. Fossil
fuels still rule the day.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  5

One needs to only witness new toll roads in Nigeria and Pakistan, huge
maritime port expansions in Eastern Indonesia and Oman, or massive air-
port expansions in China, Malaysia, and Brazil to understand the enormity
and complexity of this business. That is just for transport. We have not
even mentioned new coal-fired power plants being commissioned in India
and Vietnam, fossil fuel use for heating homes and water, creating poly-
vinyl extrusions that make plastic bottles, accessories, clothing, and bags,
and the other fossil fuel products used in steelmaking, specialty chemicals,
and pharmaceuticals. The world’s burgeoning and accelerating demand
for resources and energy is staggering in the past 100 years alone.
Despite the press and attention given to global warming, in most of the
developing world, if it burns, it can, and it will, become a fuel source either
for direct combustion, such as cars, trucks, busses, or for heating water to
drive giant electricity-generating turbines. The addiction to fossil fuels in
the developing world is crystal clear. Yet, all fossil fuels are finite upstream
resources, and even biomass, such as coconut husks or palm oil residue,
requires a regrowth and regeneration timeline. Carbon-based fuels will
not be around forever, however, at current use rates and now pose even
more significant problems for the planet if it continued to be burned at
a breakneck pace in the residual of climate change.10 If all the carbon still
locked in the ground (coal, oil, and gas combined) and estimated at 2800
gigatons of reserves are burned, it would significantly physically alter the
planet we call Earth. This is not merely a figurative argument by any means,
global warming is happening, and quickly, according to 99.9 % of scientists
from the Intergovernmental Panel on Climate Change (IPCC), National
Aeronautics and Space Administration (NASA), and National Oceanic and
Atmospheric Administration (NOAA). It is even acknowledged to be hap-
pening and well underway by most big oil companies (Shell and BP), the
US military, and the US CIA. We are past climate change being a negoti-
ated belief system. This will lead to profound changes into how energy is
used and carbon emissions responsibility in the near future.11
Correspondingly, a world addicted to fossil fuels buried deep under-
ground, with investors paying trillions of dollars per year for their extrac-
tion, refining, processing, and utilization, in practically all cases, generates
large profits and salaries for their workforces.12 Over 85 million barrels of
oil a day are consumed alone while falling slightly short with this year’s
drop in oil prices, 2016, while total world thermal coal consumption is fast
approaching 8 billion short tons a year, 80 % which is burned for elec-
tric power generation. Additionally, 110 trillion cubic feet of natural gas is
6  W. HICKEY

c­ onsumed yearly.13 Big oil and gas production projects that are holding
69 % of the world’s reserves will be found in developing countries in the
coming decade.14 Australia’s largest export is thermal coal, most of it going
to fuel the demand for electricity in the two Asian giants of China and India.
Canada is developing its bitumen rich ‘tar sands’ mostly for the benefits of
Chinese investors. Chinese are also driving and advancing credit for large
infrastructure projects across Africa, South, Central, and Southeast Asia,15
and most recently with an ‘Asian Infrastructure Investment Bank’ or AIIB,
to open up the arteries, if you will, for resource extraction and thus even
more fossil fuel burning.
According to Thomas Friedman, it is a hot, flat, and crowded planet
we must all share.16 The ‘Arab-Spring’ protests that started in part by
the masses of unemployed and redundantly employed in Tunisia, Syria,
Libya, and Egypt, may in part be a precursor of a burden-sharing need
the rest of the world faces.17 Developing countries simply cannot con-
tinue to entertain high unemployment for the benefits of the few entitled
and privileged in a traditional economic arrangement of the ‘natural state’
whereby it is business as usual for poor countries selling their only tangible
and exhaustible fossil fuel assets (oil/gas/minerals). Assets that would be
better served promulgating their competitive advantage if they had the
know-how to use it more effectively.
Therefore, a new socio-economic contract, rooted in stronger insti-
tutions18 is called for. As of this writing, the world sits in a deflationary
economic environment. At its root, there are simply too many unskilled
people and not enough unskilled jobs.19 Automation and overcapac-
ity have rendered many low- and medium-skilled jobs obsolete, if not
completely unnecessary (such as internet retailing, payroll processing,
­
high-­tech assembly lines, and mining coal or ores).20 Growing unemploy-
ment problems continue to ferment political instability worldwide.
For example, practically all countries in resource-rich Saharan Africa
have a greater than 10 % unemployment rate.21 Youth unemployment in
many developing countries, and with huge stocks of fossil fuels them-
selves, approaches 50 % or more. Mass migrations from developing coun-
tries (many rich with natural resources) to developed ones are straining
welfare and social systems in the said developed countries, and are redefin-
ing a type of ‘desperation economics’ of migrants risking everything to get
to a place they perceive as better, no matter what the costs, while ignoring
resources or opportunities in their own developing lands, due to political
upheavals and repression.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  7

This tremendous wealth transfer from poor to rich in times of record

world unemployment (constant and growing) mandates that even a tiny
link to developing people sequentially is required ‘Burden-sharing’, gain-
sharing, or a more ‘open-access’ social order22 is called upon for coun-
tries that want to succeed in a new economic paradigm.23 Fossil fuels,
and their carbon backed derivatives (palm oil, biomass), are finite national
resources that, while owned by the citizenry in name via constitutional
proclamations, do not directly benefit them all, but rather certain ruling
elites.24 As Peter Senge at MIT succinctly puts it 15 % of the people having
95 % of the wealth, is simply not sustainable. This is a timely statement by
Dr. Senge, the assumption that people will not continue to abide willingly
by these discrepancies is implied.25
While the enormity of the foreign direct investment (FDI) and gross
domestic product (GDP) generated by these resources in developing
countries (in the billions of dollars is not unusual) can be hard to grasp,
it rarely has lifted living standards in its current investment format, con-
tributing to what is known colloquially as the ‘resource curse’. Countries
under the ‘curse’ are all well endowed with natural resources, but social
and educational development is lacking or non-existent.
This situation has lasted for a long time, and a detailed rehashing of
what the resource curse is on a theoretical level and its causes is beyond the
scope of this work, but rather to say that three of the most pressing prob-
lems facing humanity at this time: Overpopulation, mass unemployment,
and now climate change are critical issues dictating that the status quo
must and needs to be changed. It is no longer an optional or philosophi-
cal debate facing mankind. Change is mandated and necessary for the
immediate health of the planet and continuance of resource sustainability
for future generations. There is a sense of urgency. The entire ‘carbon-­
cycle’ of resource extraction, processing, and utilization needs a remake
and much better husbandry and stewardship. That means getting more
people involved to utilize, service, and maintain it.
To that end, a consumption-driven society, while according to Milton
Friedman may be the only game in town, it is also highly destructive to a
very finite physical planet with wanton wastefulness and fossil fuel emis-
sions. A rethink of what higher living standards really means is in order,
and needs to incorporate cultural values and political stability, and above
all, a true cost of energy needs to be reflected in all consumption-driven
patterns and economic scenarios.
8  W. HICKEY

Jeffrey Sachs, director of the Earth Institute at Colombia University,

has written extensively about the need to engage people on relevant level
in many industries (not just energy)26 and about the resource curse,27
whereby countries that are endowed with natural resources tend to be
economically underdeveloped and autocratic in regard to human rights,
empowerment, and democracy. Economic theories aside,28 Sachs is criti-
cal of the dependency fostered by many aid and economic development
programs that are underutilized in the developing world, including coun-
tries with very ample natural resources. Sachs and others acknowledge that
uncontrolled corruption in developing countries hinders development29
and that foreign investors in many of these economies bear some part of
the corruption blame. Some of Sach’s work is consistent with the new the-
oretical burden-sharing model by Joergen Moeller30 that societies which
do not recognize resources as their national strategic economic drivers
that need protection will be left behind. That is, making known inputs
more efficient to create better outputs.
Nevertheless, inputs and outputs are not always found in neatly con-
tained, stable systems, as Senge, also wrote in regard to systems theory,
and was later amplified by Nassim Taleb in his book, The Black Swan.31
Old behaviors are reinforced by a continuous pattern of group think; that
old methods and economic drivers are not easy to change, and that in
order to break out of patterns of circular thinking, a reinvention or re-­
engineering of current methods is necessary. Senge’s work centers on the
idea that in order for organizations, or systems (from tiny equatorial col-
lectives processing palm oil from trees, to the behemoth international oil
companies in the fossil fuel industry drilling for deep sea offshore  oil),
to meet an exemplary outcome, they must recognize the steps in what
they are doing wrong in the processes in order to reframe and correct
them. This requires continuous learning and adaptation. Also, both Peter
Senge and Jeffery Sachs are now heavily involved in global warming/CO2
mitigation initiatives with developing countries, which are the direct effect
of fossil fuels overusage32 and over-reliance since the beginning of the
Industrial Age in the mid-nineteenth century.
Michael Porter33 at the Harvard Business School has theorized the fit of
cluster competitiveness and development of industry and living standards
is based on utilizing a country’s true economic drivers, or ‘industrial fit’.
Countries need to go with their winning economic engines, develop home
industry, and workforce, and to promote efficiency, to develop a national
competitive advantage as opposed to creating pell-mell industry they
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  9

c­ annot gain advantage in or cannot develop on their own. In order to do

this, metrics attached to skills-based competency roadmap need to come
into alignment34 with core industry, for fostering a proper HRD mindset.
A new conceptual paradigm then regarding fossil fuels and resources is
put forward to reduce vast world unemployment by creating more mean-
ingful worker engagement on a localized level. This is beyond merely the
‘upstream production’ level of the resource or economic process outputs
(i.e. electricity generation). On the face, due to large capital investments,
it would appear that fossil fuels generate little societal employment beyond
the initial upstream extraction (mining or drilling), and its immediate ad
hoc jobs for workers: truckers, accountants, cooks, sales managers. Many
have written that today’s extractive industries are ‘capital intensive not
labor intensive’,35 which is a very true statement under the current sys-
tematic extraction arrangement and management of the fossil fuel indus-
try. A system that the fossil fuel industry would also very much like to
keep unchanged, protected, and insulated from the flat, hot, and crowded
planet they operate on.
The status quo of all things fossil fuel could probably be kept that way
if countries with large populations of poor people did not have access to
the internet and mass media, unlike say in 1975, 40 years ago, where min-
ing and oil extraction processes were largely non-transparent and secre-
tive. Foreign energy companies making backroom or offshore ‘deals’ with
unaccountable dictators such as Indonesia’s Suharto or Libya’s Qaddafi, or
installed leaders like Mohammad Reza Palavi (the Shah of Iran) or Chile’s
Pinochet, who rarely shared information, never mind resource proceeds,
with their own citizens and lived in exclusivity away from the prying eyes
of their own public and unaccountable to civil society.
The Information Age has radically changed the transparency dynamic.
People demand more information from their governments and the rights
that go along with it. However, it has also historically been demon-
strated within the fossil fuel industry itself that even more considerable
employment can be garnered past the initial extraction stage in three very
important aspects, with even larger knock-on effects and more localized
engagement that was previously unrealized, as follows:

Sustainability  Husbandry of the resources leads to a better stewardship

level. Many mines and oil wells are not fully developed due to costs. As oil
fields decline, lower well pressures and shrinking reserves mean that getting
the rest of the oil out will become a progressively more difficult and expensive
10  W. HICKEY

business proposition, and foreign investors will seek to leave these diminish-
ing returns behind. However, if the right skills are applied and transferred to
lower wage host populations, more employment can be generated toward
successfully managing well life. This is similar for coal mining. Higher calorie,
low-ash-content coal, for example, is the most sought after, however, by add-
ing better management skills to the workers, lower calorie coal can be more
intensely mined on a lower capital return investment timeline, and then mixed
to enhance its downstream (sales) value.

Enhancement  This concerns creating value added after the initial pro-
duction stage of the resource. Many countries, such as Malaysia and Saudi
Arabia, are now taking a second look at adding value beyond the crude
oil or raw ores stage of production. In Malaysia, crude palm oil (CPO) is
being refined to create better resins and substrates in order to add value to
their local workforce skills inventory. Instead of merely shipping CPO to
China or India for further processing there, they are seeking to add value
to their own people with attendant activity based on the in situ resource.
In Saudi Arabia, they are investing heavily in the creation of polyethylene
via the by-products of the huge amounts of natural gas that come with oil
production, instead of wasting it as was traditionally done through flaring.
Both the Malaysians and Saudis are thus ‘moving up the value chain’ to
middle-level semi-finished products level that will give their workforces
higher wage growth and competitive advantage.

Safety and pollution reduction (Responsibility)—Fossil fuels generate

large amounts of waste by-products in their both production and usage.
On top of all this, however, the world now faces a crisis in CO2 emissions
highly correlated with global warming. While the precise and ultimate
long-term effects of global warming is under considerable debate, no one
doubts that exponentially increasing amounts of carbon being dumped
into the atmosphere will give us a very different planet by 2050, than the
one we have today. Currently, 2015 is registered as the hottest month
in recorded world history, with all of 2016 on track to be even hotter.
Earlier in 2015, CO2 ppm measured consistently around the world at
400 ppm. It is estimated that 350 ppm is needed to keep global tem-
perature averages from rising above the 2 °C mark, which is expected to
radically alter weather patterns and ocean acidity levels. Certain low-lying
Pacific nations, such as Maldives, Fiji, and Nauru, are already facing the
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  11

initial onslaught of rising sea levels and submerging shorelines. Even the
USA is feeling this, Key West and South Florida in general have witnessed
so-called sunny day flooding,36 where rising tides impact communities.
Climate change is real, it is not an abstract belief system and will have real
impact on economics, society, and migration.

What This Book IS About

Energy access and its all-encompassing meta-ability to build social capital,
improve lifestyles for the better, reduce poverty, and empower people in
a new, more environmentally conducive business model is what this book
seeks to portend. Studies have shown that access to cheap energy means
empowerment and social capital building.37 This ideal must be cemented
in a pragmatic government investment policy, acknowledging the utmost
importance of aligned educational initiatives in a population’s strategic
resources. A paradigm of strategic competitiveness contexted against an
information-intensive, warming world, that is facing vast youthful and
unskilled populations38 with their future opportunities in the very devel-
oping countries that harbor the most natural resources. This is the ‘big
picture’ and holistic context of this book. A mindset of better develop-
ment with more human capital engagement to foster (and sustain) social
capital building for overall societal gainshare through burden-sharing is
not a new concept. Both economics and management professors have
been expounding on this since the days of Frederick Taylor, and his con-
cept of work and human performance.39
Nonetheless, a preponderance of academic work via meta-analysis has
been at the macro level or 10,000 meter view of issues. Here, econo-
mists have acknowledged en masse, of a greater societal issue of economic
growth through human development, and at the micro level or 500 meter
level, where management academics are furiously transferring skill sets
and performance competencies to individuals and corporate workforces.
The ideal proposed then for effective localization is to meld the macro-­
economic direction, with the micro level of human interaction, thus oper-
ationalizing HRD initiatives and methods in a national policy format for
strategic industry at the meso-economic level, or 2000 meter level, or as
it may be colloquially put, where the rubber of operations meets the road
of economics. Under this scenario, localization has been identified and
mechanized. See Fig. 1.1.
12  W. HICKEY

Fig. 1.1  Macro, meso, and micro viewpoints of HRD from various scholar and
practitioners (Hickey)
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  13

Alleviating and overcoming the resource curse via an effective g­ overnment

policy. While these concepts may seem idealistic, perhaps quaint to some,
‘Marxist’ to others, the alternative, of doing nothing and following the same
old business model playbook based on colonial principles (now since evolving
to neo-colonial practices) that transfer wealth abroad or to well-connected
elites while burning more and more fossil fuels as the planet suffers will not
suffice. As Einstein is alleged to have said about what insanity is: doing the
same thing over and over again and expecting different results.40
This book is about engaging and empowering people in their own domes-
tic resources, whether upstream (coal mines) or downstream (oil refineries)
and not merely about ticking boxes to placate host (usually out of touch
and unresponsive) governments or appeasing elite forces who control these
resources under a current, usually contrived, legal framework rooted in past
colonial practices or a nepotistic influence that left without intervention will
simply create a neo-colonial extractive and energy framework.
Changing the energy/resource model we all need for survival is possi-
ble, is necessary, and most importantly, is doable. All it requires is focused
political willpower and policy,41 the methods are clearly there in the age we
live in. This book then portends to create a roadmap for effective localiza-
tion: Empowering locals to take control of and develop their own ‘in situ’
resources, for a better and more effective social capital engagement on our
flat, hot and overcrowded planet. The book is about pulling systems together
and aligning those systems to create a new platform for citizen engagement,
‘total localization’ if one wills. And as Einstein also said, We cannot solve our
problems with the same level of thinking that created them.42 An appropriate
discussion of why that is, remains so critically necessary today.

What This Book IS NOT About

This book is not about one specific type of energy, such as oil or windmills
or NPPs (nuclear power plants), though fossil fuels (oil in particular) do
presage a huge part in the empowerment of locals in large host communi-
ties in the developing world; expansive windmill farms are now a cutting-­
edge alternative energy producer that is 100 % carbon emissions free of
its energy production; and nothing can beat the electrification process of
splitting the atom with nuclear energy, but that explanation could fill vol-
umes. For a working example, consider nuclear power (NP) as stand alone
and development of all HRD competencies for it. There are many areas.
Each area has a large degree of specialty and can employ many, up to
14  W. HICKEY

hundreds of people, with specialized tasks, routines for maintenance, and

safety ­functions. We consider some main, book-length areas that could be
discussed ad nauseam43:

• Nuclear economics, finance, and feasibility

• Reactor and power plant design
• Construction and supply chain
• Safety and preparedness planning
• IT and security for nuclear energy
• Policy, regulatory, and licensing issues
• Manpower development and community acceptance
• Nuclear fuel supply and trans-shipment/logistics

Nor is it about extolling the benefits of fossil fuels to power develop-

ing economies cheaply (which they are not if one considers the long-term
implications of CO2 emissions on the planet). Nor is it about any narrow
training and vocational planning for one type of energy. There are many,
many plans available, from highly technical offshore oil safety training to
equipment maintenance for open-cast coal mining, to the extreme engi-
neering process methods for geothermal, to total safety training for NPPs.
Any reiteration of a specific industrial plan for this development would
be useless herein, as most of these plans are not only industry but also
­company specific and correspondingly, some are proprietary (however,
some samples are provided in the appendix).
Further, any of these plans bereft of real educational or development
mandates in investment contracts and government policies encouraging
and incentivizing a localization initiative is useless in itself. Nor is this
book about using any particular HRD methods or facilitation for educa-
tional development, such as for andragogy, ‘instructional design’, ‘shared
or shadow learning’, ‘succession planning’, or ‘competency development’.
HRD methods must be applied in a context for whatever the given situ-
ation needs for endorsement, be it the training cycle for upgrading semi-­
literate workers or a complete job competency for aspiring local managers.
Nor is it an analysis about any one type of financial instrument, such as
derivatives, break-even analyses, or any sovereign wealth fund (SWF)
agglomeration. These financial tools all derive tremendous wealth off the
energy business, but again are all ‘type-specific’ for very certain situations.
This book does not attempt to rehash the endless political arguments
of the myriad causes of the resource curse (unaccountable and unelected
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  15

leaders, looting of natural resources by elites, low education levels in

developing countries, etc.) nor about reinforcing the need to minimize
overall corruptive practices namely bribery and rent-seeking, but rather to
show a way past the resource curse, through educational empowerment.
Nor is it about the long-term pitfalls of climate change and its attendant
scientific debates (such as melting ice sheets in the Antarctica/Greenland,
disappearing native species in the Arctic tundra, or increasingly deadly
wildfires in South Australia) or about the impacts of global warming on
human activity (flooded cities) or about the extreme largess of the fossil
fuel industry in political circles (the House of Saud, African dictatorships,
or Organization of Petroleum Exporting Countries [OPEC] leaders) to
keep their addictive systems static nor amid the vast corruption by those
controlling elites in developing countries (Russian ‘oligarchs’).
All these issues are very discipline precise and have been well docu-
mented by some of the best and brightest scholars in the world. It does not
attempt to address detailed disciplinary specificities in methods regarding
energy, HRD, finance, corruption, or climate change. So much has been
written about these issues already by so many experts in each area: Yergin
(oil), Becker (economics), Sachs (economic development), Senge (systems
feedback loops), Porter (competitiveness), Rothwell (T&D), McKibben
(Climate Change), and so on. It is not an attempt to outguess or trump
the visions and methods of any guru or academic in a narrow or definitive
field.44 This is left to the individual experts to analyze.

Unstable Systems Seeking Stability

The world today is bereft with unstable systems, though their govern-
ments may try to put a happy face on it, things are far from settled. Yet,
everyone, markets and individuals seek certainty in an uncertain world.
Consider just a few:

Global Warming  An entire quotient of mostly the US population believes

this public goods dilemma does not really ‘exist’ and is willing to fight and
uphold any progress on dealing with this most contentious of political
issues. Yet, ice sheets in Greenland and the Antarctic are melting quickly
and sheering away, intensity of storms and droughts increasing, with 2015
noted as the hottest year in recorded human history since 1880 and 2016
expected to exceed those temperature records. 
16  W. HICKEY

Currency Wars and Quantitative Easing  Countries are now trying to ‘out-
devalue’ each other and print more money (quantitative easing) to make their
goods and services cheaper than their neighbors’. If we take a step back, it
would seem absurd, by racing to the bottom of human development and
offering cut-rate labor prices, countries make themselves more desirable. The
idea being that cheaper goods and people will lead to more demand, more
exports, more business transactions. It’s the other way around: countries with
highly performing human resources, like Swiss or Germany, are the trend line
for quality investment. The entire world’s economic advancement is based
on a so-called ‘consumption economics’ model.45 In other words, this has
failed to materialize. In fact, it’s gone the other way, where in a deflationary
environment, as the world is now arguably facing,46 people simply put their
money aside (savings gluts) while awaiting cheaper prices and hold off on
big purchases of cars, real estate, and washing machines. Big ticket items that
make the economy go round that reinforce the circular model of services and
thus and ethereal ‘economic growth’ ensues. 

Political Turmoil and ‘Terrorism’ This is most pronounced in the

Middle East. Syria and its refugee crisis is the residue of a three-way proxy
between great powers and religious fanatics. Iraq, Afghanistan, Libya,
Yemen, all have similar or lagging scenarios. Power vacuums and illegiti-
mate governments have created volatility. Failing states, with resources,
such as Libya or Venezuela are especially unstable. 

Emerging China and India  In total, both these countries combined are
home to nearly 40 % of the world’s population, encompassing a staggering
amount of humanity. These countries have rising GDPs (Gross Domestic
Products) and large populations that need gainful employment. Their
citizens demand and expect more, but their systems, infrastructures, and
policies are products rooted in another era. This contradiction is causing
growth pains and spawning social questions and political problems domes-
tically and foreign. While China has certainly outpaced India in terms of
total development, both these countries also have deeper issues with learn-
ing and educational development for the long term.

All these instability themes are linked to one constant and over-riding
theme: Energy and rights to natural resources. Global warming is about the
‘right’ to use heavily polluting or climate alternating types of energy at the
expense of the planet. Currency values in many countries are ­underwritten
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  17

by commodity resources in situ or by how well-given countries (S. Korea,

Japan, Singapore) have added value to those commodities in a process, via
refineries, polyvinyl extrusions, or arguably, financial derivatives on forward
financial markets. As oil and commodity prices are now, at the time of this
writing, in a severe glut, currencies have become weaker and weaker (Russian
ruble, Nigerian naira, Canadian and Australian dollar, Malaya ringgit, etc.).
Political turmoil, most notable in the Mideast, is due to oil reserves and the
importance of those reserves to the big powers and their proxy states.
Business leaders and investors want policies that insure stability for their
investments, in other words, certainty. The economists are ‘ruing the day’
with instability on a macro level. Economists sit at the table with the lead-
ers and discuss the importance of an ‘Information Society’ that embraces
changing dynamics, yet they propose no mechanisms and rarely any
details. They are ensconced with thinking at the macro-economic level,
but real change can only be via the meso-economic or policy level. As with
all organizations and governments, they are only as strong as their admin-
istrators and managers who must interface the policy with the outside.
Today, HRD must sit equally at the policy table for Information Age
relevance. This can only be done through policy changes which are pre-
saged by mindset changes, meaning past engineering mindsets and finan-
cial playbooks. If economic policies only uphold the gods of finance above
all else, with all their attendant investment, taxation, and supra-national
growth mechanisms (North American Free Trade Agreement [NAFTA],
OPEC, Trans-Pacific Partnership [TPP], etc.),47 the people development
dynamic will continue to be neglected, today there must also be HRD
policies enacted in a truly ‘knowledge society’ to get to ‘go’, namely to
move past finance, we must institutionalize HRD also. It cannot be left to
the ambiguities of the market in the Information Age of the twenty-first
century. There is simply too much information available and analyzing it
correctly requires human capital investments in know-how, skills trans-
fer, and self-directed learning. If this is not realized, the economists in a
consumption-driven world, will default to financial playbooks every time. It’s
all they know, despite any well-wishing to human development concerns.
Consider that they are doing it right now with a slowing China and 1.4
billion people who have been preconditioned to trust in a one-party state
and manufacture what the world needs. All the above-mentioned financial
gimmicks are now being employed in a system of state-controlled capital-
ism to keep the consumption game (predicated on cheap energy supplies)
going: manufacture low-value products to export to the rest of the world.
18  W. HICKEY

Yet, with the world’s largest population, long-term political stability

rests on this issue of human development for an increasingly empowered
society. This core of the human capital investment theory leads to better
defining social capital.48 China simply cannot afford this old model in an
information-intensive world if they are going to get past their export-­
oriented mentality. More on the China syndrome and stability will be cov-
ered later in the book.

‘Localization’
Localization is at the meso level of a country’s economic and social devel-
opment. It should be viewed through a lens of globalization, not colo-
nialism or its current format, neo (new)-colonialism. It is underpinned by
relevant educational initiatives that empower people in a local community.
Companies seek to invest in host countries profitably and to increase their
market share. Yet, it’s becoming less about balance sheets and aggregate cus-
tomers as it is more about employing, developing and engaging local people
to do the work, most pressingly in many developing countries suffering from
high unemployment, redundancy or underemployment issues all leading to
instability.
While dictatorships may allow them, democratically elected host gov-
ernments in developing countries will no longer tolerate vast armies of
high-skilled, foreign workers coming in to extract their natural resources
or operate their power plants while their own constituencies push brooms
and load trucks, or worse, they stand around unemployed, completely
bereft of all operations and maintenance.49 This is the natural state of
things. Of course, many governments are also well aware of this construct.
They have failed to consider educational development and upbraiding
on the same level as economic, financial, and technical development, and
while imposing taxes, fines, and tariffs for disregarding human develop-
ment and skills at the same level as a mere financial infringement. In that
sense, government policy must be focused on localization outcomes, with
education, not only financial wherewithal. This last issue is difficult to
conceptualize, as the gods of high finance, we will see in Chapter 3, are
sacrosanct to the globalized world order of international business and
economies, not human resources, though it is a nice concept for political
platitudes and armchair discussion among world leaders.
Nonetheless, there is still no concentric or agreed-upon definition
of what constitutes an effective localization or how it can be templated
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  19

to transfer to other resource-rich countries. It is not a one-size-fits-­all

approach, conversely, this variance should not allow companies and inves-
tors to shirk localization altogether. All countries are different, with dif-
ferent needs, as we shall see. As we note, many manufacturing companies
from GE to Westinghouse to Siemens do seek localization,50 but it is loosely
defined, sometimes proprietary, and rarely, if ever tied into a national plan.
Development is at different speeds. A better commonality of an effective
localization, with definition, is in order.

Some Questions Then Regarding Localization Effectiveness Arise

1. Who will mandate any localization? Is it voluntary goodwill by cor-
porations or is it government mandated in all resource investment
contracts? How will it be enforced if the latter?
2. Are contractors considered obligated in the localization scheme or
only full-time employees?
3. What job or skills levels are imparted in the localization scheme?
Workers, technicians, supervisors, middle managers, executive posi-
tions? What constitutes ‘effective’ localization? What will the rewards
and compensation scheme be in a full localization plan? Is it truly
localized and spatially sectored rural areas, do all or only elites from
capital cities qualify?
4. Is the localization reimbursable or not? This is a key question, as
many oil companies we shall see later are paid NOT to develop locals
in their production sharing contracts (PSCs).
5. Is the localization ‘empowered’ (using the WB definition of empow-
erment)? This means is it merely a voluntary box ticking of local
employment, part-time employment, or even engaging locals in
subcontracts or is it actual guaranteed hiring for full-time positions
with advancement and management opportunities if the potential
hire has the skills necessary to advance in the company? Can local
advancement be entertained for the C-suite?

Finally, even if specific hiring and development criteria are met, it can
never be put past the companies or host governments to game the system
for marketing or political grandstanding.51 This is a problem today, for
example, with the US H1b visa issue. The idea is to attract skilled foreign
workers when locals do not have the skills to do the jobs necessary. The
reality is that the H1b visa issue seems to mimic a compensation visa,52
20  W. HICKEY

where US companies can hire considerably cheaper and unorganized

Chinese and Indian tech workers, as opposed to higher cost, organized
US engineers.
Many foreign investing mining and oil companies in developing coun-
tries are quick to point out they hire large percentages of locals and love to
show Gantt charts demonstrating decreases in expat workforce, contrasted
with increases in  local hires with climbing salaries and living standards.
These are generally percentage increases, not actual numbers. If actual
numbers of local hires are overlaid against skilled contractors, however, a
very different picture emerges. Contractors form a type of parallel organi-
zation where most real and technical capability work is provided by non-­
encumbered, third-party contracting companies that are unaccountable
for any localization policy initiatives, including safety, technology and skills
transfer, and corporate social responsibility (CSR). In essence, appearances
and motivations can be very deceiving depending on the precise terminol-
ogy that is used.
Of note is that most large multinational oil and mining companies do
not hire directly. Hiring is via a ‘CCP’ or consolidated contracts provider
(also called an integrated services providers). This is the general contractor
for the entire operation. For example, when BP invests in an oil opera-
tion, its CCP may be Halliburton, Schlumberger, Saudi Arabia’s CCC,53
or some other ‘oil services’ third-party entity between host government
and umbrella national oil company. Any local hiring will generally be via
the CCP. BP forms a contracting bank or super-holding entity only and is
generally not involved in day-to-day workforce operations. If BP does hire
locals, it will generally be via a consortia partner, usually a state-owned
company, which provides incumbents who have been with them for many
years. BP itself will generally not recruit fresh hires, which is the CCP’s
job.
Actual local hiring then can be obfuscated through various levels of
social obligation.54 The CCP’s job is to get the best value for the com-
pany, not to be concerned about political mandates. This is why many oil
sites in developing countries use third country nationals (TCNs) Nepalese
security guards, Indian caterers, Turkish laborers, Pakistani welders, and
Bulgarian pipe fitters. They are considered as contractors, not formal local
hires. Contractors don’t really transfer anything. What the holding com-
pany bills the contractor for is the real matter of record then and creates a
gap dynamic between responsibilities.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  21

Getting locals involved and engaged meaningfully in these industries

can promote some sense of responsibility via their ownership quotient of
the resource. Further, this sense of responsibility (or crises) will put many
of these same locals in the vanguard to understand more about and push
for developing alternative energies (and the outcomes of climate change).
It will be considerably difficult to make the jump from fossil fuels to purely
alternative energy (i.e. solar, wind, etc.) without a transition period. But if
we enter the era of carbon development mechanisms (CDM) and alterna-
tive energy without a redress of corruption and empowerment (namely
the same systems and status quo methodologies being recycled over and
over), the results and intended effects could be disastrous.55 This transi-
tion must be fostered by innovation and introduction of disruptive tech-
nology56 that will give an option to traditional fossil fuel sources. This is
not idealism, but the roadmap must be rooted in a new energy policy.
Simply put, old methods are cause for concern, they are not working to
address problems, but left alone are creating more problems.
Only a more clear understanding of resource sustainability is, and
enhancement via, value-added capacity of the resources (beyond the initial
extraction level) can foster a mindset that will lead to the ‘critical inci-
dencing’57 required to make these technological leaps from the day-to-day
business drivers that place finance, not human development, and its world
front and center.
One who digs coal out of the ground, washes it, loads it on barge, or
ships it abroad for a contracted price cannot see, feel, or empathize with
the creation concept of ‘value added’. It is a meaningless construct to
them at task level. The concepts of coal feedstock, enhancing ‘life of mine’
by blending higher ash content coal with high caloric coal, or mitigating
the carbon footprint of CO2 through carbon sequestration cannot be envi-
sioned. These things are abstract and ethereal to the worker.
Fostering awareness or a ‘Eureka moment’ can be created by actual
industrial engagement and contact as opposed to static concepts and final
outputs that are far and away, removed from the actual workers inputs.
The ideal is that awareness creates buy-in, which creates responsibility,
resulting in action and change.58 All these competency-based sectors
can promote skilled engagement outcomes and localized employment.
Complementing this concept of good HRD competency development is
use and knowledge of respective safety issues, with consistent safety train-
ing (Table 1.1).
22  W. HICKEY

Table 1.1  Sample of HRD competencies needed (outside of raw extraction) for
energy localization
Core Sustainability Enhancement Responsibility
competency

Theoretical J. Sachs, M. Porter, P. Senge, J. Sachs

framework J. O. Moeller,  W. Rothwell
W.  Easterly
Resource
For oil Well enhancement Refining capacity Safety training
Life of well, Polystyrene creation Environmental/CSR
proven reserves fertilizer/medicinal CDM/CO2 reduction
Reservoir use
management
For mining Life of mine Coal blending Safety training
Assay of ores/ Rare Earths extraction Environmental/CSR
minerals Metallic ores
Mine development processing
For energy Technology Grid (electric) CDM/CO2 reduction
creation transfer expansion Community interaction
(i.e. Power Workforce Dual-cycle/geothermal Environmental/CSR
plants, dam) development Exporting excess CDM/CO2 reduction
Int. standards power
alignment

Specific ad hoc and downstream competencies required for certain energy businesses. By Dr. William
Hickey

Theoretically then, we are able to expand the competency ­development

beyond only extraction into resource enhancement, sustainability, and
environmental responsibility that are all interlinked and create, by exten-
sion, their own unique competencies. What is certain is that core industrial
competencies are building blocks for jobs creation, and if linked to eco-
nomic drivers, jobs that create gainful employment by way of value-­added
activity. It is interesting to note that this competency creation driver is
similar to the Porter ‘diamond model’ concept in cluster competitiveness,
which also has brought significant wealth to many industry-specific coun-
tries.59 See the conceptual model, Fig. 1.2.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  23

Fig. 1.2  Interlinkages of competency for extractive resource development

(Source: William Hickey)

HRD Mechanisms: The ‘How to’ of Localization

To get to any effective localization initiative of employing local citizens as
actors in their own strategic industries, there must be an overall effort by
companies and government for education and hiring outcomes in relevant
areas through effective mechanisms. Engagement, critical incidents, role-­
playing, shared learning, computer-based training, and affective awareness
are all drivers that enhance a skills base and understanding of the underlying
asset. Outside factors such as production sharing agreements (PSAs also called
PSCs), mine ‘reworks’, turnkey projects, and lifting costs can become politi-
cal, proprietary, and corporate barriers that while protecting and rewarding
investors can also minimize or stunt localization HRD strategies and thus
reduce meaningful employment opportunities and local engagement.
Any valid localization plan must be part of governmental policy and pur-
sued knowingly. In today’s world, competitive advantage is d ­ enominated
in large part, by skills in the workplace, and only the employees that have
24  W. HICKEY

demonstrated those skills can significantly partake in the global economy.60

What denotes ‘meaningful skills’ can only be realized by research of best
practices, benchmarking, and good policies. Even the best skills can be
mitigated if employment outcomes do not reflect real engagement (or
underutilization) in the position without increasing rewards and payoffs.
This issue is not solely about educational change but also about empower-
ment and thus real economic opportunity. Economic opportunity cannot
be merely defined as ‘export led’ growth, but also increased endogenous
activity, and socio-economic progress, defined as endogenous (domestic)
activity toward better societal outcomes, such as burden-sharing, gainshar-
ing, and relevant genuine progress indicator (GPI) metrics, not merely a
growing GDP which is suspect to misguided investments.61 Mechanisms
are core in the ‘how’ to realizing this.

Why Energy for Economic Growth?

The world’s economic development and growth are underpinned and
driven by cheap, plentiful fossil fuels. Much of the US rapid economic
growth the past century since the founding of Standard Oil in 1857, has
been based on oil and mobility.62 It is a historical fact.63 Moreover, the
energy business has enriched countless individuals and nations. If one
considers economies of scale, energy is simply where the money is. It is a
true and perpetuating source of wealth. Traditionally, this energy has been
found in the form of fossil fuels. This will not change any time soon due
to the sheer magnitude of demand and infrastructure already in place, but
other sources of alternative and clean energy are coming online. Consider
this factoid from Thinkprogress in 2012.

Exxon’s $41.1 billion in 2011 profit translates into nearly $5 million in

profit every hour, or more than $1,300 every second64

Energy development and utilization is a very important concept in regard

to national economic development in terms of both competitiveness
and regions. Nonetheless, many resource-rich countries pursue paths of
economic development that do not reflect this wealth of resources for
gainshare with their people. This has been known as the ‘resource curse’,
and much has been written and researched about it.65 The resource
curse states that countries endowed with resources suffer inversely with
human development. As economies get rich due to resources, a false
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  25

wealth ensues. People don’t advance themselves, and poverty is the overall
result. Conversely, countries with a paucity of natural resources, such as
Singapore, South Korea, and Taiwan, go in the other direction, human
development exceeds expectations, simply as people have only themselves
to advance and must develop their human capital.
Namely, only the energy business in terms of upstream, midstream, and
downstream can provide the resources needed on an economic scale to
lift large populations out of poverty and promote societal improvement
and local-content initiatives. Making T-shirts, candy bars, plastic acces-
sories, or handbags destined for export to the USA or European Union
(EU) in an era of cutthroat competition and manufacturing overcapacity
simply cannot do that. There are too many low-wage countries competing
for a slice of the export pie. A Blue Ocean or the ‘Cluster Economics’66
concept alone cannot solve this overcapacity/large unemployment reality
factor. Energy, even in a down economy, still delivers trillions of dollars in
revenues and profits to select holders of the resources each year.67 It needs
to be developed better for maximum value for localized populations.
We simply live in an overcrowded world with too many problems, such
as political instability, mass migrations, endemic poverty, and now climate
change to ignore this reality. The old business model must be changed. It
is no longer an option to accept this old way of doing business in light of so
many pressing needs. In this aspect, HRD is an in-part answer to these issues.
Fossil fuels and their transition carbon-based energies (CPO, liquefied
petroleum gas [LPG], liquefied natural gas [LNG], compressed natural
gas [CNG], ‘Biomass’, etc.) then that are economically and strategically
reconnoitered, with their populations on an empowered level, become a
new store of value that is urgently needed in developing countries under
the weight of unemployment and burgeoning, unskilled, youthful pop-
ulaces. This ‘new’ currency or social capital can in part be reflected by
the utilization of the resources of the country in situ or downstream if a
country does not have direct access to resources (i.e. Singapore and Asia’s
largest refineries).68 Utilization creates effective employment by way of
burden-sharing.69 Burden-sharing is not merely about upstream produc-
tion with a finite amount of knock-on jobs; however, it also creates oppor-
tunities in the competency sectors of resource enhancement, sustainability,
and responsibility (see Figure 1.3).
Elite ownership of the resources, legal and contractual policies rooted
in colonial systems, and corporate intransigence on proprietary rights will
dumb down and mitigate any true localization effort. Many researchers70
26  W. HICKEY

Fig. 1.3  Hickey diamond of HRD and localization for natural resources

all agree that cooperation is needed in today’s world. Instead of individu-

als ‘racing to the top’, we need to condition gigantic populaces to work
together for mutual societal benefits in today’s shrinking, overpopulated,
and polluted world.
To get to any effective localization initiative of employing local citi-
zens as actors in their own strategic industries, there must be an effort
by companies and government for education and hiring outcomes in rel-
evant areas via effective mechanisms. Engagement, critical incidencing,
and awareness are all important drivers that enhance a skills base and the
knowledge of the underlying asset. Outside mitigating factors such as
political, proprietary, and corporate barriers that while protecting inves-
tors can minimize or stunt localization effectiveness and thus reduce any
meaningful employment opportunities. A valid localization plan must be
part of any governmental industrial nationalization policy and pursued
knowingly. Only by giving locals contemporary skills and know-how can
they compete meaningfully. Chapter 7 will cover more on localization in
greater operational detail.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  27

A new store of value, whereby energy is translated to currency, is needed

in the world as developing economies are compromised under the weight
of unemployment and burgeoning, youthful populaces: fossil fuels that are
economically reconnoitered with their populations on an empowered level
become a new source of this development currency or social capital.71 As
stated, this currency or ‘social capital’ may in part be reflected in the sus-
tainability, enhancement, and husbandry of the resources of the country
in situ. This will promote effective burden-sharing. Burden-sharing is not
merely about upstream production with finite knock-on jobs; however, via
a boiler plate CSR initiative, it also demands resource enhancement, sus-
tainability, and responsibility. This is not wishful thinking or pure idealism.
It has actually been accomplished in specific countries and places such as
the UK, Norway, and the US State of Alaska in regard to different para-
digms of their economic development. It is true these are developed places
with transparent policies, but they have all developed their resources in
unison with all their citizens to serve as effective templates.
Conversely, elite ownership of the resources, legal policies rooted in
old colonial systems that indemnify minority holders against the major-
ity,72 and extreme corporate intransigence on disclosing any proprietary or
ownership rights,73 however, will dumb down and mitigate a true local-
ization effort. Cooperation is the norm-needed word in today’s world,
yet political contrivances of sovereignty and non-interference in domestic
affairs can moot that. Instead of individuals ‘racing to the top’, we need
to condition populaces to work together for mutual societal benefits in
today’s shrinking world. This is also the theme of most top researchers
today from climate change to poverty alleviation to mass unemployment.
This book considers a way forward, introducing necessary changes to
acknowledge the information-intensive world we live in today in order to
deal with existential threats of global warming, poverty, political instabil-
ity, and unemployment. The change to deal with these threats will not
come through larger bond subscriptions, carbon credits, stronger curren-
cies, better financing terms for investors, or risk guarantees from finding
new sources of fossil fuels, to setting up a windmill to generate electricity.
This change must come through paradigm changes that synthesize and
align the information at hand with all civil society, including the rights the
citizens have in their sovereign nations that have long been ignored by
leaders and elite insiders who could control, deny, and manipulate informa-
tion flows for their benefit at the expense of the society at large. That ship
has sailed. People now have access to instantaneous i­nformation around
28  W. HICKEY

the world. They know and demand what their rights are. The world simply
has too many people (expected to grow to 9 billion by 2020), too deep in
poverty, with too few opportunities, and with too finite resources (includ-
ing the atmosphere and oceans) available to waste time playing the old
extractive resources game, set in a different time and era, both physically
and politically, that is masquerading neo-colonialism today. Simply, we
have too many people on too small a planet.
The remaining chapters of this book return to and consider significant
points that will either promote or hinder a localization initiative via energy
policy in the Information Age. Chapter 2 considers types of energy uti-
lized for most of the planet, namely fossil fuels, though alternatives are on
the horizon and growing, they are not yet economically feasible. Chapter
3, energy as currency, concerns the stranglehold high finance and the US
dollar have on the world’s energy business and its users, in particular via
investment portfolios, abstract derivatives, and SWFs. Chapter 4 considers
the looming problem of climate change, and how addiction to the fossil
fuel model is creating a zero-sum game toward emissions controls under
the nation-state umbrella of sovereignty. Chapter 5 examines mainstream
methods of effective HRD, a very linear and objective process of educa-
tion and training for specific goals and competence. Chapter 6 is about
energy ownership, particularly ‘constitutionally empowered ownership’ of a
nation’s resources by all the citizens and what this really means in a modern
world underpinned with colonial concepts of resource extraction from a
bygone era that have traditionally benefited only elites (both local and for-
eign). Chapter 7 is about localization, transferring skills, jobs, and wealth to
a host country’s people, not only citizens but also all stakeholders. Chapter 8
discusses the new behemoth in world affairs, China, and how their state-
driven model of capitalism for a sacrosanct political stability cuts against the
grain of any Western-style capitalism for profits. Chapter 9 briefly discusses
corruption via HRD, nepotism and the ‘client driven model’ of business as
usual in energy and resource extraction namely set in place during colonial
and times of resource exploitation. Finally, Chapter 10 explores the total
integration of all the prefaced considerations in order to make it work. And
workable it is if the political will is there!
Systemic change is in order, change that will address significant issues
outside of ‘business-as-usual’ scenarios. This book is an HRD manifesto to
that end: Human resources are everything in an information-intensive age.
The world cannot afford to delay any longer or cling to old nineteenth-­
century colonial practices or twentieth-century energy policies. Too many
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  29

pressing threats are facing humanity: terrorism, climate change, economic

deflation, to name a few. To preserve stability and wherewithal in dealing
with these issues, HRD (namely, strategic education initiatives that align
people with their resources) becomes a competitive advantage and national
resource in its own right.
Strategic HRD will lead to a new paradigm of how citizens view, access,
utilize, and develop their own resources as it leads to a direct, not ethe-
real, empowerment in them. This book will demonstrate this is not pie in
the sky idealism. It can be done and has been done in countries with an
educated understanding of the resources on hand and government policies
that promote a husbandry and shepherding of the resources on a national
level, putting their citizens and industry first, not investors from Wall St. or
Canary Wharf.
These natural resources and the people aligned with them then become
a strategic asset. In essence, this is a tangible empowerment right the
people then have in their countries. It is necessary that people have this
empowerment more than ever as our very finite planet is under consider-
able economic and physical strain. The 21st century begins the informa-
tion millennia. Human survival as we know it may very well depend on
these changes. It is possible, but it requires action, a real nation-state com-
mitment, and a sense of urgency.

Notes
1. http://www.energyquest.ca.gov/story/chapter01.html
2. Rothwell, W. (2000) ASTD models for human performance improvement,
2nd Ed.: The American Society for Training and Development. Alexandria,
VA.
3. Trompenaars, F. (1998). Riding the waves of culture. Homewood, IL:
Irwin.
4. See Hampden-Turner, C., and Trompenaars, F. (2000). Building cross-
cultural competence. New Haven: Yale University Press; for more detail on
new social trends and for shifting tectonic plates in economics, education,
and migration, see Thurow, L.C. (1996). The future of capitalism.
New York: William Morrow & Co.
5. For an excellent case study on how to develop company workers in a
developing country, see: Yan, R. (1998). Short term results. Harvard
Business Review, 5 (11), 61–75.
6. Rothwell, W. (2000) ibid., see also Mager, R. and Pipe,  P. (1997). 
Analyzing Performance Problems, 2nd Ed. CEP Publishing: Atlanta.
30  W. HICKEY

7. Hickey, W. (2004). An Evaluation of Foreign HR Consulting Company

Effectiveness in China, Performance Improvement Quarterly. 17(1)
pp. 81–101.
8. Misallocation of resources, written about extensively by development econo-
mists. See: Asker, J., Collard-Wexler, A. and De Loecker, J. (2012),
‘Productivity Volatility and the Misallocation of Resources in Developing
Economies’, unpublished paper, Princeton University.
9. See Gary Beckers’ work on human capital. Becker, G. (1993) Human
Capital, Chicago: University of Chicago Press.
10. Barbara Freese (2003) Coal: A Human History. Perseus: Cambridge, MA.
11. Much has been written about the corporate and world military outlook on
climate change as a game changer with new threats being created around
the world. See: http://www.shell.com/sustainability/environment/cli-
mate-change.html and also: http://www.theguardian.com/environ-
ment/2015/jun/10/climate-change-has-left-us-exposed-in-arctic-
say-military-experts
12. Energy 27 Study is a yearly salary survey across all jobs and locations for
the oil industry, reflecting on the large salaries paid in the fossil fuel busi-
ness. See the 2012 Hays study .PDF here: http://hays.com/cs/groups/
hays_common/@og/@content/documents/digitalasset/hays_724929.
pdf
13. For growing fossil fuel consumption: eia.gov/emeu/aer/txt/ptb1115.
html (2009) World natural gas consumption index, US Energy Information
Administration URL.
14. Much has been written on these futuristic energy scenarios by the Energy
Information Administration, EIA.  See: (EIA, 2010a), (EIA, 2010b),
(EIA, 2010c), and EIA, 2009  in bibliography. Along with Rutledge, I.
(2004) The Sakalhin II PSA: A Production ‘Non-Sharing’ Agreement.
Sheffield Energy and Resource Information Services (SERIS). URL (con-
sulted July 2011): http://www.­bothends.info/mfi/dos3-SakhalinPSA.
pdf. and in (Businessweek, 2011) ‘The Decade Ahead in Oil and Natural
Gas Exploration’. Retrieved from: businessweek.com/magazine/the-
decade-ahead-in-oil-and-natural-gas-exploration-­0 7072011-gfx.html
and also IEA (2011) World Energy Outlook: Executive Summary, Paris:
International Energy Agency.
15. Moeller, J. (2011) How Asia Can Shape the World. Singapore: ISEAS
Publishing.
16. Friedman, T. (2008). Hot, Flat and Crowded: Why We Need a Green
Revolution. Farrar, Straus, and Giroux: New York.
17. Moeller, J. (2011) ibid.
18. North, D. (1990) Institutions, Institutional Change, and Economic
Performance. New York: Cambridge University Press.
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  31

19. Thurow, L. (1999) The Future of Capitalism. New York: Wm. Morrow &
Co.
20. Rifkin, J. (2000) The End of Work, see also Jacques Fitz-enz, Paul Ehrlich,
and others in regard to work and population.
21. Despite the largest commodity resources in the worlds, African unemploy-
ment notorious, and is a stability problem: http://www.tradingeconom-
ics.com/nigeria/unemployment-rate
22. North, D. (1990) ibid.
23. Douglas North was the 1993 Nobel Prize laureate for economics for his
theory on the ‘natural state’, where 10 % of any human system is composed
of elites who are served by the other 90 %. In a limited access order, only
elites possess the right to form contractual organizations whose internal
arrangements are enforced by the state. The heart of an open-access order is
fluidity and change in social arrangements, namely, the empowerment of all
citizens with their attendant rights. See also Sachs and Warner, 2001, and
Joergen Moeller’s significant and game changing  writings on ‘Burden
Sharing’.
24. For elite ownership of resources, see: Mikesell, R. (1997) Explaining the
Resource Curse, with Special Reference to Mineral-­Exporting Countries,
Resources Policy 23(4) and Ross, M. (2001) ‘Does Oil Hinder Democracy?’,
World Politics 53(3): 325–61.
25. Senge, P. (2002). Human capital in 21st century organizations. In:
Management: Inventing and delivering its future. Cambridge, MA: MIT
Press. P. 118.
26. Sachs, J. (2008) Common Wealth: Economics for a Crowded Planet.
New York: Penguin Press.
27. Sachs, J. and Warner, A.M. (2001) The Curse of Natural Resources,
European Economic Review, 45, Issues 4–6, pp. 827–38.
28. Chang, H.J. (2008) Bad Samaritans: The Myth of Free Trade and the Secret
History of Capitalism. Bloomsbury Press. And also Easterly, W. (2007). The
White Man’s Burden. Oxford University Press.
29. Pinto, P. and Zhu, B. (2009) Fortune or Evil? The Effects of Inward Foreign
Direct Investment on Corruption, Saltzman Institute of War and Peace
Studies (SIWPS) Working Paper No. 10.
30. Moeller, J. (2010) Savvy and Foresight Will Be the Winning Commodities
in This Era of Scarcity. Yale Center for the Study of Globalization in The
Jakarta Post, 8/12/2010.
31. Taleb, N. (2007) The Black Swan book is about random events happening
outside stable systems with catastrophic and exponential outcomes on tra-
ditional processes, for example the Asian economic crisis in 1997.
32. Senge, P. (2006) The Fifth Discipline: The Art and Practice of the Learning
Organization, NY: Doubleday.
32  W. HICKEY

33. See Michael Porters work in 1990 on the ‘Porter Diamond’, in

his 1998 book On Competition.
34. Rothwell, W. & Kazanas, H.C. (1994). Human Resource Development: A
Strategic Approach, Amherst, MA: Human Resource Development Press.
35. Ibadildin, N. (2004). Oil and Authoritarianism in Kazakhstan.
36. Retrieved from New York Times: http://www.nytimes.com/2014/05/08/
us/florida-finds-itself-in-the-eye-of-the-­storm-on-climate-change.html?_r=0
37. Chaplin, D. et  al. (2012) Evaluation of the Millennium Challenge
Corporation’s Electricity-Transmission and Distribution Line-­Extension
Activity in Tanzania: Baseline Report. Mathematica Policy Research:
Washington.
38. http://finance.yahoo.com/news/youre-young-job-outlook-grim-­
120002514.html
39. ‘Taylorism’ was the concept of dividing work into the smallest of subcom-
ponents to measure what optimal human performance should be over time.
Due to lack of ergonomic and human factors, it has since been discredited.
40. Einstein quote. Retrieved from: http://www.brainyquote.com/quotes/
quotes/a/alberteins133991.html
41. Norway, UAE examples. See: Hatakenaka, S., Westnes, P., Gjelsvik, M.,
Lester, R. (2006) From Black Gold to Human Gold. MIT Working Paper
Series, MIT-IPC-06-004.
42. Einstein quote, ibid.
43. IAEA competencies listing. See IAEA (2006) Knowledge Management
for Nuclear Industry Operating Organizations. IAEA-­TECDOC-­1510,
and IAEA (2009) Draft Nuclear Energy Series Document: Workforce
Planning for New Nuclear Power Programs.
44. This book attempts to use world’s best acknowledged experts in their
fields as a ‘benchmark’ for knowledge.
45. See Chandran Nair’s 2011, Consumptionomics: Asia’s Role in Reshaping
Capitalism and Saving the Planet.
46. Dominic, R. ‘World faces third deflationary wave’. Financial Times. 2/9/2015
p. 3 retrieved from: http://www.ft.com/intl/cms/s/0/11932fc0-
4ca1-11e5-9b5d-89a026fda5c9.html#axzz3yDr41PHq
47. These economic treaties consider much about trade and finance, but with
the exception of the EU, little about human development, though there is
much on human mobility, in order for companies to access ‘cheaper labor’.
48. Coleman, J.S. (1990) Foundations of Social Theory. Cambridge, MA:
Belknap.
49. Chinese laborers entering Indonesia for energy and infrastructure
projects in http://en.tempo.co/read/news/2015/08/31/055696470/
Thousands-of-Chinese-Workers-Enter-Indonesia
50. Localization plans of companies are not new to manufacturing, in an
attempt to reduce costly expat labor and access cheaper local labor (which
 INTRODUCTION TO ENERGY AND HRD: TOWARD EFFECTIVE LOCALIZATION  33

is why they invested in the first place), but the energy business is opposite
this.
51. See the political science work of Michel Crozier regarding system changes
and manipulation in Strategies for Change (Cambridge, MA: MIT Press,
1982).
52. Hickey, W. and O’Lawrence, H. ‘H1-b Technology Visas and their impacts
on international training efforts’ (IVETA Conference Keynote, Kinston,
Jamaica, 2001).
53. CCP, in Saudi Arabia, employs over 130,000 in the oil business.
54. Most oil and mining companies in developing countries are contracted for
some social obligation, usually cash payments to a village but could be schol-
arships, vocational center, or hospital, but are largely unstructured.
55. See Peter Senge’s work, 2006. The idea of systems thinking is not new to
resource extraction and economics. Systems thinking was founded by Dr. Jay
Forrester at MIT in the 1950s who was later invited to the Club of Rome to
ask if this system could be used for modeling to predict availability of oil
resources with economic growth. Namely, systems thinking states that the
structure of any system is just as important in predicting behavioral outcomes
as the individual actors themselves.
56. Porter, 1990, ibid.
57. Rothwell, 2003, ibid.
58. This is the concept behind the ‘Coleman Boat’ for social awareness and
societal change. Coleman, J.S. (1990) Foundations of Social Theory.
Cambridge, MA: Belknap.
59. Porter, M. (1998) On Competition. Harvard Business School Press:
Cambridge, MA.
60. Porter, M. ibid.
61. GDP can be skewed to the upside, for example, such as by a natural disas-
ter that brings in considerable foreign aid, or FDI targeted at only the
fossil fuel industry.
62. Strahan, D. (2007) The Last Oil Shock: A Survival Guide to the Imminent
Extinction of Petroleum Man. John Murray Publishers: London.
63. Yergin, D. (2008) The Prize: The Epic Quest for Oil, Money & Power.
Simon and Schuster: New York.
64. See Exxon record profits for 2011. Retrieved from: http://thinkprogress.
org/climate/2012/01/31/415337/exxonmobil-41-billion-but-pays-
tax-rate-lower-than-most-taxpayers-­­but-not-romney/
65. Various citations here, consider a few: Karl, T. (1997). The Paradox of Plenty:
Oil Booms and Petro-States. Stanford: University of California Press; Gylfason,
T. (2001), ‘Natural resources, education, and economic development’,
European Economic Review, 45, pp. 847–59; Sachs, J.D. and Warner, A.M.
34  W. HICKEY

(2001) The Curse of Natural Resources, European Economic Review, 45,

Issues 4–6, pp. 827–38.
66. Porter, (1998) ibid.
67. Thinkprogress, (2012), ibid.
68. Singapore Economic Development Board: Singapore, with no natural
resources, is the refining hub of Asia. Retrieved from: https://www.edb.gov.
sg/content/edb/en/industries/industries/energy.html
69. Moellers, J. (2012) ibid.
70. See the aggregated works of Peter Senge, Jeffery Sachs, William Easterly,
and Dambisa Moyo, and others about post-colonial development in devel-
oping countries, in particular, Africa.
71. On burden-sharing and social capital formation in Asia, see Moeller, J.
(2011) How Asia Can Shape the World. Singapore: ISEAS Publishing.
72. Machmud, T. (2000) The Indonesian PSC: An Investors Perspective. Den
Hague: Kluwer.
73. Taverne, B. (1996) Co-Operative Agreements in the Extractive Petroleum
Industry. Den Hague: Kluwer.
 CHAPTER 2

Types of Energy and Usage

Developing economies are pushing their economic growth at a breakneck

speed underpinned by fossil fuels, namely oil, coal, and natural gas. All of
the developing world’s export and infrastructure growth is reliant on them.
Aggregation is the  main problem. If only one developing nation were
doing this, it would be understandable, but in fact, all developing countries
are doing this. Eighty-eight percent of the developing world’s energy con-
sumption is based on using fossil fuels. Yet, if they are all allowed to develop
similarly to countries in Western Europe or the USA with the traditional
model of fossil fuel usage, not only will tremendous pollution be generated
but also global warming may prove unstoppable. Fuel subsidies across all
energy, for both consumer and producer, need to be addressed. The former
is more open in the media for introspection, whereas the latter is hidden
by government policies and bureaucratic legacy. Alternative energies must
be considered, but at what costs, and who pays financially and for safety?

Introduction
Before HRD can be engaged in an industry, the content and drivers of that
industry must be thoroughly understood for it to be a valid framework
for development. This includes all the industries’ direct products and pro-
cesses, the energy itself, and indirect or extraneous influences, such as pol-
lution, finance, regulations, insurance, and politics. Any discussion about
energy must first begin with the economics of it all. All countries seek

© The Editor(s) (if applicable) and The Author(s) 2017 35

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_2
36  W. HICKEY

economic growth, and the cost of energy is the make or break litmus that
will ultimately determine their competitiveness or not. Whether one looks
at Indonesia, China, India, Nigeria, or Brazil, one theme emerges among
all of them with only nuanced differences: that is, predication of economic
development and future growth on a baseload capacity of fossil fuels and
at a breakneck pace. The fossil fuel model powers most of the world either
via combustion for transport (oil) or for electricity generation (coal). Even
at present, it is still the most cheaply available fuel source on the planet on
the front end. As recap, we briefly consider what fossil fuels are.
Fossil fuels are the remains of living organisms that died millions of
years ago from simple plants to dinosaurs then decomposed over that time
with varying factors of pressure, chemical content, such as sulfur or salt,
and rate of decay to determine whether gas, oil, or coals were formed.1
Natural gas, as it is called, is mostly methane or hydrogen atoms on a
carbon atom, CH4, and can be found in oil reservoirs, sandstones, and
shale rock.2 Crude oil is found in reservoirs deep underground or beneath
the sea. It has different forms and qualities. Oil gas is considered ‘light’ if it
has few hydrocarbons (usually less than 3 or 4 carbon atoms per molecule),
‘heavy’ if it has a long hydrocarbon chain (usually 12 or more carbon
atoms per molecule), ‘sweet’ if it has little or no sulfur content, and ‘sour’
if laden with sulfur via sulfuric acid (H2SO4). ‘Sweet, light, crude’ is the
most highly prized oil as is it easy to work with, with a low-carbon chain,
and can be refined quickly; Saudi Arabia and Nigeria have large stocks of
this oil. ‘Sour, heavy crude’ is the least desirable and requires significant
energy inputs to break it down to more useful fuels. This oil is representa-
tive of the large reserves in Kazakhstan and Venezuela. We can see then that
oil is not always about quantity, but rather quality in its value. Grading the
quality and weight of crude oil is an extremely complicated and detailed
business.3 Oil then produces all types of value-added downstream products
from kerosene to plastics (polyvinyl chlorides). See Figure 2.1.
Coal is from the formation of highly pressurized carbon in a solid form.
It has three grades: lignite, considered the lowest grade, used in many
developing countries for cooking; bituminous or black coal, used for ther-
mal (steam-generated power plants); and anthracite or ‘King Coal’, high
caloric and high carbon composition,4 used in steelmaking and metallurgy.
Anthracite is the least polluting of the three grades. Similar to crude oil,
coal stock can be used to produce a plethora of products.
However, this chapter by no means seeks to praise fossil fuel usage in
today’s world. On the contrary, fossil fuel usage is polluting the world and
 TYPES OF ENERGY AND USAGE  37

Fig. 2.1  The fossil fuel use spectra (Source: http://www.uncoverenergy.com/

liquid-gold/ [used with permission])

Fig. 2.2  Graph of electricity generation by fuel type in the AEO 2015 (Source:
EIA)

emitting carbon at a yearly increasing pace. Fossil fuels, while continu-

ing to be burned at these exponential rates, are really a ‘past source’ of
energy. All countries also envision greater economic development as there
are more individually owned cars, more discount airlines, more high-rises,
more bridges and toll roads, more air conditioners and refrigerators, in
short: a greater grid electrification (see Figure 2.2). Most do not reflect or
cannot fathom, that they live in an energy-intensive society, from the cars
they drive, to the plastic they use in computer components, to water bot-
tles, to shopping bags, to air conditioning and refrigeration, to the things
they order online that must be delivered by diesel-consuming trucks and
pollution-spewing motorcycles.
38  W. HICKEY

With these things said, any transition energy sources (such as to natural
gas or shale oil) or alternative renewable energy sources (such as wind
power or solar energy) will all be based on what skills base is known,
available, and transferred from fossil fuels. This means that all extendable
energy use know-how for the production, finance, safety, and downstream
value-added enhancement is based, for better or worse, on the fossil fuel
model, and the trials and errors with it from its historic past.  It also means
the world will continue to be beholden to the fossil fuel industry no mat-
ter what energy type is utilized into the foreseeable future. It is highly
doubtful, due mostly to costs, that an entirely new skills base will be cre-
ated overnight to service and maintain any new alternative energy source.
An exception to the fossil fuels-based HRD model of skills basing would
be NP (Nuclear Power), which is discussed later in detail, and brings its
own set of skills issues and safety problems to the energy table, in regard
to safety, storage, and public acceptance. Hydropower (dams), while a tre-
mendous electricity generator, and also with its own skill sets, is still a tiny
part of the world’s overall energy portfolio, with the exception of certain
developing countries, such as Tanzania and Sudan.5 Overall ~88 % of the
world’s total energy is derived from carbon-based fuels. See Figure 2.3.
These issues are especially exacerbated in a fossil fuel-addicted develop-
ing world, now with burgeoning wealth due to higher education levels
and economies soaring with increased exports to the USA/EU that are
reflexively stoking even more internal demand. Yet, if developing coun-

Fig. 2.3  Worldwide energy use sources (Source: EIA)

 TYPES OF ENERGY AND USAGE  39

tries are allowed to develop the same as countries in Western Europe or

the USA, with the traditional model of fossil fuels supporting economies,
not only will it generate tremendous pollution but also global warming
with attendant climate change (see Chapter 4) may prove unstoppable.
Most cities in developing Asia today are hooked on fossil fuels, with no
foreseeable change in the near future to alternative or renewable energy
(i.e. solar, geothermal, or wind power) beyond only token political efforts.
Fossil fuels are driving Asia’s growth, but at what long-term social, eco-
nomic, and environmental costs? To address this, mindsets and paradigms
on fossil fuels must change. Consider three medium-sized cities all in
developing countries as actual cases of fossil fuel addiction:
Busan, Korea (population 4 million)—This is a major industrial port
for the roaring Korean export economy of Samsung, LG, POSCO, and
Hyundai. Shipping volume here is enormous. New overpasses, loading
cranes, container cars, bridges and tollroads are all clearly visible on the
horizon. Numerous buses, trucks, and vehicles, fueled by fossil fuels, make
this city vibrant. It is a microcosm of what is happening around much of
exporting Asia in regard to export activity. Products bound for Western
markets require significantly more fossil fuel inputs and transport costs
than Asian ones, generating more fuel demand  by bitumen and diesel
burning ships and producing more economic activity.
Bandung, Indonesia (population 2.5 million)—Bandung is Indonesia’s
artistic playground and educational/leisure city for the wealthy of
Indonesia and now with a bigger airport; bargain shoppers from Malaysia
and Singapore on weekend jaunts seeking cut-rate apparel. Bandung is in
the volcanic foot hills of Western Java, with cooler, rainy weather. On any
given day, especially weekends, huge traffic jams form on its narrow, climb-
ing streets that can stretch for kilometers. Shopping malls, hotels, and new
villas are overbuilt now, with ingress and egress dictated by cars. The traffic
has gotten so bad there, that in 2013,6 the city government required that
cars entering from the freeway from Jakarta at rush hour have four pas-
sengers aboard. Even Jakarta, with its legendary traffic jams only requires
three passengers at rush hour. Bandung demonstrates the Asian economic
boom in Indonesia created by adherence to cheap  fossil fuels due to an
export boom of raw commodities to India, South Korea, and China.
Colombo, Sri Lanka (area population 1 million)—After years of bitter civil
war between Tamil Tigers and the ethnic Sinhalese, Sri Lanka is on the move
and trying to make up for lost economic time. To give an idea of how far
behind Sri Lanka fell, in 1960, Sri Lanka (then Ceylon) had a larger GDP
than Malaya, Singapore, and even South Korea. Conflict stunted this coun-
40  W. HICKEY

try. Today, in Colombo, the streets and homes that harkened back to days
of the British Empire are being torn down and replaced with bigger man-
sions, housing blocks, and wider roads. Cars, three-wheeled motorcycles,
and buses clog the roads, and property prices are soaring with new economic
vibrancy. An expansive airport, toll roads, and port, all China financed, are
taking on a new hurried dimension to the fossil-fueled dependency. With
no natural resources of its own, Sri Lanka must import oil and coal.7 The
Colombo stock market index was the world’s best performer in 2011 with
returns of almost 50 %, but has cooled off  the past five years. Consumer
fuel subsidies and a pegged currency in Sri Lanka have helped to keep the
boom going, but are quickly depleting government coffers and contributed
to an ongoing currency devaluation and driving up inflation, nonetheless
the roots of a new fossil fuel-addicted country are apparent everywhere.
Individually, none of these cities is doing anything ‘wrong’. They are
all developing their economies based on their needs as they see fit, and on
a historic economic precedent of oil- and gas-fueled growth. However,
this situation, when taken in aggregate, is simply not sustainable for the
planet we live on if multiplied by the dozens of emerging and developing
economies. When all the cities of an emerging Asia (especially considering
China/India), Africa, and South America are summed, we have a problem
with enlargement of the world’s fossil fuel demand and an addiction that
increasingly becomes a more apparent reality.
While Korea is not considered a developing country by the OECD, it was
one about 30 years ago, and provides a growth template the rest of the devel-
oping world envies. Its burgeoning export model via state-favored chaebols
and policies provides a GDP high enough to import all the fuel necessary to
stoke its economy. In essence, the other places, Colombo and Bandung are
emblematic of emerging NICs (newly industrialized countries) that need
to keep the export model humming by way of fuel subsidies and exporting
low value-added agricultural and manufactured products. Purchasing power
in these countries is still too low to create serious sustainable demand for
higher-priced products if the economy has a downturn and their currencies
must be consistently devalued to aid in keeping economy activity afloat.
The fossil fuel addiction thus becomes a necessitated economic growth
‘right’ in these places. The economists (going back to Milton Friedman8)
did not have a clear plan for these energy issues in the advent of oversup-
ply and climate change, perhaps the market’s ‘invisible hand’ may not be
the best problem solver for public goods phenomena. Higher fuel prices
might force a change in lifestyle, such as using motorcycles and eating less
meat, for example, as economists predicted, but doing neither is liked,
 TYPES OF ENERGY AND USAGE  41

and people will and do protest, sometimes violently if they are forced to
return to more austere times. No one likes to consider a forced change in
their lifestyle, in this era of CNN, Instagram, and Facebook, as an honest
solution to their country’s economic woes.
Thus, major problems are created with these situations in a developing
world that must be addressed due to increased fossil fuel addiction. First,
consider the big picture:

• Despite the rhetoric, any initiatives with solving global warming or

CO2 reduction are continuously ignored/weakened, even by coun-
tries most effected by rising world temperatures.9 The addiction to
cheap fossil fuels creates resistance to paying for costly and unproven
alternative technology. For example, in Indonesia, a kit to change
cars from using gasoline to burning natural gas is about $1500.
While a tremendous idea toward reducing carbon emissions, $1500
is more than most Indonesians make in a year, further, such a change
will void manufacturing warranties on vehicles that they own.10
• Suburban communities will become even more scattered, increasing
the fossil fuel addiction if cheap and plentiful. Most of humanities liv-
ing space is then pretexted on the idea of expansion, not centralization.
For example, China is creating new ‘satellite cities’ like the USA cre-
ated with ‘Levittowns’ in the 1950s, far removed from urban centers
with attendant urban sprawl that a car culture and cheap energy pro-
mote. As China is heavily dependent on fossil fuel, fueling these new
areas have only served to strengthen this addiction, from ghost cities
in Mongolia, to shopping malls in Shanghai, and remote airports.
• Any increased costs with fuel will course radically through the system,
creating price increases systemwide and keeping those dependent on
all types of subsidies ever more dependent. Sri Lanka’s currency deval-
uation, due to increasing imports, has stoked food inflation for exam-
ple in large part as it must import all its fuel at US dollar world prices.

If Asia alone then, home to 60 % of the world’s population, seeks to

develop like the USA or EU explicitly on fossil fuels, we will need the
equivalent of 3–4 planets at current resource burn rates to meet this
demand. Simply put, there are not enough oil wells, gas fields, or coal
mines to sustain this activity for long on the planet we have to sustain our
fossil-fueled ‘addiction’ into perpetuity.11 Deep-sea oil drilling, mining tar
sands for oil, clear-cutting jungles for open-cut coal mines, and so on are
destroying the planet at a rapid rate.
42  W. HICKEY

For a rethink, starting with the entire commodity export model and the
fossil fuels enabling it are in order. With 7.3 billion people on a planet of
dwindling resources, the lights are flashing red. Of course, at the time of this
writing, the world oil prices have collapsed to $30 a barrel, but that does not
mean more oil has been created. It is an economic cost of doing business. As
of early 2016, oil-rich economies such as Saudi Arabia and Russia are furiously
out pumping each other in hopes of driving out of business so-called mar-
ginal producers in the USA and Canada who, by using new technology, have
created more efficient extraction techniques with non-­conventional shale oil
and tar sands.12 These latter techniques, while more ­efficient at extraction,
are also more polluting with groundwater and environmental degradation.
Unfortunately, cheap oil may only have the unintended effect of creating
further demand which will lead to more pollution in the long term.
For a primer, we consider the overall types of energy that are imme-
diately available to all on the planet, and their so-called greenhouse gas
emissions (GHG) mostly of CO2, CO, and CH4, which are respectively
carbon dioxide, carbon monoxide, and methane, as they all contain car-
bon atoms. See Figure 2.4. These are all non-renewable energies coming
from combustion of coal, oil, and natural gas. Their creation as a source
of energy took millions of years, and we are using it faster than it was pro-
duced and faster than it can ever be recreated.
Renewable energies come from the sun or from nature, namely wind
and water. While the energy is free, it costs money to collect and store
it. Renewables face many economic challenges. With the exception of
hydropower (dams), they don’t deliver the consistent baseline energy load
required to power national electricity grids. They are costly on the front
end to install. Additionally, some renewables, such as palm fronds or wood
chips, are burned as fossil fuels would be. In this case, carbon emissions are
still a process by-product.
Nuclear and geothermal energies aren’t truly renewable either but they
are treated that way since their natural scale is so immense.

The Problem with Oil

In 1991, Daniel Yergin wrote a long historical epistemological tome on
the oil business that won him the Pulitzer Prize called The Prize: The Epic
Quest for Oil, Money, and Power.13 The book garnered high praise for the
machinations of big oil, its actors both corporate (the Seven Sisters) and
governmental (Mexico, Venezuela, Iran, and the granddaddy of them all,
 TYPES OF ENERGY AND USAGE  43

Fig. 2.4  Worldwide energy profile and emissions, 2014 HSBC global research
report entitled, ‘Stranded Assets, What’s Next? (Used with permission)
44  W. HICKEY

Saudi Arabia), and the ‘realpolitik’ it has played, and continues to play, in
practically all world events. While the book is a fascinating read about the
people and politic involved in the oil business since its first commercial well
in the US State of Pennsylvania in the 1850s, it fails to address current envi-
ronmental trends and lurking depletion problems with oil. It also assumes
the world’s entire economy will be underpinned by its usage, well into the
twenty-first century and for the next several decades, lending immediate
impetus and credibility to even more long-term fossil-­fueled  mega-proj-
ects, exploration, and their vast financing arrangements required.
According to the International Energy Agency (IEA), oil usage sits at
93 million barrels per day or 34 billion barrels a year.14 As of 2016, this
usage has dipped slightly with a severe commodity downturn, but is fore-
casted to pick up again in the next few years due to developing country
growth.15 Most of this growth will be driven to 2040 by emerging India
and China, together accounting for almost 40 % of the world’s population.
Yet, oil is an exhaustible resource, it won’t be around forever and overall
world demand continues to grow (even in deflationary times). Most of the
so-called easy oil has already been discovered. Oil has become more ‘tight’
or harder to get at  worldwide. Exploration now must be carried out in
inhospitable regions (like the Arctic) or politically unstable areas (such as
Congo or Turkmenistan) or in the deep oceans and seas (such as the gigan-
tic Tupi field off the coast of Brazil, or the newly found Eni Zohr field in
the Mediterranean also in deep water, off the Egyptian coast). This means
that oil is getting ever more costly to ‘lift’ or produce. Much field viability
in oil extraction is decided by lifting costs or by politics, (such as Russia
claiming most of yet unfounded Arctic sea reserves for itself). This means
the cost that is required to extract a barrel of oil from any given field, either
onshore or offshore, becomes prohibitively expensive. In essence, even
with utilization of fracking, oil (and gas) are still exhaustible resources, and
with world demand ever increasing, we will eventually reach the stage of
‘peak oil’ or what the IEA defines as ‘the maximum possible annual rate of
extraction of conventional crude oil, due either to physical resource con-
straints or above-ground political, economic or logistical factors’.16
Most big oil fields of today are in terminal decline under current Western
oil management practices. This means that under the ‘business as usual’
metrics of costs and utilizing Western-trained labor, they are no longer or
will no longer be profitable at some point. When an oil reservoir (or field)
goes into decline, though, it does not mean that the reservoir is empty.
There is still oil in the well. It does mean, however, that the pressure and/
 TYPES OF ENERGY AND USAGE  45

or volumes of oil available deep underground are no longer profitable

to commercially produce.17 This is an important distinction and one that
will effect further HRD initiatives regarding the concept of reworks and
lower labor costs that will be discussed further in Chapter 7, utilizing
­lower-­priced domestic labor in developing countries to enhance and con-
tinue production. Yet, as we shall see, political and legal constraints ham-
string this ideal, no matter how beneficial if may seem to impoverished
people groups, many of whom are living on top of or next to the very
reservoirs that are making others wealthy who live far from these reserves.
Currently (2016), we are in a deflationary environment with oil prices
plumbing multiyear lows of less than $30 per barrel. This on the face would
seem good for consumers, but  consider that it only further addicts the
planet to a dwindling resource, as it is considerably cheaper than cleaner
alternatives. It also shelves projects for oil companies and causes excess
employees to be released. This means that when oil prices do recover,
there will not be enough big projects commissioned or engineers ready to
produce oil, so more problematic shortages will occur. Prices then have
a tendency to spike quickly due to the shortage. This is a classic ‘binge
and purge syndrome’ as known in HR, or the proverbial pig in a python
in economics. When times are good and oil prices high, lifting costs and
project timelines are negligible and the oil companies feast and take more
risks than usual. When times are lean, the oil companies release workforce
and mothball costly projects. It is a volatile cycle in capitalist economics
and history repeats itself. In order to possibly offset this cycle, OPEC
has decided to open the taps with unlimited production of spare supply,
essentially getting the planet even more addicted to its product so that
when prices do eventually rebound (and they always do), OPEC will be in
an even more commandeering spot, despite fracking, tar sands, and other
unconventional sources, such as GTL (gas to liquids) that are currently
threatening their monopolistic position. Most recently, OPEC has agreed
to some production freezes in order to stabilize crude oil prices, but this
may only prove rhetoric as it is difficult to control all member states.18
Another issue is that the world contains approximately about 1.65 tril-
lion barrels of oil in total proven reserves, of which OPEC controls 1.2
trillion barrels or around 73 % of all known oil19 and just over 7 quadrillion
cubic feet of natural gas. These figures ebb and flow and are not exact sci-
ence, but are fairly reliable.
However, and as we will discuss alongside coal, if all these reserves
were burned (approximated at 2800 gigatons of fossil fuels), it would
46  W. HICKEY

significantly alter heat-trapping CO2 levels on the planet to the upside and

with dire results, as we will see in Chapter 3. In other words, it is not
environmentally tolerable to burn all these fossil fuels, and a balance must
be struck, and soon, eventually between demand and availability. We
­simply don’t have a lot of time to change the fossil-fueled model without
significant environmental consequences.

The Problem with Coal: It’s Not Clean

Coal-fired power plants account for most electricity generation in the
developing world today. Yet, coal-fired power produces more CO2 emis-
sions than all the world’s oil-powered cars and trucks combined. Overall,
coal-fired plants produce 41 % of the world’s electricity, including half or
more of the power in developed countries like the USA and Australia (see
Fig. 2.5). Nonetheless, developing countries are the largest users of coal
for electricity, with South Africa (SA), China, and India utilizing it to meet
almost 75 % of their overall electricity generation needs.20
However, most coal-fired plants in these countries have much lower
efficiency and even lower emissions standards than Western countries,
meaning more pollution is emitted, effecting public health, the environ-
ment and contributing vastly to global warming. Yet, coal is not going
away anytime soon. It is still by and far the most accessible and cheapest
fuel available to impoverished populations, extraneous costs be damned, as
the WB and UN continue to fund building coal-fired plants in the poorest
of countries. Recently, it has been reported that China has severely under-
estimated its CO2 coal-fired emissions, with a deficit of 17 % of its total
output or around 1 billion tons of CO2, or as large as the yearly CO2 emis-
sions of all of Germany’s going unreported.21 This all means that China’s
carbon footprint is even more serious than previously thought.

Coal in Electricity Generation

South Africa 93% Poland 87% PR China 79%
Australia 78% Kazakhstan 75% India 68%
Israel 58% Czech Rep 51% Morocco 51%
Greece 54% USA 45% Germany 41%

Fig. 2.5  Selected country coal use in their overall electricity generation (Source:
IEA 2012)
 TYPES OF ENERGY AND USAGE  47

According to a risk assessment by the World Resources Institute, approx-

imately 1200 coal-fired plants with an installed capacity of 1401 (Gw) are
being considered. Furthermore, ‘If all of these projects are built, it would
add new coal power capacity that is almost four times the current capacity
of all coal-fired plants in the United States.’22 In short, this is a troubling
issue to say the least as coal usage is expected to increase another 21 % from
current levels by 2035 further enlarging the carbon emissions footprint.23
There is really no such thing as ‘clean coal’.24 It is the paradox of pay me
now for energy or pay me later for pollution cleanup and carbon emissions
controls. On the front end, coal mining (both open pit and underground)
is environmentally destructive. It has detrimental effects on the land,
water, and miner’s health. On the back end, coal is especially destructive
to air and drinking water contamination via increased pollutants, not just
carbon emissions. The conventional coal cycle, from mining to processing
to consuming (burning), is one of the most environmentally destructive
on earth and is considered the ‘worst-in-class’ option for fossil fuels. On
average, coal emits 888 grams of CO2 per kilowatt-hour for power genera-
tion compared to natural gas, the ‘cleanest’ fossil fuel option, which emits
less than 500 grams CO2 per kilowatt-hour.25
‘Clean coal’ is a marketing gimmick derived by the mining industry to
make coal more palatable and appealing to the public. It entails the use of
costly ‘scrubbers’ and other technology such as ‘carbon capture and stor-
age’ and ‘catalytic reduction’ installed in power plants by using ammonia
to remove the emissions of NOx (nitrous oxide), sulfur, and heavy metals
from the coal combustion cycle. The process is also still in its infancy and
only captures a portion of the total CO2 emissions. These Western technolo-
gies are also too expensive for developing countries to incorporate into their
energy processes.26 It has been estimated the costs for retrofitting one coal-
fired power plant to control emissions and pollution would be over $1.8
billion, so costly in fact, it wouldn’t make sense commercially to operate.
Lastly, we consider the political ramifications of coal. Coal is a gigan-
tic jobs creator, especially in many low-skilled areas of  which develop-
ing countries have many, and thus becomes a political bulwark as well.
This is especially true in developing countries with large coal reserves
and vast amounts of unskilled workers, such as India, Indonesia, China,
and SA. Even developed countries with skilled workforces and advanced
economies such as Germany, with a low-carbon national energy pol-
icy (Energiewiende), have had some trouble weaning themselves off of
coal and its attendant political issues. In fact, there has been a resurgence
of coal production when energy prices become volatile.27
48  W. HICKEY

Transitions: Risks of Becoming Permanent

Resources
It will be difficult then to make the jump from fossil fuels to purely alterna-
tive energy (i.e. solar, wind, geothermal, etc.) without a transition period.
Right now this transition can be found in  LNG (liquified natural gas),
which is still a fossil fuel, but not as polluting. Much of it today is derived
from the technology of ‘fracking’, a process where gas molecules lodged
in porous rock are freed and pooled for commercial viability by injecting
sand, plastic pieces, and pressurized water into shale rock formations.
However, fracking cannot be allowed to slide into another permanent
fossil fuel source just due to a cheap price. A fossil fuel transition state that
becomes another fossil fuel permanent state will not lead to any systemic
changes that lead us to cleaner alternatives.28 Burning gas can be com-
bined with hot steam to that is reintroduced into the system under a com-
bined cycle power plant format (CCP), which essentially turbocharges the
steam turbines for maximum efficiency by reintroducing so-called waste
heat from the initial burning from the exhaust, but fossil fuels are still
being consumed.29
Additionally, gas is not easy to transport, simply as considerable volume
must be used to create the same energy intensity as coal or oil for a power
generation baseload, usually for electricity, of the minimally accepted
demand on a power system.30 If there are no pipelines available, gas must
be either compressed or shrunk by chilling it until it becomes a liquid,
or liquefied natural gas, LNG. As many islands and remote places in the
developing world have gas reserves, methods are being developed to create
more efficient shipping and storage technology to export the gas to far-
away markets, conversely, islands themselves are frequently separated from
grids on the mainland, making electricity expensive in the many regions
that use small-scale diesel generation facilities instead, such as in Papua
in Indonesia. A potential new method is in using LNG-based generator
ships or floating offshore gas power plants that could substantially lower
electricity charges to two-thirds of those of conventional onshore genera-
tion on remote islands. Unfortunately, while GE, Siemens, and Mitsubishi
have been pursuing this type of offshore fossil-fuel-based power genera-
tion, the precise maritime technology that would make this happen is still
lacking, especially in regard to hull design and navigation for these remote
areas, in case of storms.31
 TYPES OF ENERGY AND USAGE  49

CTL and GTL
Bill Paul, an energy consultant and writer in his book Future Energy has
written glowingly about the transition of conventional oil to unconven-
tional oil, namely coal-to-liquids (CTL), gas-to-liquids (GTL), and shale
oil (extracted via so-called fracking). In his book, Paul claims we are facing a
new era in energy demand where coal becomes the everyman fuel32 to make
new synthetic gasoline via the Fischer-Trope process, which was invented
by the Germans in the early 1900s and used successfully by Nazi Germany
during World War II and later by the South Africans under Apartheid, in
both cases for self-sufficiency due to international blockades. Both coun-
tries have enormous amounts of coal reserves. Paul then continues on with
tar sands (squeezing bitumen out of dirt), fracking or shale oil recovery (by
cooking rocks underground with high pressure), and concludes with LNG
(liquefied natural gas) by stringing together gas molecules to create liquids.
Many of Paul’s ideas are good, as they will employee and maintain con-
siderable workforce, there are no problems with that. The problem is circu-
lar systems. Paul’s efficiency and unconventional fossil fuels mandates still
tether us all to a carbon fossil-fueled model that does not seem to be able
to be broken. Consider that according to the IEA,33 if adding biomass into
the mix of current energy sources (burning palm fronds, leaves, and wood
pellets) then carbon-based energy intensity still comprises almost 90 % of
the world’s energy portfolio, leaving only 10 % of the world’s energy supply
to nuclear and other non-carbon-based energy source initiatives. This is an
extremely important dialectic to ponder. Oil, gas, and coal still rue the day.

CPO and Biomass
Biomass is (still) a relatively small contributor to the worlds overall energy
portfolio, despite the media attention to get us out of ‘fossil fuels’ and
into renewables. Biomass is a renewable and accounts for half the world’s
renewable energy profile, but while it is arguably not a ‘fossil fuel’, all bio-
mass does indeed contain a carbon chain. Simply put, if it burns, it releases
CO2. Biomass is popular in developing countries as it is readily available. A
significant type of biomass used in the developing world is CPO (crude
palm oil) due to its abundancy.  Nonetheless, it is not a s­ erious energy com-
petitor simply due to its tiny economies of scale compared with fossil fuels.
In developing countries, corn has been used to produce ethylene to
mix with gasoline to reduce a reliance on foreign oil imports. Even though
50  W. HICKEY

ethylene is cleaner burning than crude oil, it still has an emissions foot-
print. But the real problem is in feedstock. Growing corn or other food-
stuffs to transfer to the energy portfolio runs the real risk of creating food
shortages elsewhere, especially in developing countries. In short, to fully
replace the fossil fuel portfolio component of the world’s entire crude oil
production with corn-produced ethylene, would require the development
of more farmland than is available on earth to meet this new challenge.
This is a huge impediment. We simply do not have enough agricultural
space to feed and fuel the planet.

The Problem with Alternatives and Non-Carbon-­

Based Renewables: Upfront Costs and Timelines
Up until now, we have fully discussed fossil fuels and their carbon-based
derivatives. Despite the promotion and fanfare, non-nuclear, non-carbon-­
based renewables receive outsized political attention for a very miniscule
economic  profile of about 3.3 % in the entire world’s energy portfolio:
hydropower (dams), photovoltaic (solar), wind (fan-generated power),
and geothermal (steam from the earth’s fissures). In fact, with  the
increased gross usage of fossil fuels by emerging China and India, the total
energy generation profile of these renewables has actually decreased from
a roughly 3.5 % total footprint in 2006.
In other words, while more windmills, dams, and solar panels may have
been constructed, their overall total power contribution has not kept up
with the bigger and voracious  demand for fossil fuels. This is a serious
issue policymakers must entertain. It highlights the fact that non-carbon-­
based renewable have failed to move the needle of the world’s energy
portfolio or more simplistically, the baseload for a nation’s power genera-
tion is usually in the domain of national hydroelectric, nuclear, and coal-­
fired plants. It has also demonstrated the need for sustained government
policies that introduce and subsidize non-carbon-based renewables.
As we will see in the finance section of energy as currency, long payback
times to profitability have a detrimental effect on these projects. Investors
want guarantees to risks they face from respective governments ­regarding
prices and payback times. As it stands, fossil fuels are straightforward
investment propositions due to their commodity-based nature (a barrel of
crude oil, a ton of coal, a cubic foot of gas, etc.), non-carbon-based renew-
ables are not as tangible  possibly considered as ethereal by hard-­nosed
investors and with many inherent risks, regulations, and politics involved
unlike fossil fuels. Wind can stop, days can cloud, steam wells (and rivers)
 TYPES OF ENERGY AND USAGE  51

can dry up, and so on but fossil fuels continuously generate power day in
and day out.
The largest problem is that most non-carbon- and non-nuclear-based
renewables are simply not up to the economies of scale needed to con-
tribute meaningfully to providing reliable power to the ‘baseload’.34 They
all suffer from either upfront costs, power reliability issues, or both. The
largest exception (and contributor) to the renewable energy portfolio is
hydropower or dams. Yet dams require a very long planning horizon and
vast regulatory approval processes, making the projects payback timelines
long and needing significant government financial backing to proceed and
commence. Dams and the electricity they generate contribute almost 2 %
to the world’s total energy portfolio.
Consider, for example, the gigantic Three Gorges dam in China. It gen-
erates a whopping 22.5 GW (gigawatts) of installed electrical power. Yet it
took nearly 10 years to build and will not pay back its costs of $26 billion
until 2022 at the earliest. The total project timeline to payback then is 20
years. This requires large government support and policy mechanisms to
enact it. Even with the dam online, China’s electricity generation growth
profile is still overwhelmingly ‘fossil fueled’ by coal.
Other non-carbon-based renewable, such as geothermal energy, solar
panels, and windmills still combined generate less than 1.5 % of the
world’s entire energy portfolio. Again, the reasoning is simple—costs.
Geothermal, like hydro, requires significant upfront investment and large
amounts of regulatory approval, including land acquisitions. Even after
commissioning, payback times can be long. Geothermal runs the added
risk of wells going dry (or a stop in generating steam). In that sense, geo-
thermal becomes a high-risk investment project.
Solar panels have come down in price considerably since their introduc-
tion in 1940. Solar panels convert sunlight to electrons and thus electric-
ity is created. The problem with solar is that it does not generate enough
electric intensity (power) to run air conditioners, refrigeration, and heat-
ing systems on a  sustainably reliable level. While it can heat water, run
lights, and power home computers and cell phones, it is lacking. While the
panels have become cheaper, there are still installment and maintenance
issues, not to mention cloudy days. Recently, regulation has cropped up
regarding solar and net metering initiatives with power companies, as it
is affecting their profitability and sunk costs, especially with lower energy
prices due to economic downturns in commodity resources.
Harnessing wind power has been the darling of environmentalists for
several years now, and wind farms in Spain, Korea, and California have
52  W. HICKEY

Fig. 2.6  Energy production in China, 2015 as indicative of fossil fuel addiction.
(Source: EIA, 2015)

proven that it can indeed generate enough power for many homes in an
area. The problem with wind is costs for turbines and installation. This
creates a long payback time to profitability; despite the media attention
and political interest in clean wind power, hurdles remain as long as it is
more cheaper to buy a gallon of gasoline or burn a ton of coal on the front
end, though once the government subsidies are calculated, it will generate
electricity more cheaply (Figure 2.6).35

Problems with Non-Carbon-Based Renewables

All renewable sources do however generate one significant HRD oppor-
tunity: Maintenance of the equipment and operations, which includes
localized downstream activities, such as building sheds, roofs, water wells,
lines and poles to the grid, paths and roads. These sources all require very
knowledgeable vocationally trained manpower with high learning curves
to install, operate, and maintain for optimal performance. In short, educa-
tion can provide considerable local jobs for these industries if developed
correctly. See Figure 2.7 for various types of renewable energy.
 TYPES OF ENERGY AND USAGE  53

Fig. 2.7  Types of renewable energy used in developing countries (Source: MCA-­

Indonesia, 2014)

Solar
A core issue with all renewable sources is their baseline capacity, or reli-
ability to continuously generate robust power. Solar energy with its cost,
efficiency, storage, and unreliability (not every day are there blue skies) is
seven times or more expensive than using coal or nuclear to produce elec-
tricity.36 There are many moving parts with solar in developing countries
that are not readily apparent in particular the maintenance and upkeep of
panels for smooth transmission.

Wind
The problems with wind turbines are many. They are very costly and wind,
unlike burning coal or spinning uranium, is not constant. Turbines also
contribute to environmental degradation, blight on otherwise open land-
scapes and emit low frequency noise that can be quite annoying, even at
great distances.37 Additionally, wind power, due to both grid and reliability
issues, is not always profitable. A study in The Utilities Journal found that
84 % of western Denmark’s wind-generated electricity was exported (at a
revenue loss) in 2003. Of note is that Denmark’s multiplicity of wind tower
projects only serve 3.3 % of the nation’s total electricity capacity.38 Again,
Denmark, as a country without natural resources or big rivers, needs a fos-
sil fuel baseload to ensure a reliable and continuous power supply.
54  W. HICKEY

Hydro
Hydropower or dams require committed public investment to create.
Further, they have a significant damaging effect on the environment from
river basins to farmland with flooding, habitat destruction, and entire
community relocations. Transmission of the energy created also requires a
large public investment in grid expansion. To that end, dams require sig-
nificant government intervention and sponsorship, usually at the national
level, to get past (or push past) localized political objections, and with
attendant government guarantees on loans to build the dam.
Once a dam is created, however, its main selling point is that it can
generate enormous  electric power more cheaply than fossil fuels and is
comparable with nuclear energy. Nonetheless, the environmental objec-
tions, in all but the most stalwart of authoritarian governments such as
Myanmar or China, have been growing. Due to this issue, dams are not
a good political option in many countries,39 though their jobs creation is
massive for large swaths of unskilled workers, mostly for digging, moving,
and the more low-skilled, labor-intensive parts of construction.
In short, wind, solar, and hydro, while all sounding very plausible and
impressive  for reducing the carbon footprint, are more ad hoc sources
of energy for a total energy baseline. Renewables are heavily dependent
on government subsidies, tax breaks, and preferential policies to enact
their use on economies of scale level. Without these, they quickly become
non-­competitive for electricity generation in relation to oil, nuclear, and
­hydropower. What needs discernment is a detailed cost–benefit analysis
which includes long-term variables of the environment, finance, and man-
power sourcing against other types of fossil fuels. The point of this is not
to bash renewables, they are sorely needed on a planet under the loom-
ing shadow of climate change, but rather separating facts from fiction.
Consider Table 2.1, where discount rates are applied to determine cost of
money for doing long-term energy projects.

Geothermal Energy
The biggest problem for geothermal energy (electricity created via power
plants installed above natural steam wells and hot springs) is in the avail-
ability of  skilled manpower for equipment, staffing, and transmission,
which is also an HRD mandate. Yet, gaining these vocational and man-
agement competencies is difficult. The second major problem is the huge
sunk costs for the installation of the power plant atop the steam source,
 TYPES OF ENERGY AND USAGE  55

Table 2.1  Actual costs of electricity (US cents/kWh) where CCS is ‘carbon cap-
ture and storage’
Technology Region or country At 10 % discount At 5 % discount
rate rate

Nuclear OECD Europe 8.3–13.7 5.0–8.2

China 4.4–5.5 3.0–3.6
Black coal with CCS OECD Europe 11.0 8.5
Brown coal with CCS OECD Europe 9.5–14.3 6.8–9.3
CCGT with CCS OECD Europe 11.8 9.8
Large hydroelectric OECD Europe 14.0–45.9 7.4–23.1
China: Three 5.2 2.9
Gorges
China: other 2.3–3.3 1.2–1.7
Onshore wind OECD Europe 12.2–23.0 9.0–14.6
China 7.2–12.6 5.1–8.9
Offshore wind OECD Europe 18.7–26.1 13.8–18.8
Solar photovoltaic OECD Europe 38.8–61.6 28.7–41.0
China 18.7–28.3 12.3–18.6

Source: OECD/IEA-NEA, 2010 (as adapted by Hickey, 2015) Projected Costs of

Generating Electricity

and accessible transmission lines for electricity in perhaps quite remote and
rugged areas, like mountain valleys or near, if not in, volcanoes. Generally,
hot steam springs are by their nature isolated and exist along seismic fault
lines, so more extensive electric power infrastructure needs to be built.40
Due to these factors, ‘Geo’ also requires significant government subsidies
and investment  guarantees not to mention human and societal risk and
impact  assessments. Cash-strapped governments will quickly avoid this
costly, but very environmentally friendly, type of renewable energy if they
can default to cheaper and more reliable fossil fuels.

A Hydrogen Cell?
Hydrogen-based power has been a wish list for a long time to power
many developed countries economies. Like certain renewable and nuclear
sources, it has zero carbon emissions in its production, and its only by-­
product is pure water. Hydrogen is not really an energy source per se, as
gasoline or coal is, but more of a carrier source. Hydrogen fuses chemi-
cally with oxygen in a fuel cell or battery to create electricity41 by generat-
ing an electron flow across an anode.42 The electricity generated is then
fed to electric, not internal combustion, motors which run silently. The
56  W. HICKEY

hydrogen ions then react further with the air to combine to make water.
Unfortunately, a large amount of energy is expended in its industrial pro-
duction, splitting the hydrogen from water in the first place, and then
creating a reliable and efficient fuel cell for large-scale commercial use is
complicated, thus rendering it an impractical and expensive, though very
clean, fuel. In short, it is again simply not a practical fuel source today to
compete against the economies of scale required in a fossil-fueled world.
With that said, however, the eventual application of hydrogen as a fuel
source offers vast opportunities for skills development and jobs as the sun
eventually sets on fossil fuels. The opportunities to utilize a hydrogen-fuel
source from our vast oceans is large. Few know much about fuel cell cars
or commercial applications, and know less about the systems for extract-
ing, containing, and transporting crude hydrogen.

Nuclear Power: A Safety Mindset Needed

Up until now, we have discussed energy reactions that require burning or
motion (water/wind) in order to create energy. NP, however, is different.
Nuclear energy is the result of an atomic reaction, fission, or splitting of
atomic nuclei by neutrons that produces an incredible amount of heat-­
creating steam which spins super turbines for generating electricity.43 NP
requires the highest level of human competence for energy creation, but
once attained, it fits the bill for cheap, clean, and reliable (though not
renewable) power. The greatest challenge that most developing countries
will face in their effort to introduce NP will be in having enough quali-
fied manpower and experts on hand. Unlike all the other types of energy,

Table 2.2  A 2 × 2 of conventional versus non-conventional/and renewable ver-

sus non-renewable energy (Hickey)
Conventional Non-conventional

Non-renewable Coal CTL, GTL, oil shale, tar sands

Oil methane hydrates
Gas
Nuclear (U, Pu, Th)
Renewable Biomass (wood, peat) Geothermal (tectonic location)
Hydropower Tidal flows
(dams) Ocean currents
Solar
Wind power
 TYPES OF ENERGY AND USAGE  57

oil, coal, wind, and hydro, the scope of this contextual HRD challenge
that developing countries face cannot be underestimated. To fully utilize
nuclear technology, developing nations must embrace HRD.
After the March 2011 Tsunami, directly effecting the TEPCO (Tokyo
Electric Power Co.)/Fukushima NPP in Japan, the nuclear industry
came under severe international pressure to revamp its safety protocols.
Some countries (i.e. Germany) reacted to the disaster by declaring they
will phase out NP by 2022. This type of uncertainty going forward with
nuclear energy has had serious effects on future manpower sourcing needs
for the industry, and for HRD planning in particular.
Nonetheless, the demand for nuclear energy, especially in developing
countries with an insatiable need for inexpensive energy, continues to grow.
India, China and Russia are considering further NP expansion to their exist-
ing electric grids, which are now largely powered by heavily polluting bitu-
minous coal. South Korea has made the jump from developing to developed
NP in 50 years. Other countries, such as Indonesia, Malaysia, and even
Sudan are eager to create NP as a pillar to their largely fossil-fueled econo-
mies. Development of human resources (HRD) in these countries are at
different stages and with different needs. Much of this has already been dis-
cussed in existing International Atomic Energy Agency (IAEA) literature.44
India, with over a billion people, is going to potentially increase its NP
generation to 470 Gw by 2052 (a 70-fold increase over current capacity).
Indian per capita electricity consumption is about 600 KWh/Yr, but 5000
KWh/Yr are needed to surpass the poverty threshold. India estimates it
will need a workforce of 7000 nuclear engineers alone just for a planned
20 Gw increase in power to its existing nuclear output by 2020. India gets
less than 3 % of its electricity from nuclear, but it is, along with China and
Russia, one of the leaders in current new construction, boasting six of the
world’s 35 reactors under construction.
These are all very large numbers with high expectations for a country
such as India where previous deficiencies in construction projects have led
to huge cost overruns that were plagued by mismanagement (i.e. 2010
Commonwealth Games). HR development and research for NP in India
is mostly conducted by the Homi Bhabha National Institute in Mumbai
which is an umbrella for ten existing R&D and education institutes across
the country. Homi Bhabha utilizes a high bandwidth web for interactive
learning with its other institutions for real-time problem solving.45
China is planning for 80 Gw of installed nuclear capacity for electric
generation by 2020. Even if realized, this would only be about 5 % of the
total Chinese grid electric output. China’s NP is vertically integrated, from
58  W. HICKEY

sourcing (uranium) to enrichment to fabrication to operation to spent fuel.

China operates largely through the ideal of ‘self-reliance’ for its NP genera-
tion and keeps to its own China standards. Nonetheless, much of the design
for China’s NPPs is via technology transfer from France (Daya Bay, M
310 plant), Canada (Qinshan, Candu 6 plant), USA/Japan (Sanmen, AP
1000 plant).46 These designs have been further adapted and hybridized for
local conditions. China is perhaps the most progressive of all the develop-
ing countries in cross-training and managing tech transfer and knowledge
(KM) from foreign investors. They also promote web and safety education
and self-directed learning and further have linked this learning to incentive
systems of promotion and higher pay. China is also a potential supplier
of technology and turnkey services, particularly in Asia. Ergo, China is
quickly asserting itself as a world player in NP via integrated HRD systems.
Russia has 31 operating reactors, 7 under construction and significant
expansion plans. Yet, Russia needs largely to modernize an existing NP
educational system. It is built on an outdated Soviet system that ignores
international norms (EU Bologna process for nuclear disciplines), col-
laboration, and market fundamentals. Whether or not Russia and its
state-sponsored purveyor of NPP, Rosatom, can eventually meet these
challenges remains to be seen.
Perhaps a good example of bridging the ‘gap’ from a developing to
developed country in human resources and NP over 50 years would be
South Korea (ROK). In the 1960s, Korea was the most impoverished
country in Asia. It is now one of the richest per capita in the world.47
The ROK pushed very hard for self-reliance, collaboration, and capability.
Korea has 20 reactors in operation and 3 more under construction and has
far outdistanced the giants of China and India in its nuclear growth where
NP already supplies nearly 40 % of its electricity needs.
In the early stages of NP in Korea, plants were built under turnkey
arrangements with a large reliance on foreign technology. In time, gov-
ernment policy changed to favor engineering services to full on domestic
industry. HRD has underpinned Korea’s technological self-reliance since
1987. This encompasses an integrated team approach, working closely
with contractors, and a focus on joint-system design (JSD) with consistent
review to ensure interoperability. As the focus is on tech transfer leading
to self-reliance, Further, Korea is now looking past mere self-reliance for
its nuclear energy industry; it is actively exporting nuclear technology and
is competing with developed countries for tenders. Consortiums led by
KAERI and KEPCO (Korean nuclear and electric companies) have outbid
 TYPES OF ENERGY AND USAGE  59

many overseas competitors for building a research reactor in Jordan and

NP reactors in UAE, respectively, for example.48 More about this type of
outward ‘localization’ will be discussed in Chapter 7.
Many developing countries are now what the IAEA defines as ‘consid-
ering nuclear power’. The IAEA has published detailed materials on how
to develop HR for nuclear energy, but costs, skills availability, and cultural
issues must be incorporated before countries can embark on these ambi-
tious programs.49
Let us consider Sudan as a new NPP candidate in a developing coun-
try. Current thermal coal and hydroelectric-installed capacity for electric
generation is 2.5 Gw in a country of 40 million. Bringing an NPP online
by 2020 is expected to only add 0.5 Gw to the grid. Nonetheless, despite
the political rhetoric, Sudan is a poor country with vast oil reserves and
a largely fossil-fueled power baseload. History has shown that countries
with natural resources fare weakly when it comes to developing HRD.50
See Figure 2.8. This is not to say however that Sudan is not making any
inroads. Sudan is scheduled to build a 5 Mw nuclear reactor for training
purposes in the near future and is seeking collaboration with other coun-

Existing & Committed Thermal New PS Steam Coal Plant Hydroelectric

New Crude Steam Plant New LSD Plant New CCGT Plant
New GT Plant New Nuclear Plant Peak Demand (MW)
Reserve Margin (%)
25000 120

100

20000
80
Capacity & Demand (MW)

Reserve Margin (%)

60
15000
40

20
10000
0

-20
5000

-40

0 -60
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Fig. 2.8  Sudan power plan forecast with nuclear option (Source: Sudan Atomic
Energy Commission (SAEC) used with permission)
60  W. HICKEY

tries. Nevertheless, serious development of an NPP will require more than

a token investment in a training reactor. It will require a steadfast govern-
ment policy and financing focused on energy securitization to truly wean
itself off fossil fuel dependence. Unfortunately, a relapse to fossil fuels is a
serious obstacle to long-term NP development.
However, most developing countries in Africa, SE Asia, and some for-
mer Soviet countries will not be able to take on NPP programs at a respon-
sible and committed safety level. This shortcoming could prove hazardous
to local people and neighboring countries should they decide to embark
on a NP initiative without considering all the issues. These countries sim-
ply do not have the manpower sourcing structure in place to pursue NP.
Indonesia, for example, has recently approved of a 2 Mw plant to supple-
ment its coal-driven electricity grid, but the details of who will build and
operate the plant remain murky, and after Fukushima, it is highly probable
that public support will be firmly against it.51

Fukushima
No discussion about NP is complete without mentioning the events
that transpired on March 11, 2011 at the TEPCO NPP operation in
Fukushima, Japan. This was predated by two other NPP disasters in the
USA in 1979 (Three Mile Island) and later, Chernobyl, in the then Soviet
republic of Ukraine. The Three Mile Island disaster was a nuclear reactor
meltdown caused by a loss of coolant52; in Chernobyl, a reactor was com-
promised which led to several steam explosions, and a radioactive cloud
forming which traveled over much of eastern and central Europe. While
Three Mile Island was not life threatening, Chernobyl killed several work-
ers, significantly increased local cancer rates, and caused 350,000 people
in Ukraine to be relocated, with unknown long-term  consequences to
several national populations. Its final cleanup costs were gigantic, and the
negative press put NP on its back foot for more than a decade.53
The Fukushima Daiichi NPP accident, unlike Three Mile Island and
Chernobyl, was caused by two external factors, first a major earthquake
occurred off the coast of Japan, followed by a 15-meter-high tidal wave of
water striking the NPP complex. The magnitude-9 earthquake did little
to the NPPs themselves; they shut down, but the ensuing flood of water
disabled the backup power generators and all electrical circuitry. With the
ensuing loss of power and without coolant, three of the six total reactors
at the complex melted down, releasing large amounts of radioactivity into
the atmosphere and surrounding seawater. Uncontrolled fission contin-
 TYPES OF ENERGY AND USAGE  61

ued to produce heat, which caused further meltdowns, a perpetuating

situation. While the problem is still being dealt with in Japan, long-term
health and environmental problems are still unknown.54 In any event, the
disaster further gave NP a black eye.
The important takeaway is that all three disasters were worsened by lack
of a holistic HRD mindset, or more simply and specifically, human factors
from a lack of big picture safety training. When much of HRD for nuclear is
discussed today, it is in a context of ‘creating more nuclear engineers’ only.
That issue itself does carry tremendous importance, but for nuclear to be
truly safe, effective, and efficient, and to enhance total workplace perfor-
mance, nuclear energy demands a global competency.55 In short, there are
many additional jobs that can stimulate NPP employment that require min-
imal academic educational preparation but all require safety as paramount.
Furthering this point, it would seem then that even HRD for NP is still
being conducted by engineers and operations people who are very techni-
cally oriented but may not be grounded in holistic educational trends. Edgar
Schein, a prominent HR professor at MIT, has warned repeatedly about the
pitfalls of an ‘engineering mindset’.56 Namely, engineers may not holistically
envision problem solving outside their specific competency area, and nuclear
power demands this big-picture mindset. This was most pronounced when
engineers at TEPCO could not fully grasp the enormity of the Fukushima sit-
uation and failed to communicate it to all stakeholders, both in the company
and in the community. Additionally, not all of the competence for working in
a nuclear plant can be encapsulated in a terminal engineering degree that only
considers rote cognition with a predetermined sequence of discrete functions.
Fukushima demonstrated that problems out of the box or Black Swan events
with catastrophic implications can and do occur. For community acceptance
to occur, nuclear will have to demonstrate if it is beyond safe for most.

Other Problems with Nuclear Energy

All countries are ‘fighting the demographic tape’ with aging workforces.
As stated, getting long-term career commitment early from young peo-
ple in an industry that has had well-publicized environmental mishaps,
‘NIMBY’ issues, and ‘phase outs’ announced by certain countries is a main
HRD challenge. Nuclear training requires the longest of all holistic skill
sets not found in other energy industry such as  in coal-fired plants or
hydropower  projects. To recruit, train, and retain good candidates will
require a demonstrated government commitment to the projects with real
incentive structures. Higher pay alone is not enough, people want job
security and skills development for mobility.
62  W. HICKEY

The IAEA has actually showcased much new learning and HRD best
practice in a 2006 document entitled Knowledge Management for Nuclear
Industry Operating Organizations.57 The two key HR issues it highlights,
and which are indicative of NP today, are:

1. Retention and building on existing skills and competencies for a

period of over 50 years, particularly in countries where no new NPPs
are being planned; and
2. Development of new skills and competencies in the areas of decom-
missioning and radioactive waste management in many industrial-
ized countries if younger workers cannot continue to be attracted to
the nuclear disciplines.

Without being overly technical, KM (knowledge management) precisely

is the process through which organizations generate value from their
intellectual and knowledge-based assets.58 Much of this knowledge is not
found in books (explicit) but rather in the context (implicit) and situation
(tacit). Unfortunately, many developing countries focus on the explicit
(education) only, while not giving much credence to the other areas such
as communication, case study, and lessons learned. Nonetheless, this is
also important knowledge that needs to be shared and understood to get
to the performance, efficiency, and value creation that a NPP requires.
Knowledge mapping of the vast amounts of information that NP requires
is a good approach and fits well with HRD. See Figure 2.9. Simply, even
if a developing country could create 1000 new nuclear engineering PhD’s

Fig. 2.9  A knowledge map of methods for explicit, implicit, and tactical knowl-
edge building
(Source: IAEA, 2006)
 TYPES OF ENERGY AND USAGE  63

a year, it would not solve all HR issues for NP in regard to human perfor-
mance problems and systems.59
Harmonization of standards and processes will enhance self-reliance
and energy security for NPP. There are sharing platforms, but these do
not carry the weight of an internationally accepted standard.
As China moves up the value-added chain to exporting NPP technol-
ogy to developing countries to foster political ties, the lack of a world
standard (such as ISO) for specifications and procedures could prove
problematic if using third country contractors for integrating, enhancing,
or upgrading NPP technology. This is also emblematic of why Russia can-
not easily change its Soviet past. For example the issue of storing spent
fuel is also a  necessary component of any nuclear energy development
program. Japan already is working on HRD processes at its non-nuclear
proliferation laboratory to address concerns smaller countries may have in
regard to spent fuel handling and business practices for fuel cycle storage.
Alternatively, a large developing country, say in not using a world-accepted
storage protocol and poor oversight enforcement, could decide to store
spent fuel in poor conditions. In short, lowered or uneven standards carry
tremendous hazardous societal cost and considerable safety risks with any
NPP.  Harmonization of all standards is not optional  without this, the
developing world cannot be responsibly introduced to nuclear power.

Energy Overview of Developing Countries:

Overwhelmingly Fossil Fueled
There are many types of energy. Despite looming climate change issues
caused by growing world demand and burning carbon, due to reliability,
intensity, transportability, and overall cost effectiveness, our world is built
on coal and oil, and this will probably be the case in any country’s overall
energy portfolio for the next 100 years. Fossil- and carbon-based fuels con-
sistently average around 88 % or seven-eighth of any nation’s total energy
consumption portfolio, be it developed country or developing nation in
Africa, Asia, or South America and increased with growing China and
India, see Figure 2.10. Right now, alternatives are growing but puny. Even
the UK, a developed country, used as a control group for a portfolio of
energy types, generates power primarily from fossil fuels. There are some
minor nuances, for example, Brazil has a larger hydropower profile than
the others, and Nigeria burns more carbon-based biomass. It is important
to note we are speaking of total energy consumption. If only considering
64  W. HICKEY

Fig. 2.10  Growing global energy demand with breakout for China and India
(Source: EIA, 2012)

electric consumption, then total fossil fuel percentages decrease across the
board.60 Norway is a lone standout, generating nearly all of its domestic
electricity from hydro (dams) via its various fjords61 despite being a major
exporter of fossil fuels. See Table 2.3.
Transition energies, like natural gas, is still a fossil fuel. Carbon-based
renewables, such as biomass and wood pellets, are also polluting and not
‘clean’ from a combustion standpoint. Clean renewable sources of energy
such as wind, solar, and geothermal can have a larger risk profile than
the benefits received in terms of either cost or safety or both. Cleaner?
Definitely yes, cheaper and more reliable? Despite all the considerable mass
marketing from government and environmental agencies, no. Hydropower
can definitely deliver the economies of scale cheaply, for r­ eliable baseload
power, but while very clean, carries huge environmental and destructive
social costs (people and animal relocations and obliterations).
Finally, NP, when safely and efficiently utilized, is the paramount
emblem of a country’s HRD. Nuclear is all about technology and safety,
but most developing countries cannot utilize the manpower needed to
engage either. If they can though, nuclear energy provides the best way
forward for growing energy demand in the developing world. While car-
rying some risk, it is cheap and it is clean, and it is reliable. The world will
need to seriously address NP in the future as an offset to increasing carbon
emissions from fossil-fueled cultures.
 TYPES OF ENERGY AND USAGE  65

Table 2.3  Total energy consumption in selected developing countries by type of

energy62
Country % fossil fuels % Overall % of % %
(coal, oil, renewables fossil and renewables nuclear
gas) (carbon: carbon (non-­
wood, bio) carbon)

Angola 44 49 94 6 -0-
South Korea 86 <1 86 -0- 13
China 91 1 92 8 (Hydro) 1
Tanzania 70 <1 ~70 30 -0-
(Hydro)
Malaysia 93 4 97 3 (Hydro) -0-
Mexico 93 <1 93 6 (4 1
Hydro)
Ecuador 81 <1 82 17 -0-
(Hydro)
Nigeria 19 80 99 1 -0-
Oman 80 N/A >80 -0- -0-
Egypt 96 N/A 96 4 (3 -0-
hydro)
Indonesia 78 18 96 4 -0-
India 73 22 95 4 1
Brasil 60 N/A 60 39 1
(Hydro)
Developing 74 14 88 >9 >1
Group Avg.
Average World 87 2 88 8 (7 4
(BP) Hydro)
UK as Control 87/86 2/N/A 89/86 3/N/A 8/7
BP /EIA

Source: EIA and BP Statistics, 2012–2014. (Table compiled by Hickey)

Thoughts for the Future of Energy

We can see there is no ‘perfect’ source of energy, all engage human

resources at different levels. Some with more upstream (production)
intensity, such as coal or oil, others with more downstream (solar, wind,
and geothermal). NP and hydro could be considered more midstream,
once the dam or power plant is in place, raw energy flows that must be
transmitted and distributed (T&D) via maintenance and safety skills.
66  W. HICKEY

Most middle-income and developed economies, such as Korea, China,

and Turkey, pursue an ‘all of the above’ energy mix’ conversely, most
developing and emerging economies such as Sri Lanka, Sudan, and
Indonesia have an outsized reliance on fossil fuels that will not change
soon. In all aspects, countries are prisoners or leaders in their HRD strat-
agem. The more know-how a country has, the more it can entertain a
wider portfolio in the energy mix. Less know-how, leaves a country teth-
ered to simplistic but heavily polluting, fossil fuel burning to power cars
and trucks, boats and planes, and spin turbines. Make no doubt about it,
this world is still and will continue to be addicted to fossil fuels into the
foreseeable future. Overall, education is the key to move world energy
engagement forward yet is still sorely neglected in the developing world
due to perceived costs.

Notes
1. Freese, B. (2004) Coal: A History. Penguin Books.
2. See: http://www.uncoverenergy.com/liquid-gold/
3. Our Industry, Petroleum 5th Ed. (1977) The British Petroleum Company.
Printed by Staples Printers Kettering.
4. Stefanenko, R. (1983). Coal Mining Technology: Theory and Practice.
Society for Mining Metallurgy.
5. See MCA-Tanzania Mathematika study and also Sudan Atomic Energy
Commission baseload study.
6. Traffic jams are a part of life in Indonesia, now effecting all cities. http://
regional.kompas.com/read/2013/01/19/07251778/Pagi.Ini.Sistem.
4.in.1.di.Gerbang.Tol.Pasteur
7. Sri Lanka, 13th Ed. (2015) Lonely Planet Publications, Pty.
8. Friedman, M. (1978). The Energy Crisis: A Humane Solution’ In The
Economics of Freedom. Cleveland: Standard Oil Company of Ohio.
9. In recent Paris, 2015 Climate Change Accords, India stated it will burn
even more coal than before to power its developing economy. And
Petrominer. 2010. Petrominer Monthly Magazine No. 01 Vol XXXVII.
10. Converting to gas, why not? The Jakarta Post, retrieved from: http://
www.thejakartapost.com/news/2012/01/26/converting-­gas-why-not.
html
11. Leggett, J. (2006). Half Gone: Oil, Gas, Hot Air and the Global Energy
Crisis. Portobello Books.
12. Klein, N. (2014) This Changes Everything. Allen Lane, pp. 143–144; this
gives analysis on unconventional fracking and tar sands.
 TYPES OF ENERGY AND USAGE  67

13. Yergin, D. (2008) The Prize: The Epic Quest for Oil, Money and Power.
Simon and Schuster: New York.
14. http://www.iea.org/aboutus/faqs/
15. World Energy Outlook, EIA 2016 URL: http://www.worldenergyout-
look.org
16. Ibid.
17. Deffeyes, K. (2001) Hubbert’s Peak: The Impending World Oil Shortage.
Princeton University Press.
18. For 2016 production freezes and cuts, see: http://oilprice.com/Energy/
Oil-Prices/Why-OPEC-Production-Freeze-Could-Pave-The-Way-For-
Actual-Cuts.html
19. Oil and Gas Journal, 2013. http://www.ogj.com/articles/print/vol-
ume-111/issue-12/special-report-worldwide-report/worldwide-­
reserves-oil-production-post-modest-rise.html
20. http://www.worldcoal.org/coal/uses-of-coal/coal-electricity/
21. h t t p : / / w w w. t h e g u a r d i a n . c o m / w o r l d / 2 0 1 5 / n o v / 0 4 / c h i n a -
underreporting-coal-consumption-by-up-to-17-data-­suggests
22. World Resources Institute (2012) http://www.wri.org/blog/2012/11/
new-global-assessment-reveals-nearly-1200-proposed-coal-fired-­power-
plants
23. Annual Energy Review 2011 (2012) Coal section, 195–215 (accessed at:
https://www.eia.gov/totalenergy/data/annual/pdf/aer.pdf November
5, 2015).
24. http://www.nrdc.org/globalwarming/files/coalmining.pdf
25. World Nuclear Association  (WNA). Comparison of GHG emissions of
project life cycles.
26. Coal Hard Facts: Cleaning It Won’t Be Dirt Cheap (2009) http://online.
wsj.com/article/SB123751110892790871.html
27. Germany has changed to renewable under its ambitious Energiewende pro-
gram, but the politics of coal is still an ‘Achilles Heel’, see http://www.
nytimes.com/2015/12/04/world/europe/germany-may-offer-model-
for-reining-in-fossil-fuel-use.html?_r=0
28. Klein, N. (2014) ibid. Particularly pointed critique of the fracking technol-
ogy to get the world to a ‘transition state’ between traditional fossil fuels
and renewables is really a ‘null choice’. P. 200.
29. GE has best technology available for burning gas more efficiently in a
CCP.  See https://powergen.gepower.com/resources/knowledge-­base/
combined-cycle-power-plant-how-it-works.html
30. For a precise definition of ‘baseload’, see the Energy dictionary: http://
www.energyvortex.com/energydictionary/baseload_plant.html
31. LNG and Mitsubishi. See http://asia.nikkei.com/Business/Companies/
Mitsubishi-Heavy-tests-waters-with-floating-LNG-power-plants
68  W. HICKEY

32. Paul, B. (2006) Future Energy. Wiley. P. 6.

33. IEA (2011) World Energy Outlook: Executive Summary, Paris:
International Energy Agency.
34. Ibid., http://www.energyvortex.com/energydictionary/baseload_plant.
html
35. Simmons, R. (2015). What’s the true cost of windpower? Newsweek, April
11.
36. http://www.solarpoweristhefuture.com/problems-with-solar-­e nergy.
shtml
37. A Problem With Wind Power. Eric Rosenbloom—September 5, 2006.
38. David J.  White, ‘Danish Wind: Too Good To Be True?’, The Utilities
Journal. (July 2004).
39. For hydro power or dams, http://www.ucsusa.org/clean_energy/our-
energy-choices/renewable-energy/environmental-impacts-­hydroelectric-
power.html#.VkrAQycaySM
40. http://www.conserve-energy-future.com/Disadvantages_GeothermalEnergy.
php
41. http://www.alternative-energy-news.info/technology/hydrogen-fuel/
42. http://americanhistory.si.edu/fuelcells/basics.htm
43. Most nuclear energy is produced by ‘fission’, also including the terms
fusion and decay for simplicity. See http://www.bbc.co.uk/schools/gcse-
bitesize/science/add_aqa_pre_2011/radiation/nuclearfissionrev1.shtml
and also Derived from: http://www.energyeducation.tx.gov/energy/sec-
tion_1/topics/forms_of_energy/nuclear_energy.html
44. IAEA (2009) Draft Nuclear Energy Series Document: Workforce Planning
for New Nuclear Power Programmes.
45. Homi Bhabha National Institute in Mumbai see: http://www.hbni.ac.in
46. China looks forward to reactor firsts. World Nuclear News, See URL:
http://www.world-nuclear-news.org/NN-China-looks-­f orward-to-
reactor-firsts-1409157.html
47. South Korean development in the past 50 years has been phenomenal to
say the least.
48. Human Resources Capacity-Building for the Jordanian Nuclear
Programme.
49. The IAEA actually has many outstanding sources in regard to these issues,
but are they operationalized? See Appendix 1.
50. Sachs, J. and Warner, A. (2001) The Curse of Natural Resources, European
Economic Review, 45, Issues 4–6, pp. 827–38.
51. Analysis: Indonesia. ‘Powering up’ Oxford Business Group, Mon,
12/26/2011.
52. U.S. Nuclear Regulatory Commission. A Background on the Three Mile
Island Accident. Summary of Events.
 TYPES OF ENERGY AND USAGE  69

53. Chernobyl: the true scale of the accident. April, 2011.

54. Explainer: What went wrong in Japan’s nuclear reactors. IEEE Spectrum,
April 2011.
55. Grogan, J. (2010) Developing Competencies for a Global Workforce.
Workforce Solutions Review, pp. 42–43.
56. Schein, E. (1992) Organizational Culture and Leadership. San Francisco:
Jossey-Bass Publishers.
57. Document found at: http://www.iaea.org/inisnkm/nkm/documents/
te_1510_web.pdf, see p. 4.
58. Santosus, M., and Surmac, Z., The ABCs of Knowledge Management,
Knowledge Management Research, at http://www.cio.com/research/
knowledge/edit/kmabcs.html
59. Senge, Peter M. (1990). The Fifth Discipline: The Art & Practice of The
Learning Organization. New York: Currency.
60. For example, regarding the UK, most electricity generation comes from
fossil fuels (64 %), particularly coal (36 % of total generation), followed by
nuclear (20 %), hydroelectricity (2 %), and other renewables (15 %).
Although coal’s share of electricity generation decreased somewhat in
2013, it is still high compared to the period between 2008 and 2011,
when it contributed about 30 % of the UK’s electricity generation; see EIA
2012.
61. See EIA for Norway Electric energy consumption sources.
62. The following EIA sources give full graphics and statistics of actual total
energy consumption and source:
Angola: http://www.eia.gov/beta/international/analysis.cfm?iso=AGO
South Korea: http://www.eia.gov/beta/international/analysis.cfm?iso=KOR
Oman: http://www.eia.gov/beta/international/analysis.cfm?iso=OMN
Sri Lanka: http://www.eia.gov/beta/international/analysis.cfm?iso=LKA
Indonesia: http://www.eia.gov/beta/international/analysis.cfm?iso=IDN
China: http://www.eia.gov/countries/cab.cfm?fips=CH
India: http://www.eia.gov/countries/cab.cfm?fips=IN
Thailand: http://www.eia.gov/countries/cab.cfm?fips=TH
UK: http://www.eia.gov/countries/cab.cfm?fips=UK
 CHAPTER 3

Energy as the ‘Non-Devaluing’ Currency:

A Store of Wealth in Today’s World

Energy and Money Are Different Sides

of the Same Coin

In the twenty-first century, energy becomes an incipient store of wealth, a

source of value. With the gold standard long since disbanded, and central
banks printing more and more paper fiat currency, energy becomes a de
facto currency in its own right. Those who have access to resources either
in extracting energy (upstream) or in transmitting it (downstream) hold
economic drivers in their hands. Energy resources from mining and oil
have, over many years, generated vast amounts of capital in many devel-
oping countries since the beginning of the automobile age around 100
years ago. Cases in point include Shell’s vast holdings in Indonesia (which
later became part of Standard Oil of California and Stanvac), PEMEX in
Mexico, Saudi Aramco in Saudi Arabia, the Iranian national oil company
and BP, AGIP-Eni in Libya, to name a few of the major players.1 The enor-
mity of the wealth generated should not be underestimated. Nonetheless,
much of this wealth never went to really developing the societies  these
resources were held in, but rather was spirited into foreign bank accounts,
investments, and other offshore holdings.
Before the nineteenth century, energy for transport and manufacturing
was found in the form of animals, wind, and hydropower. These powered
the world of commerce and were largely transitory energy sources and
could not be captured, stored, or used in all conditions. The invention

© The Editor(s) (if applicable) and The Author(s) 2017 71

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_3
72  W. HICKEY

of a wood-burning steam engine, soon replaced by coal, by James Watt

a Scottish engineer, in 1763 replaced the use of draft animals and water
wheels for power generation and in 40 years would be mounted upon a
carriage to create the world’s first locomotive for mobility. This may argu-
ably be the most important invention in world history,2 as it launched the
Industrial era.
In the early part of the Industrial Revolution, coal, a solar storage
medium if one wills, due to fossilized plant matter, fostered in Britain’s
industrialization with a large-scale intensification of energy used in the
economy, for powering the steam engine, iron (then later steel) produc-
tion, and railroad transport. As a new medium of power generation, it
became a new currency for economic development, mobility, and soci-
etal advancement. Coal was an abundantly available and cheap source of
power. Mines, both above and below ground, proliferated, creating mass
employment opportunities that paid well.3 The British Empire expanded
worldwide due in part to coal-powered steam for manufacturing and trans-
portation, and became the most powerful nation in the world by 1905.4
This industrialization then took rapid hold in the USA, and by 1918, coal
had reached a peak production of 680 million tons.5
A pivot began to occur in the run up to World War I as then mechanized
warfare utilized oil for success. Petroleum became a new driving force toward
modernization. Coal was cheap, but also dirty, and cumbersome to transport.
By WWII, it was well accepted that participation in warfare mandated access
to oil resources. Any combatant without access to oil reserves was doomed
to defeat. With world domination at hand, oil then became the largest busi-
ness driver for energy in world history, a status that remains to this very day.
The dollars status as pre-eminent currency for oil dealings was cemented
in 1973 during the oil embargo when Saudi Arabia, the largest oil pro-
ducer in the world, committed to using US dollars exclusively to trade
in oil. This was brought about by the US support of Israel in the Yom
Kippur war, whereby concerns of a united Arab embargo would render the
dollar use insignificant. Through realpolitik, the US government under
Richard Nixon in 1973 persuaded Saudi Arabia, with practically unlim-
ited oil reserves, to affect this dollarization by a quid pro quo of financ-
ing national security and infrastructure using US firms and US favoritism
toward realizing Saudi political aspirations in the Mideast. The result was
that oil prices quickly stabilized, and further the Saudi’s agreed to violate
any OPEC tenets of production limits in order to shield the USA from
high prices in the future6 (this is also happening again today in 2015).
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  73

These actions, led by Saudi Arabia, created a new ‘oil standard’ replacing
the dollar’s previous ‘gold standard’ that had been ended in 1971; the pet-
rodollar was born, oil then became a supporting currency to the dollar and
propped up the dollar’s value immediately.7 Today, practically, all global oil
transactions are settled in dollars. Recently, China has attempted to make
inroads into this system with their currency, the yuan, in Ecuador, Russia,
and Iran, but they are miniscule compared to total trade volumes in dollars.
Essentially, the theory is that the US dollar’s value is determined and
supported by oil under a relationship few in the world can grasp. Whereby
a US-centric ‘car culture’ with the most advanced interstate road system
in the world that is used to service ‘urban sprawl’ and suburban expansion
became addicted to the ‘All- American fuel’ and the role that oil is and con-
tinues to play in world events.8 Gasoline, kerosene (jet fuel), and heating
oil account for 80 % of the breakdown of all US oil consumption. In other
words, US growth and economic activity is predicated on oil consumption. 
The conventional thinking then is that when oil prices are low, the US dollar
gains in strength (as we are seeing today in 2015), conversely, when oil prices
are high, the US dollar weakens considerably (as it did in 2005/2006).9 This
is because higher oil prices in USA create a large current account deficit to
pay for oil imports. Recent technological gains in producing oil and gas such
as ‘fracking’ have made the USA more energy independent and have now
created the USA as an energy exporter, which would lend economic credence
that a current account surplus would tend to push up a nation’s currency.

The Petrodollar
This phenomena of trade surpluses due to oil continues to this day even
under the guise of ‘Sovereign Wealth Funds’, where previously known as
petrodollars, then later as ‘petrocurrency’ which is the surplus currency
earned by petroleum exports and products, from any oil-exporting nation,
usually denominated in dollars or some other hard currency. It is esti-
mated that trillions in petrodollar wealth have been created, which in turn
has underpinned the value of assets and derivatives worldwide. The very
recent collapse in oil and commodity prices have tested petrodollars and
the sovereign wealth funds that save and invest them. The trend has been
that the petrodollar is essentially the world’s currency.10 If distilled further
and used as a proof, oil is the world’s real currency.
The outcomes of this dollarization of oil have been far reaching and
profound. It has enabled big producers of fossil fuels to develop significant
74  W. HICKEY

‘war-chests’ of foreign exchange (mostly dollars) that has enriched them and
bloated their GDPs, in tandem with foreign investors who also invest to gain
an interest in richly rewarding fossil fuel projects. In the early 1970s, these
surpluses of dollars were recycled into commercial banks, bonds, and equi-
ties of mostly developed nations and in the USA, in order to earn higher and
more stable returns that their own developing countries could not provide.
In the decades of the 1970s and 1980s, these petrodollars were circulated
outside of their home countries, but unfortunately, this plethora of money
rarely made impacts locally. By 1981, the current account surpluses of all
OPEC members amounted to over $450 billion, a vast and staggering sum.11
What is again important to note here for the purposes of this book is that
while financially prudent, these investments did little or nothing to aid in the
human and social development of their own people, at least on internation-
ally accepted scales of development. It has only been recently, with declining
reserves, and many mouths to feed, that countries have reassessed this.
It also allowed the US dollar seigniorage over local currencies from
oil-exporting nations. This means that the dollar became the real store of
wealth of financing in these countries, subjected to US economic policy.12
This system also then provided significant benefits to the US economy.13

1. An increased world demand for US dollars.

2. An increased investment demand for US Treasuries and assorted
instruments.
3. A currency the USA can print at will (Quantitative Easing) in order
to buy even more energy.

Sovereign Wealth Funds

It’s Not Just About Oil  The advent of Sovereign Wealth Funds, (SWF)
also in Asian countries, due to vast inflows of fossil fuel related investments
changed this somewhat, but not completely. As noted in Chapter 2, seven-
eighth of the world’s power generation activities is still directly related to
oil, gas, and coal.

SWF have existed in various forms since the 1950s. In fact, ‘Petrodollars’
in the Middle East oil economies became the logical predecessor to SWF.
Many in the oil-rich countries in the Middle East that held these dollars
from the last oil boom in the 1970s were inconsistently invested, in turn,
leading to capital losses with no real impact in long-term national benefits.
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  75

This was a painful lesson these countries learned with the collapse of oil
prices in the mid-1990s, and sought not to repeat it by seeking out stron-
ger performing investments in other, usually Western, countries to diversify
portfolio risks. Only recently have SWF emerged as the mega-­managers of
large national capital reserves and diversely held foreign portfolio assets.
Nonetheless, any country holding a capital surplus, not a deficit, of energy-
or natural resource-related revenues including downstream revenue activity
(such as in Singapore, China, or S. Korea with refined fossil fuel products for
sale), can then also become a net producer of wealth14 via an energy-backed
currency, that being either the physical resource, such as crude oil or the
know-how resource to process the commodity such as smeltering, polyvinyl
extrusions, or high-end refining capacity, including the ability to transport
or store the refined material/finished product. Unlike a fiat currency, which
has no physical  asset backing like a gold standard or other commodity, a
currency backed by real assets can produce a significant national economic
advantage. A new store of wealth is created. This wealth needs to be invested
in order to earn returns. But where the wealth is invested is the key. We live
in an information-intensive world. Investment returns must be considered
along the spectra of knowledge development, and the funding to increase
that said development then becomes a paramount driver.

SWF: A Definition
SWF, at their core then, are from surplus funds that invest the savings of
governments or retirees in various forms, mostly through foreign vehicles.
As of 2013,15 SWF were conservatively valued worldwide at around 6 tril-
lion dollars. In physical form then, SWF are massive state-owned investment
vehicles of stocks, bonds, property, precious metals, and other financial
instruments that include private equity. This number has no doubt fallen
significantly since then due to crashing commodity prices since 2015 and
large SWF holders such as Norway and Saudi Arabia are now partially cash-
ing out with so-called redemptions to keep funding their various social obli-
gations.16 Nonetheless, SWF still represent significant pools of wealth due
to oil and gas activities from mostly developing countries, even in an eco-
nomic downturn. There are many SWF under different names and man-
dates, from Kazakhstan to Iran to Singapore to Norway and the Middle
East,  with most, but not all, such as China, in oil-­producing countries.
There are also nascent ideas for SWF in places such as Myanmar, Congo,
Nigeria, and even Indonesia, which is now a net oil importer, but oddly
76  W. HICKEY

has rejoined OPEC. But these ideas are hamstrung due to the extreme and
incipient corruption at high executive levels and that exists in many of these
countries. The main commonality with all SWF is that they are using sur-
plus cash assets to generate high financial returns to cover social expenses.
Returns that are generated usually, but not exclusively, from developed
countries abroad, in the USA, Switzerland, and the UK. The ‘short shrift’
then is in generating better human capital assets domestically.
Norway (a developed country) holds the largest sovereign wealth fund
in the world, valued conservatively at over $900 Billion, but down recently
due to cratering oil prices. While the exact portfolio composition is secret,
it is estimated that Norway’s ‘Government Pension Fund’ holds 1 % of all
global equities.17 Most of this wealth was derived from its North Sea oil
fields, in operation since 1962, but it is also derived by the human capital
that its major state-owned oil company, Statoil, has developed over the
years and now exports services abroad. Statoil and Norwegian engineers
are world renowned for successfully developing offshore oil projects in
much of the developing world.18 The Norwegian Sovereign wealth fund
also excludes investing in companies that violate human rights, produce
armaments, or cause considerable economic damage to the environment.19
In short, the Norwegian government has taken the aspects of HRD at an
early stage of its wealth agglomeration to a much higher level than most
other oil-producing countries in the world and have provided a bench-
marked model of creating human capital from oil. As a model, it can be
directly applied to other countries and it should be.
Unfortunately, many developing countries are far removed from using
their resource wealth for the advancement of their own people such as
in Norway. (As we shall see in the chapter on localization, Chapter 7,
Norway is also a pre-eminent localization story and has created a human
development template many countries, developing and developed, should
consider and be inspired by.)
Generally, the problem is that SWF look to invest their funds outside
their countries for more stable and greater financial returns at the expense
of their own citizens. This would have made sense 30 years ago when
human development indexes were not as well understood and the world
did not have instantaneous communications via cell phones and the inter-
net, but not today. We exist in the information age. Only countries that
develop their people to globally benchmarked standards of competence
and ability will be able to succeed. In this aspect, energy wealth can be
translated into real human capital  in short order. It’s not really about
currency, it’s about policy. Human resource policy must be reflected in
the proceeds obtained from the resource that their citizens own. On the
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  77

surface, no one would disagree that this ‘substance problem’ arises in the
processes and procedures that are tightly held by finance.
There are several prolific researchers of SWF who utilize differing defini-
tions of what an SWF is precisely. The Peterson Institute’s Edwin Truman
qualitatively defines SWF as ‘separate pools of international assets in the forms
of cash and equities mostly held emerging economies, with the governments
of these economies having more direct control of the international reserves
than in developed countries’.20 Simon Johnson, a former vice-director of
the International Monetary Fund (IMF), quantitatively defines SWF as a
‘secretive vehicle to manage accumulated excess foreign exchange reserves,
or foreign money from exports due to current account surpluses’.21 Ashby
Monk is currently a co-director at Oxfords SWF Project, which attempts
to influence world SWF policies, prefers to use the IMF definition of SWF,
‘vehicles that typically help fund socio-­economic progress…or… industrial
policies that might raise… potential output growth’ and focuses more on the
best practices, growth, and financial processes involved with them.22

Financial Relevance
Understanding the mechanisms behind SWF is core to the financial implica-
tions of energy and HRD. Two types of SWF exist: Commodity based (the
largest type, based on oil or mining reserves, and primarily what this book
considers which exist in countries like Malaysia, Kazakhstan, and Australia)
and Non-Commodity SWF based on overall export surpluses, such as
what exist in China or that Korea have in light industry and technology, or
based on downstream value-added services, such as oil, coal, and gas-based
chemicals, medicine, and polyvinyl chlorides, or in the massive financial ser-
vices used to conduit the energy-trading businesses, that an Asian hub like
Singapore provides. For this book, we limit the discussion to commodity
(energy)-based SWF in developing countries better yet for education direc-
tives in ‘emerging economies’, such as Angola, Kazakhstan, or Myanmar.
During the first economic crisis of 2007/08, SWF discussion in largely
disappeared with developing country governments trying to maintain
immediate economic stability. This has also happened again, with the
recent oil slump of 2014/15, but during that abatement time, and with
worldwide energy growth, the discussion of what to do with commodity
revenues took center stage. An obvious suggestion was national economic
diversification. Brazil became notable for this at the time.23
Perhaps then, we must consider that the best development of a country’s
citizens in the information age is not best reflected in financial returns such
as CAPMs (Capital Asset Pricing Models), WACCs (Weighted Average
78  W. HICKEY

Cost of Capital), ROEs, or ROIs, (Returns on Equity/Investment) but

rather in timely skills programs that put people to work competitively on
international levels. That’s the core of the problem, national inequality
issues rooted in a lack of jobs. Inequality that goes unfunded, but doesn’t
have to, in countries very rich with natural resources.
Namely, in today’s world, a country’s national store of wealth should
then be used to first develop its human capital (or software) as opposed to
an extremely singular focus of investing in financial assets (tangible assets,
paper and liquid instruments, or the hardware) only. Nonetheless, all con-
temporary literature and governmental policy points to SWF seeking finan-
cial returns and how to maximize those financial returns at the expense of all
else, seemingly bereft of the new normal of educational gravitas the world
now faces. It becomes a rather one-dimensional argument, which should
not be the case, nonetheless, as Chapter 2 ­demonstrates, the extreme per-
suasive power the financial industry has over resource assets  allocations
and the baseline they form from which all decisions devolve.
Further, a 2010 study by the OECD/ESADE compared 14,000 vari-
ous sovereign wealth fund investments to 11,000 mutual fund invest-
ments from financial brokers such as Fidelity, Vanguard, and Templeton
and found that they do not differ when considering the political profile
of various investing countries (as many SWF originate in non-democratic
countries). The study also considered the political regimes in the invest-
ing and host countries, finding that both SWF and mutual funds did not
differentiate in asset allocation and invest without bias in both democratic
and non-democratic countries. In other words, investment is blind to
many practices in countries with poor governance.
According to Truman,24 SWF combine economics, finance, institu-
tion  building, and public policy; however, the one large missing factor
Truman neglects in his work is education, which is core to the formation
of human capital development in this information era. In fact, this new
paradigm is implicitly stressed in the information age: Where human, not
financial capital is necessary as a fundamental first-step in building human
capital and then in creating, sustainable social capital.25

Controversy
Many developed nations have large sovereign debts due to the defi-
cit financing of high social expenditures in the form of ‘entitlement’ pro-
grams and are in dire need of outside resources—which are primed for
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  79

investment by SWFs. In other words, cash-strapped democratic countries

are most concerned that privately held strategic industry (oil, electric,
ports, hi-tech, infrastructure, telecom) could be bought by authoritarian
regimes with non-transparent intentions to sway management decisions.
While this has never been conclusively demonstrated to date, it is a threat
that is taken seriously, such are, for example, Chinese state-owned compa-
nies leasing the Panama Canal26 or ports in the Middle East.
The real controversy, however, on investments today are about realizing
know-how that is then transferred to a paradigm of today’s ‘knowledge
economy’. Simply, endogenous education leading to skills and better man-
power development must be the a priori key27 for a nation’s advancement.
This is how globalized economies truly compete and references the cluster
competitiveness facet of the diamond.28 Nonetheless, the focus of SWF,
especially in developing countries, continues to be maximizing financial
returns through portfolio investments or hard asset purchases in other
countries only and in perpetuating that model of finance as a yardstick of
development, not knowledge.
Of course, this focus does nothing to advance or develop large special
sectors of populations, but instead tends to reward government insiders
and elite operators, thus promoting corruption, which has been so much
written about in the developing word. This can be especially detrimental
in African and Asian countries such as Nigeria or Indonesia, which have
large, underemployed populations, but much in oil and gas reserves, and
are now considering increasing or creating new SWF due to mostly huge
knock-on effect of Chinese FDI for commodities. The oil itself does not
generate employment, but the revenue it produces can lead to economic
growth and returns for investors.

Frameworks for SWF
We consider three frameworks for monitoring and standardizing SWF
which have been proposed to promote better investment actors on the
world stage, these standards are aimed at developing countries who have
had, or continue to have, poor records of corruption and transparency or
both. It may be mentioned that most holders of commodity-based SWF,
with the exception of Norway, also have compromised human rights
records. None of the standards, as follows, considers human rights.
80  W. HICKEY

The Edwin Truman Scoreboard  In 2007, Edwin Truman developed a

mathematical index for the international expectations of SWF along four
paradigms: structure, governance, accountability, transparency and behav-
ior. Unfortunately, most SWF consistently scored low on one or more
of the ideals, including the GIC (Government Investment Corporation)
of Singapore, which was deemed low on transparency and behavior
(2.25/25). Truman has been ranking SWF for several years, and his opin-
ions are well sought after by policymakers. 

The Santiago Principles  These are the Generally Accepted Practices and
Principles (GAPP) that responsible holders of SWF worldwide agreed to
participate in as signatories in Chile in 2007. There are 24 GAPP sub-
sections, which, like the Truman Scorecard, can essentially be broken
down into four general areas: a stable financial system, transparency and
­disclosure of holdings, economic and financial risks, and risk management
and accountability. Some SWFs, such as Norway’s national pension fund,
are highly accountable and self-policed, others, such as Iran’s, are non-­
compliant and have shown indifference toward these principles altogether. 

Andrew Ang SWF Benchmarks  Columbia University Finance Professor

Ang has written about four benchmarks of SWF in order to determine the
economic and political context an SWF has on its government’s policy in
regard to its legitimacy, the investment intention, performance of returns
as benchmarked against other funds, and overall endurance (time hori-
zon) of the fund. Ang is mostly writing about SWF from purely financial
aspects, in what he defines as ‘a mechanism for moving a country’s savings
and investments from the present to the future’.29
None of the regarded frameworks mentions anything about devel-
oping, nurturing, or creating human capital inside their own domestic
systems, with the lone exception of Edwin Truman’s Scoreboard, ideal
on ‘Transparency and Accountability’. The Oxford SWF program, which
exists ‘to  make contributions to academic literature and inform policy
debates’30 also clearly shows the power of the financial system in today’s
world bereft of social development initiatives. A matrix highlights the one-­
dimensional portrait of financial and economic concerns as over-riding
SWF goalposts. (See Table 3.1.)
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  81

Table 3.1  SWF standards matrix where green is strong, yellow is weak, red is
non-existent (Source: W. Hickey)

Ideal SWF Categories The Santiago Edwin Truman Andrew Ang

Principles Scoreboard Benchmarks

Policy Formulation Ideal Compliance Governance Legitimacy

Overarching Mission Economic Stability Investment Structure Investment Intent

(Institutionalized)

Return on Investment. Weak Fund Behavior Performance

(ROI, ROE or CAPM)
(Some Risk and
Return related
Considerations)

Timeline -N/A- -N/A- Endurance

Human Capital None Weak– None

Building?
(named as ‘Transparency
& Accountability’)

A Rainy Day
The overarching and consistent ideal then behind the SWF is for a rainy-­
day fund, or for when the oil or other resources run dry and a country’s
future generations will largely need to make due on their own initiatives.
‘Future generation employment’ (if not engagement) is a consistent theme
then among the foundation of all SWF for their legitimacy. Somehow this
approach may be misguided: the rainy day is actually  here today. Putting
money in higher risk foreign investment vehicles, especially in an era of his-
torically low capital returns (due to a world growth slowdown, low oil prices,
and arguable deflationary forces) is shortchanging their citizens. It would
then seem that, and according to the research,31 highly centralized pools
of money in developing countries tend to attract corruption, not dilute it.
Simply, any SWF scoreboard, benchmark, or general principle must
clearly enshrine a component of HRD to its ideal assessment in today’s
world. Simply, some countries have no justification in seeking ‘higher capi-
tal returns’ elsewhere when their people largely remain unskilled, unde-
veloped, and with a nowhere future of bleak poverty unveiled in front of
them. Especially, if these countries, rich in resources, are the recipients of
any donor ‘aid’ and WB/IMF loans at substandard interest rates. It just
82  W. HICKEY

doesn’t make sense if they have billions parked in accounts in Switzerland

or London or in shell companies in the US State of Delaware or Cayman
Islands while their people go unengaged, marginalized, or underemployed.
Past history has shown that Milton Friedman’s model of money and eco-
nomic development do not merely ‘trickle down’, but must be institution-
alized in educational and developmental policy for a precipitate to occur.

Sovereignty and Wealth Policy

This is not mere semantics; the inequality gap between countries with people
rich in knowledge is growing exponentially wider each year compared to other
countries with uneducated populations that are simply being left behind. This
is a worldwide problem, contributing to mass migration, resurging health
epidemics, political instability, and beggar-thy-neighbor currency policies
(again, all clearly related to a root cause of structural unemployment issues
in societies failing to adapt to the Information Age) none of which can be
easily maintained or hidden from spillover across borders. The bottom line
is that all countries have to take notice of human capital development not
only inside their own sovereign territory but also inside their neighbors. That
means just chasing the money and considering developmental issues inside
one’s own country, while ignoring a neighbor’s, simply won’t do.
Basically, problems cannot be kept neatly tucked inside sovereign bor-
ders anymore. That is an old paradigm that is also costly to maintain. One
country’s problems can systemically become another’s if not held in check
and addressed. Countries that gladly accept huge amounts of money from
SWF in developing lands also need to hold to account the investors if
they are indifferent to the suffering next door (such as the USA accept-
ing vast amounts of oil investment from Saudi Arabia, which borders the
essentially ‘failed state’ of resource-poor Yemen32). This is what is defined
in Joergen Moeller’s ideal of cross-border ‘burden-sharing’ in the over-
populated world we live in. Without burden-sharing as a noted consid-
eration, the contagion and spillover of cross-border conflicts fueled by
illegal immigration, impoverished youth, resource scarcity, and growing
inequality will be exacerbated.33
The current policy assumption is largely that the sovereign state is the
best decider of how to build human capital inside their own borders. We
will discuss more of this in Chap. 6, Ownership. Things were formerly this
way, but the world has changed, and significant transnational issues such
as refugee populations, global warming, the illicit drug trade, cross-border
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  83

tax policies and investment breaks, and labor mobility simply cannot be
decided on a one-size-fits-all dimension of sovereignty. Before developing
countries with large SWF seek a direct financial payback in foreign lands,
perpetuating in most instances the North–South phenomena, they must
direct their investments inward toward developing their own and poten-
tially their near neighbor’s people. This last point cannot be overstated.

Implications and Policy Rethink

It is no stretch to say that the world’s best performing assets (physical and
human) are based on knowledge economies, think US aerospace, German
cars, Japanese electronics, Korean flat-screen TVs and mobile phones, or
Swiss financial services, and yet the persistent direction of SWF investing
is in tangible assets only, while ignoring or marginalizing human capital
needs in their own countries, looms large. Norway’s SWF states directly
that it ‘is an instrument for ensuring that a reasonable portion of the coun-
try’s petroleum wealth benefits future generations’.34 The future lies in
education, that being relevant education, meaning the IT, planning, lan-
guage, and soft skills employers want. This is particularly noteworthy in
the Middle East, where Kuwait, Saudi Arabia, and the UAE are now con-
templating a future society without oil exports. Then what will happen?
There is also a bigger macro-economic effect as we are witnessing today.
Countries with resources simply cannot be allowed to play the ‘beggar thy
neighbor’ game anymore if their elites squander or misappropriate vital
national resources. If the leaders in non-democratic countries have previ-
ously shown a disdain for developing human capital (Mongolia, Angola,
Nigeria), then the countries that are accepting this cross-border invest-
ment need to also consider these issues. They are then complicit in the
huge problems an overpopulated world faces. In essence a ‘Sovereign’
wealth from non-transparent governments can no longer internationalize
the social costs of bad policy, while privatizing the profits and gainshare
among a tiny group of domestic elites.
The world cannot afford to look askance and tolerate this type of cross-­
border behavior anymore without addressing in their policies the overall
societal responsibility of the investing actor, not merely the responsibility
of the host country. SWF must be linked to contemporary world issues to
promote not only returns on financial investments but also the paybacks
on human capital development. That would be the most truly valuable
‘return on investment’.
84  W. HICKEY

The overarching goal of any SWF policy then must be to increase edu-
cation and human capital in resource-rich countries that have attendant
serious poverty and inequality gaps. And if human capital development
is the true mission, perhaps then developed countries could be less suspi-
cious of the SWF investments on their own soil and more accommodating
of their actual design.

Derivatives: Part Way There

In fact, we may be much of the way there already, in the form of derivatives
trading. Derivatives are financial instruments that bear their value linked
to some other underlying asset, usually a commodity such as gas, oil, or
even electricity. The total world economy is about $72 trillion dollars, but
the notional (written) size of this market alone in the total world deriva-
tives market, is almost $350 trillion dollars, or a 5:1 differential (reflecting
future growth and earning potential in world markets).35
In many cases, the fossil fuel business, inclusive of oil and gas, but also
coal assets, underpin most investments in these asset classes. It is esti-
mated that around 1 trillion tons of carbon (equivalent to 7 trillion barrels
of oil) still remain locked in the ground,36 with oil consisting of about
1.4 trillion barrels of proven reserves,37 and coal about 1 trillion short
tons proven38 with many companies, investment houses, and governments
deriving wealth from these apportioned reserves (again, in form of deriva-
tives). Unfortunately, if all this carbon were actually extracted and burned,
it would destroy the earth’s climate as we know it.39 US Banks alone hold
commodity derivatives in excess of $14 trillion of which about $4 trillion
is in oil and commodities.40 These are in totality enormous numbers, with
trillions of dollars involved. These investments are so large that insurance
has been taken out to safeguard price falls in oil. Consider that recently
the falling price of oil to now less than $30 a barrel (Jan. 2016) has pro-
voked considerable concerns among investors in these sectors. The point
is energy resources already play a large part in the world of finance. They
have just not been institutionalized, meaning being made into a formal
value structure in government policy, but fluctuate with the markets.
Recently, some large pension funds, such as Calpers (California Public
Employees Retirement System) and endowments such as Harvard
University have considered to divest themselves of fossil fuels.41 Consider
that if one told Shell or Chevron that in order to save the planet, they
couldn’t sell their booked reserves, their share values would nosedive. It is
estimated that even at today’s depressed fossil fuel prices, over $20 trillion
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  85

in assets would be lost if 80 % of the carbon was kept in the ground. These
are not precise numbers however and reflective of the ‘Pareto effect’.

Savings Gluts
As Joachim Fels, Global Economic Advisor for PIMCO, tells it, the world
now faces a long-term secular ‘savings glut’ (alongside of an oil glut and a
general money glut). This means that people, burned by the financial crisis
of 2009, want to save more money and not invest. In our consumption-­
driven economy, that is not good as it depresses prices, inflation, and
demand stays low.
This weak economy aspect has large implications of course for HRD:
Workers skills deteriorate, weakened labor force participation, finally
job layoffs and as Fels puts it, ‘lowered animal spirits’ (or motivations,
required for risk-taking in business and entrepreneurial activity).42
Another issue that Fels brings up is the world suffers from overcapacity,
whereby too many things being created for too few buyers. Investors in
old-line businesses would rather save their money than to commit more
capital to these redundant ventures. Fels is a great believer in macro-
economics, meaning that global trends will eventually dictate what will
happen locally, and he is not alone in this belief; Ray Dalio, whom we
mention in Chapter 10, also believes that world economics is governed
by business cycles, and George Soros believes in reflexivity in the money
system. Added to low oil prices and central banks printing more and
more money, this all leads to falling prices and demand, global growth
slows. Lower oil prices do lead to some economic benefit in net import-
ing countries, but overall, world economies stagnate. In other words,
a deflationary world is created. Why buy something today if it will be
cheaper tomorrow?
In a world of deflation, people rush to put their money into vehicles
and investments that will earn them any return  or the so-called ‘search
for yield’. In so doing, they increase their risk profiles enormously. When
investing becomes more dangerous with greater volatility and losses of
capital implied, people save their money instead. This is part of a secular
cycle, also known as ‘secular stagnation’,43 where savings rates are heading
out of the developing world (similar to SWA) and into investments in the
expense of the developed world, to most notably the US markets. From
economies that desperately need money to improve their people and for
capital projects to economies that already have a plethora of savings, and
will pay a low, but stable rate of return.
86  W. HICKEY

The safeguard sought here is return ‘of’ capital, not return ‘on’ capital.
Both Japan and Switzerland, both countries with stable economic systems
and desirable currencies, have bolstered this deflationary trend by having
their central banks set negative interest rates. Meaning that banks must
now pay their central bank if they hold onto cash. The ideal is to stimulate
economic activity, but the results are not clear.44
The bottom line in all of this is that stagnating economies mean low
demand, which translates into less jobs and risk to the incumbent jobs that
exist. If the situation persists long enough, permanent joblessness is the
result, and people expect governments to come to the rescue.45 Coming to
the rescue means propping up prices and employment, in short, repeating the
current economic growth model of buying and selling products to increase
growth that is tried and true, it’s all the politicians know and how they react.
Finance dictates the terms and their course of action is directed to its remedy.
We can also see that energy via fossil fuels is also an inextricable com-
ponent of the economic growth recipe, reinforcing the previously stated
fact the world and all its ad hoc undertakings run on oil, and its underly-
ing demand/cost structure. Nothing is ever mentioned in these scenarios
with Central Banks about investing in people for the long term via stra-
tegic education initiatives. It is all about financial instruments (bonds and
equities), tangible commodity prices (oil), and interest rates, today. None
of this then is really reflective of human development or using the sav-
ings glut for the advancement of society but rather perpetually fueling the
consumption-driven models of finance.

Oil and Gas Financing

Thus, the power of the financial industry cannot be underestimated.
The outsized influence of Wall Street and Canary Wharf on government
decision-­making is especially profound.46 Most large international banks
also have gigantic portfolios of loans for fossil fuel projects usually set in
times of high oil prices. The overall amounts with these banks of these
portfolios for exploration and production demonstrate just how deeply
intertwined the banking system is with energy projects. For example, the
top four banks in the USA, Citigroup, J.P. Morgan, Wells Fargo, and Bank
of America, have exposure to $100 billion in loans for new oil and gas
projects, as of 2015.47 Right now, in an era of collapsing fossil fuel prices,
bank regulators are deeply worried non-performing loans could cause sig-
nificant damage to the entire industry.48 In fact, as a recent Bloomberg
article puts it regarding low prices (emphasis writers) is that
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  87

‘The negative effects of lower oil—namely the large-scale cuts to capital

expenditures—are having a large and immediate impact on  global gross
domestic product. The problem is that commodity-related capex accounts
for circa 30 percent of global capex (with oil capex down 13 percent and
mining capex down 31 percent in the past 12 months),’ wrote the strate-
gists, ‘and thus the fall in U.S. and global commodity capex and opex has
taken at least circa 0.8 percent off U.S. GDP growth in the first half 2015
and circa 1 percent off global GDP growth over the last year.’49

Nonetheless, the lure of fossil fuels, even in an era of down prices, is just
too strong for the finance industry to resist. Like flies drawn to sugar, cer-
tain investment houses, such as hedge fund Blackstone, look to increase
their investments in oil and gas in a downturn, not devise new sources
of alternative energy. John Studzinski, Blackstone’s managing director of
strategy, in a recent interview on Bloomberg, glowingly spoke of its $9
billion investment in distressed fossil fuel reserves.50
The financial industry has hindered innovation, undid pollution rules
and laws that have protected consumers, and slowed changes that may
affect its bottom line. As former Federal Deposit Insurance Corporation
Chair Sheila Baird pointed out, it’s a culture of ‘cognitive capture’ where
governments listen more to the markets and the people that run them
with far too much cozy behavior, as opposed to any mainstream trends or
needs,51 including tectonic changes that have real effects on world popu-
lations and economies.52 A paradigm shift is required to understand that
real value is created in people not in paper. This is especially challeng-
ing in developing countries without an appreciation of human talent, but
rather of physical assets. The real key is not in creating more paper monies,
backed or not backed by assets, but in creating ‘know-how’ societies that
will create more wealth over time.
The tight and intricately woven link then between finance and energy
has also recently wreaked havoc with banks who have predicated and col-
lateralized many of their fossil fuel-based loans to oil and mining compa-
nies with the assumption of a return to high prices and accessing (burning)
these reserves into the future in other words, a quick return to business as
usual. Low oil prices trigger ‘mark to market’ or inventory write downs of
much lower collateralized values of their loans. This is an important issue.
If the prices of energy commodities goes to low, it could trigger demand
for immediate paybacks on many of these loans, or in essence a ‘short
squeeze’. However, that could bring the entire financial industry down if
loans cannot be repaid due to these ‘distressed positions’.53
88  W. HICKEY

Of note is that many energy development projects, both corporate and

government sponsored, depend on loans from the financial industry. Loans
are based on the reserve values of the resource in situ at a projected per
year average price. Understanding proven, possible, and potential reserves
of oil, gas, and coal resources is tricky geography/financial business, with
wide variations and definitions (determined by governments, companies,
and independent assessment), but at its core, reserves are fossil fuels stored
in the ground whose value is determined based on the expectancy they
will be lifted, transported, and burned at a future date. Banks and finance
houses then use the assessed reserves to collateralize big expansions and
new production projects. If the prices of the commodity go down in value,
then the value of the reserves also declines, meaning smaller loans, con-
versely if commodity prices rise, the value of the reserves gains, meaning
larger loans and investment activity can be procured.
Prices from analysts differ across the board, but a general consensus
predicted oil prices per barrel at $77 in 2014, which have since been drasti-
cally lowered to $48 per barrel in 201554 and now further to $30 a bar-
rel for 2016. This means the reserves are not as valuable as they used to
be, new loans must either then reflect higher interest rate payments for
energy development projects or lower total amounts of money available.
For example, a large refinery development project that qualified for $4.5
billion in loans in 2014 based on higher projected crude oil prices may
now, in 2015, only quality for $3.75 billion in loans for the same project.
The world of finance depends on a consistent NPV (net present value) of
the inputs underpinning the project. If the inputs become less valuable, the
project by extension becomes less valuable. Or simply put, falling prices
wreak havoc with refiners, in particular the ‘crack spread’, as it is simply not
possible for downstream industry to maintain higher-profit margins.
A key question is how long is the finance industry prepared to ‘ride out’
low oil prices? Jefferies Co., for example, has reported a loss in credit due
to low commodity prices. Jamie Dimon, the CEO for J.P. Morgan, has
recently stated that his bank has ‘stress tested’ for oil prices as low as $30 a
barrel and that his bank would have to set aside ‘at most’ $750 million in
potential losses due to bad loans for oil projects. This means the original
loan quality has deteriorated. Interestingly, while J.P. Morgan exited the
oil-trading business in 2013,55 it didn’t exit the fossil fuel loan b ­ usiness.
Nonetheless, investment bank Goldman Sachs has forecasted that due to
the recent commodity swoon, oil prices could hit as low as $20 a barrel.
The point of all this is that the low-price contagion could affect other
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  89

industries. In 2008, the US Treasury had to bail out banks due to col-
lapsing home prices, whereby banks had lent money based on inflated
bubble values of housing. This time, a crash in world commodity prices
on a sustained level could trigger an even worse response if the (or any)
government again has to bail out its banks.56
Of course, none of this has not escaped the notice of the US Government
either, due to being burned in the past with banks that are ‘too big to fail’,
they are now scrutinizing portfolios of banks to determine if significant
risks exist in their portfolios due to energy loans. The outcome then is that
in times of low energy prices, banks will reduce their overall exposure to
energy projects.
Unfortunately, this creates a binge and purge situation for HRD: with
few oil and gas development projects on line with low prices, domes-
tic  employment suffers, conversely, prices will soar in the future when
demand eventually picks up again due to a dearth of supply available, a
finite pool of workers will create an inelastic market of available talent.57
This is especially notable after the last major oil crash of 1989, when whole
sectors of the oil business went offline, experienced people were forced to
retire, and a corporate moratorium on new hiring was frozen. This set the
stage for soaring oil prices in 15 years’ time, with an ensuing decade long
oil boom and created a scarcity of talent for new project availability.

The Crack Spread

A financial process or trading derivative specific with fossil fuels exists
called the ‘crack spread’. Changing crude oil and gas into retail products
requires large capital investment and expenditures (or CAPEX). There
are differing levels in oil and gas for production (upstream), processing
(midstream), and point of sale (downstream), see Figure 3.1. It is impor-
tant to discuss this as the ‘time lag’ between crude oil and gas extraction
and finished product can be long. Risk then becomes part of the process
profile. Prices for crude oil and finished products can vary considerably,
and hence there is growth and shrinkage over time between crude oil
and various refined products, such as kerosene, gasoline, and fuel oil.58 It
is advantageous to any integrated oil company to produce the oil at the
cheapest price and sell refined products at the highest. Conversely, they
seek to hedge their costs against producing oil at high prices and selling
end products into a down market. In this latter case, risk can be offset with
crack spread contracts and options59 whereby prices are ensured.
90  W. HICKEY

Fig. 3.1  Derivatives and risk management in the petroleum, natural gas, and
electricity industries (Source: EIA 2002/Hickey)

Many things can affect the crack spread and it is a complicated business
treatise to all but the most well versed in the world of energy and finance.
In short, bad weather, shortages, political upheaval, seasonal fuel adjust-
ments can all cause volatile gaps or lags between what a product originally
costs and what it can actually sell at. What is important to know for human
development is that these types of derivatives can (and have been) manipu-
lated to influence pricing and should not be used to cheat people out
of their resources via financial engineering or gimmickry. Tankers can be
turned around in the middle of the ocean, refineries can be shut down for
‘maintenance’, high-speed trading can tip off select investors before the
many.60 ‘King finance’ looms large in energy trading today but it should
not be in the way of the information-intensive future.

Fossil Fuels Keep Countries Competitive

Almost every country’s current economic growth plan today then depends
on growing demand for and availability of fossil fuels, with only a token nod
to alternative energies, despite the political proclamations and rhetoric. It is a
default position. The reality is that cheap fuel provides an immediate compet-
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  91

itive advantage to all countries, particularly those that are export dependent
with a low-cost labor advantage. Planes fly on kerosene. Ships run on bitu-
men. Cars run on gasoline. Power plants (non-nuclear) run predominately on
coal and diesel. This is the situation that confronts us in 2015 going forward.
World governments then are so compromised and complicit with fossil
fuels and their use that they simply cannot walk away from them without
leaving their economies worse off as the true costs of energy are hidden in
a Byzantine labyrinth of producer and consumer subsidies promoting the
addiction. These subsidies then become a form of currency in their own
right, like food stamps or welfare payments, to give an economic boost
to economies that cannot change due to incumbent political structural
issues, such as high-employment costs, low levels of education, decrepit
infrastructure, and aging populations.
Simply, if the true costs of energy were passed on to their lower income,
developing country clients, the economies would become prohibitively
expensive for investment, and thus non-competitive. Unemployment
would soar, and social instability would occur. The consumption model
of macro-economic free market policies envisioned by the late economist
Milton Friedman assumes continuous availability of cheap energy with
market mechanisms ‘sorting it all out’ based on supply and demand.61
We consider Friedman’s glowing viewpoint about fossil-fueled energy and
economics in the 1978 BP funded presentation, ‘The Energy Crisis: A
Humane Solution’ in Milton Friedman’s The Economics of Freedom:

Day by day it becomes more evident that the oil we happily possess in excel-
lent quality and abundance is the mainspring of modern material civilization
… Oil in truth stands not beside but entirely above all other commodities.
It is the material source of the energy of the country, the universal aid, the
factor in everything we do … It can be no matter of surprise that year by
year we make larger draughts upon a material of such myriad qualities—of
such miraculous powers.

This neo-liberal economic philosophy, almost 40 years old now, has also
shaped the energy policies of many developing countries, and continues
to do so today.

Divestment
However, not all is always sacred in the world of fossil fuel finance.
Recent trends that have acknowledged climate change as a looming and
life-­changing threat to all mankind and the latitudinal environment as
92  W. HICKEY

we know it on the planet have spurred loud cries for divestment in fossil
fuels. The issue of divestment carries huge financial consequences. Pension
funds, hedge funds, mutual funds, and ETFs (Exchange Traded Funds, all
encompassing or linked to financial ‘derivatives’) have vast holdings in
fossil fuels and the utility companies that process them to generate power.
Nor is divestment in fossil fuels a straightforward proposition. As
HSBC puts it, in a recent report ‘to boycott all products derived from
fossil fuels is extremely difficult. Coal, oil and gas are used for 75.6 % of
global power generation. Oil meets 95 % of transport fuel requirements.
Fertilisers, petrochemicals, construction materials are all highly dependent
on fossil fuels, as are domestic heating and cooking.’62 In other words,
and as stated in Chapter 1, the world is so hooked on fossil fuels that it is
next to impossible to extricate them from use and by extension, finance.
So many feed and derive existence from unfettered extraction and use of
fossil fuels, that any change will be slow, if at all.
A wholesale divestment from fossil fuels could depress prices of these
equities by lowering the capital expenditures for operations and stall
mega-projects needed for more economic growth. This would reflexively
lower dividends and returns from these industries, and the attendant high
salaries and employment generated would also suffer. In fact, this is what
is happening right now as 2016 begins.
Two key words that the fossil fuel industry seeks to avoid are stranded
assets. These are assets that become albatrosses for companies: they lose
their value and stop generating payments. In the case of oil and coal, they
are reserves (proven and probable) that remain in the ground, due to either
policy regulations, lack of demand, or low commodity prices/high fossil
fuel lifting costs. For example, many companies have IRR (internal rates of
return) that must be met in order for a project to proceed. If the world oil
price stays at average $50 bbl. and the lifting costs for a barrel of tar sands
‘dilbit’ in Saskatchewan CN are ~$80 bbl. the project is no longer profit-
able and is a money loser. It will be shuttered, and if prices do not rebound
for a long time, stranded. This has actually happened recently in the case of
Shell with a tar sands project.63 We will see in the chapter on Integration,
Chapter 10, how lower-priced local labor may be able to mitigate some
of these issues, nonetheless, they should be used as a step toward human
development prerogatives and not an extension of the fossil fuel model.
Nonetheless, divestment in fossil fuels is then necessary for protect-
ing the planet and to force the transfer to get to non-carbon-based
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  93

renewables in a world of recalcitrant petro-states reliant on US dol-

lar revenues. Indeed, the innovation to renewable alternatives is cir-
cular, as solar panels get cheaper, wind turbines more productive, and
geothermal less regulated, they become competitive with fossil fuels.
Additionally, efficiency gains in building heating and cooling, electric
cars, battery storage, and less carbon-intensive industrial processes such
as for steel and cement making lower energy demand and thus create a
shrinking need.
But it is an ugly first-step proposition for same developing coun-
try governments that also depend so heavily on exporting fossil fuels
(mostly crude oil and unprocessed coal) for their national revenues
and have no experience or utilization with other energies due to their
political (many times unelected) regimes (see Chap. 9, regarding elites
and corruption). Currently, low oil prices are now wreaking havoc for
national coffers in Angola, Venezuela, Nigeria, Iraq, Saudi Arabia, and
of course Russia. The result has been continuously devaluing currencies,
increasing unemployment, and soaring inflation for anything priced in
dollars. The divestment is being led by certain sovereign wealth, reli-
gious, and pension funds all in developed countries, such as Norway
and CALPERs (for coal investments) and in some universities such as
Stanford’s endowment fund. The Australian National University has
divested in full or partially from fossil fuels. See Table 3.2. One method
of divestment is to attempt a partial investment or ‘tilting’ whereby
certain fossil fuel companies are excluded with a large carbon footprint,
such as thermal coal, but not all, especially those attempting to turn
the page to lower carbon emissions, such as natural gas.
Of course, any divestment from highly leveraged fossil fuels (Exxon
Mobil’s market cap, for example, is nearly half a trillion dollars) will free
up a tremendous amount of money seeking a new home. This could
reflexively be used for better alternative energy investments and know-­
how building for a lower carbon-intensive economy. Undeniably though,
and as stated throughout this chapter and in others, the gods of finance
demand capital, not human returns, on investment. Historically, fossil fuel
investments have paid comparatively consistent returns compared to many
other types of investments. In fact, fossil fuel yields will be difficult to
make up if removed from a portfolio, so there are deeper financial implica-
tions beyond ethical ones that will effect regular income streams to pen-
sioners, investors, and endowments.
94  W. HICKEY

Table 3.2  Fossil fuel divestment trends by various institutional investors (Source:

HSBC, with permission)

Net Metering
While derivatives based on fossil fuels as an asset class that are abstractly
held by the financial industry  are well understood, a more relevant and
tangible level of energy as a new currency that could possibly benefit the
individual  directly as opposed to the conglomerate, is the concept and
application of ‘net metering’. In net metering the individual energy b­ uyer’s
utility meter ‘spins backward rather than forward’.64 This is in essence cre-
ating your own energy and feeding it back into the system getting paid for
what you create65 or a bankable energy credit.66
Mostly, this is energy creation via alternatives, such as solar or wind
power, as most people do not have the economies of scale necessary on
an individual investment level (or regulated level) to drill for oil or start
a coal mine on their own. Net metering will not pay a household’s entire
electric consumption bill, but can make a significant dent in it. It depends
on how the utility pays the individual producer for the energy, a retail rate
(the most consumer beneficial) or a market rate, more the norm, where
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  95

utilities pay the individual a wholesale price, but still charge consumption

at full retail. Of course, utilities are not necessarily keen to this idea, but
it presents a bigger opportunity for cleaning up traditional fossil fuel use,
which their power plants are largely based on.
While net metering is a progressive idea toward energy creation and value,
it is not large enough to move the needle for major industrial energy use
commercially, or in technical terms, to reset baseline power generation loads
as it is unreliable energy and not a powerful enough contribution. Further,
it has been compromised by political issues and regulations. For example,
electric companies have gone to court in states and countries to get net
metering incentives ‘rolled back’ or have their financial impacts decreased
due to the initial capital-intensive investments these companies have made in
sunk funds for such things as plants, transmission facilities, and poles. This
was especially an issue in the US State of Arizona and also in Spain.67
In the former situation, in Arizona, solar users were asked to pay special
‘payback’ taxes on installed solar panels to offset the financial guarantees
made long ago to local electricity generators by the Arizona legislature in
order to connect distant rural areas to the grid. The success of solar panels
had been crimping the investment paybacks of the utility generators due
to diminishing demand of coal- and gas-fired power and net metering,
leaving the utilities with the realization of stranded assets if citizens were
not compelled to payback the financial outlays, or what may be called
energy utility ‘producer subsidies’.
Similarly in Spain, financial  guarantees made by Prime Minister Luis
Zapatero conservative-led government before 2007 encouraged people to
invest in solar panels with electricity net generation plans are now being
reneged on to pay for pensions and social costs under a mandated austerity
rubric. Correspondingly, Spain cannot ensure the buybacks promised for
continuing clean energy and is now throwing the erstwhile efforts of indi-
vidual alternative energy production away. Since the lobby of the utility
businesses worldwide is very powerful financially, they are the ones front
and center with government officials to protect their investments first, not
the average consumer idealistically hoping for a change to alternatives.

Analysis
The world’s addiction to fossil fuels has profound effects on a country’s
economies and financial systems, in terms of economic competitiveness,
investment, and development. It has enriched oil-producing countries so
much that they now seek investment vehicles for their vast wealth in the
96  W. HICKEY

form of sovereign wealth funds and attendant savings gluts. Money that

should be invested in people’s development in their host developing coun-
tries instead flows further to financial, investment, and banking houses in
the USA, Swiss, and UK, enriching the rich even further.
These SWF in many countries, have proven loathe to invest in their own
economies and populations however needful, which may provide more
stable and lower risk returns, but also perpetuate the North–South phe-
nomena by marginalizing developing countries even further, which sorely
need skills development and educational upgrading in the information age.
Fossil fuels, oil in particular, are priced in US dollars, which also gives a
boost to the dollar as a world reserve currency and perpetuates the financial
investment cycle into these energy sources via derivatives, whereby future
earnings inflate the underlying value of these assets. These derivatives, val-
ued in the trillions of dollars, provide incomes and investment opportu-
nities to  so many players, from Wall St. commercial bankers to pension
funds to university endowments. Instead, they should be used to provide
funding for their constituencies, many who remain in abject poverty in the
same developing countries that produce the said crude resources.
Cheap fossil fuels give economies a competitive boost in countries that
can’t (or won’t) change their political structures or deal with performance,
namely ‘know-how’, deficiencies. This includes labor structures and employ-
ment. Fuel subsidies, in particular producer subsidies (payouts or abatements
to companies), keep nations competitive by providing a continuous flow of
and access to fossil fuels, albeit oil and coal, into their economies. In all situ-
ations, fossil fuels then become a store of wealth and thus a de facto currency
in all world economic events. A country’s currency then rises and falls by
its access to, ability to produce, and consumption of fossil fuels. Fossil fuels
then promote the consumption model of buying and selling products and
services. Finance to them becomes the ‘a priori’; creating human capital is a
good idea, but falls a distant second place in regard to money.
Of course, the environmental costs, currently unrealized and unknow-
able, will have major costs on future generations in terms of climate change
and pollution if left to business as usual growth scenarios. This is the rub.
Alternatives such as wind and solar do not produce enough ‘economy of
scale’ necessary to realign or ‘move the energy needle’ in their respective
economic models. Some of the resistance comes politically due to legacy
investments made from the politically well-positioned actors in the fossil
fuel industry in terms of coal- and gas-fired power plants. These groups
seek to recoup their sunk costs from investments made into fossil fuels via
political mandate. Additionally, a very deep financial derivatives market in
oil and gas ensure that insiders continue to reap outsized profits.
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  97

‘Net metering’ is a tremendous concept whereby the individual is allowed

to ‘sell back’ energy (electricity) to the utility, but its overall effectiveness is
compromised not only politically but also by payback determined on an
economy of scale threshold. The amounts of electricity generated by indi-
vidual homesteads are too small to be considered in an overall economic
change model, and if they are, will no doubt be met by opposition from
the well-financed utility lobby seeking to ensure their share of any proceeds.
In short, it may be that the fossil fuel industry has already created a
parallel currency to paper-made ‘fiat currencies’. Energy becomes a tan-
gible source of value that can be traded and saved under the rubric of
fossil fuels. However, fossil fuels are also undermining the planet with cli-
mate change and CO2 emissions. Divestment then becomes an option for
people and organizations that seek to distance themselves from fossil fuels,
but risk losing considerable economic rewards into the future.
Thus said, despite some localized empowerment and platitudes in
alternatives sources of energy such as solar, and wind with net metering
initiatives, and against the looming shadow of climate change, world gov-
ernments are still predicating (and betting) their entire economic futures,
with attendant economic and infrastructure growth opportunities, clearly
on fossil fuels. Indeed, supra-national organizations like the WB (World
Bank) are still funding coal-fired mega-power plants in developing coun-
tries despite the looming problems of global warming.68
The world’s fossil fuel addiction is beyond pale if one considers the
growth plans of sovereign nations’ economic models. It will take a ‘tec-
tonic mal-event’ unfortunately to change this ‘business as usual’ default
mindset, which investment houses and the  international banks with all
their financial clout and state influence continue to perpetuate. Currently,
any country (developing or developed) without being either an A.) fossil-­
fuel  producing country or B.) having unfettered  and immediate access
to fossil fuels, is doomed under all current industrial-economic planning
trends. That is the reality our planet Earth faces. Of course, this also shows
clearly where the world’s wealth is stored and where it can be accessed and
utilized by the many. As stated, energy, namely fossil fuels, are not a ‘store
of value’ alone, but rather a world currency into and unto themselves that
everyone is forced to use in daily life without redress or recourse.

Notes
1. Yergin, D. (2008) The Prize: The Epic Quest for Oil, Money and Power.
Simon and Schuster: New York.
2. Freese, B. (2004) Coal, A Human History. Perseus: Cambridge MA p. 44.
98  W. HICKEY

3. Griffin, E. (2010) A short history of the British industrial revolution, 157–

183 (accessed at: http://www.academia.edu/1940258/Why_was_Britain_
first_The_industrial_revolution_in_global_context)
4. Freese, B. (2004) ibid.
5. Freese, B. (2004) ibid.
6. Duncan, R. (2005). The Dollar Crisis: Causes, Consequences, Cures.
7. http://www.thenational.ae/arts-culture/books/the-oil-kings-how-nixon-
courted-the-shah
8. Phillips, K. (2008). Bad Money: Reckless Finance, Failed Politics, and the
Global Crisis or American Capitalism. Pp. 124–127, Viking: New York.
9. See URL: http://yaleglobal.yale.edu/content/dealing-declining-
dollar-–-part-ii
10. See: ­http://www.zerohedge.com/news/2015-08-22/why-it-really-all-
comes-down-death-petrodollar
11. Petrodollar Recycling And Global Imbalances Presentation by Saleh
M.  Nsouli (http://www.theperfectcurrency.org/main-­energy-­currency/
energy-currency) Director, Offices in Europe International Monetary Fund
At the CESifo’s International Spring Conference Berlin, March 23–24,
2006 http://www.imf.org/external/np/speeches/2006/032306a.htm
12. Ibid., Petrodollar Recycling and Global Imbalances.
13. http://www.financialsense.com/contributors/jerry-robinson/the-rise-of-the-
petrodollar-system-dollars-for-oil
14. http://www.energybackedmoney.com/chapter7.html
15. See more about Norway’s withdrawals here, url: http://www.bloomberg.
com/news/articles/2015-10-06/norway-budget-proposes-boosting-
oil-spending-by-14-nrk-says
16. Saudi Arabia redemptions here, url: http://www.ft.com/intl/cms/s/0/
f4b9fb6c-98f5-11e5-9228-87e603d47bdc.html#axzz41CVQERnV
17. Government Pension Fund Global Annual Report 2009 (PDF), Oslo:
Norges Bank Investment Management, 2010-03-05, pp. 18–19.
18. Much of Norway’s outward oil and gas development is discussed in
Hatakenaka, S., Westnes, P., Gjelsvik, M., Lester, R. (2006) From Black
Gold to Human Gold. MIT Working Paper Series, MIT-IPC-06-004.
19. Norges Bank (2007) http://www.nbim.no/en/transparency/reports/
20. Truman, E. (2010). Sovereign Wealth Funds: Threat or Salvation? Peterson
Institute for International Economics.
21. Johnson, S. (2007) ‘The Rise of Sovereign Wealth Funds.’ Finance and
Development 44(3), September.
22. See: http://www.institutionalinvestor.com/blogarticle/3189172/Blog/
The-Rise-of-Sovereign-Development-Funds.html#.Vs851xC-2gs
23. See: URL http://www.americasquarterly.org/node/3811
24. Truman, E. (2010) ibid.
25. Becker discusses human capital formation, with then feed into social capital
formation. They are not mutually exclusive ideals. See respectively Becker, G.
 ENERGY AS THE ‘NON-DEVALUING’ CURRENCY: A STORE OF WEALTH...  99

(1993) Human Capital, Chicago: University of Chicago Press and Coleman,

J.S. (1990) Foundations of Social Theory. Cambridge, MA: Belknap.
26. URL: http://transmissionsmedia.com/is-china-in-control-of-the-panama-
canal
27. Hickey, W. (2011) POSRI article.
28. Porter, M. (1998) On Competition. Cambridge: Harvard University Press.
29. Ang, A. (2010) ‘The Four Benchmarks of Sovereign Wealth Funds.’
Columbia Business School and NBER Working Paper, p. 3.
30. See http://oxfordswfproject.com/about/
31. Pinto, P. and Zhu, B. (2009) Fortune or Evil? The Effects of Inward Foreign
Direct Investment on Corruption, Saltzman Institute of War and Peace
Studies (SIWPS) Working Paper No. 10.
32. Messner, J.J., and Kendall L. (2013). Failed States Index 2013: The
Troubled Ten. The Fund for Peace, 24 June.
33. Moeller, J. (2010) Savvy and Foresight Will Be the Winning Commodities
in This Era of Scarcity. Yale Center for the Study of Globalization in The
Jakarta Post, 8/12/2010.
34. Clark, G., and Monk, A. (2009). The Legitimacy and Governance of
Norway’s Sovereign Wealth Fund: The Ethics of Global Investment. The
Ethics of Global Investment (September 15, 2009).
35. http://www.quora.com/
36. http://www.theglobaleducationproject.org/earth/energy-­supply.php
37. http://news.discovery.com/earth/global-warming/how-much-­fossil-
fuel-is-in-the-earth1.htm and http://www.worldwatch.org/global-fossil-
fuel-consumption-surges
38. Energy Information Administration, 2010.
39. http://e360.yale.edu/feature/the_trillion-­ton_cap_allocating_the_worlds_
carbon_emissions/2703/ and http://www.theguardian.com/environment/
keep-it-in-the-ground-blog/2015/mar/25/what-numbers-tell-about-
how-much-fossil-fuel-reserves-cant-burn
40. http://theeconomiccollapseblog.com/archives/plummeting-oil-
prices-destroy-banks-holding-trillions-­commodity-­derivatives
41. http://www.pionline.com/article/20150603/ONLINE/150609935/
california-senate-passes-bill-requiring-­­c alpers-calstrs-to-divest-from-
coal and ­http://www.harvard.edu/president/news/2013/fossil-fuel-
divestment-statement
42. https://www.pimco.com/insights/economic-and-market-­commentary/
macro-perspectives/the-three-gluts
43. Larry Summers, Harvard President at HSBC Keynote speech Oct. 2015.
44. For negative interest rates in Switzerland in 2015, see http://www.wsj.
com/articles/big-swiss-banks-feel-pain-of-negative-­rates-­1469548347
and for negative interest rates in Japan in 2016 see http://www.wsj.com/
articles/japans-negative-rate-experiment-is-floundering-1460644639.
45. Nair, C. (2011) Consumptionomics: Asia’s Role in Reshaping Capitalism.
New York: Wiley.
100  W. HICKEY

46. Mukunda, G. The Price of Wall Streets Power. Harvard Business Review,
June, 2014.
47. Wall Street Journal.  http://www.wsj.com/articles/j-p-morgan-­ sounds-
fresh-warning-on-energy-losses-1456243537 accessed on Feb. 24, 2016.
48. http://www.wsj.com/articles/energy-lending-caught-in-a-squeeze-
1443050639
49. http://www.bloomberg.com/news/articles/2015-10-07/four-ways-
the-oil-price-crash-is-hurting-the-global-economy
50. http://fuelfix.com/blog/2015/02/23/blackstone-to-pour-9-billion-into-
struggling-energy-industry/
51. http://www.americanbanker.com/bankthink/schapiros-­promontory-­
move-latest-signal-of-too-much-­coziness-­1057980-1.html
52. Thurow, L. (2003). The Future of Capitalism, 2nd Ed. New York: Wm.
Morrow & Co.
53. http://www.businessinsider.co.id/jefferies-third-quarter-­results-2015-9/#.
ViW4WScaySM and http://www.bloomberg.com/news/videos/
2015-10-19/jamie-dimon-to-ceos-don-t-make-earnings-forecasts-
54. http://static.macquarie.com/dafiles/Internet/mgl/com/macquarietris-
tone/publications/energy-lender-price-survey/energy_lender_price_sur-
vey.pdf?v=33
55. JP Morgan Commodity Trading Exit, see: http://www.cnbc.com/
id/100900230
56. Too big to fail and other issues: http://www.wsj.com/articles/
energy-lending-caught-in-a-squeeze-1443050639
57. Gray, K. and Herr, D. (1998). Workforce Education: The Basics. Allyn
and Bacon, New York.
58. ­http://blogs.wsj.com/drivers-seat/2013/02/25/why-are-gasoline-prices-
soaring-blame-the-crack-spread/
59. EIA (2002) Derivatives. http://www.eia.gov/oiaf/servicerpt/deriva-
tive/chapter3.html
60. Moors, K. (2013) Green Energy Report, http://www.theenergyreport.
com/pub/na/are-the-special-few-manipulating-oil-prices
61. Friedman, M. (1978). ‘The Energy Crisis: A Humane Solution’ In The
Economics of Freedom. Cleveland: Standard Oil Company of Ohio.
62. HSBC Report, Stranded Assets: What’s Next? (April 2015).
63. http://www.theguardian.com/business/2015/oct/28/shell-halts-carmon-
creek-oil-sands-project-in-alberta-canada
64. World Bank (2011) Green Energy and Renewables online course.
65. http://science.howstuffworks.com/environmental/green-­science/net-
metering.htm
66. Ibid., Net Metering.
67. http://yaleglobal.yale.edu/content/sovereign-debts-fossil-fueled-world
68. A contentious issue, but the World Bank is still funding coal- fired power
plants in developing countries.
 CHAPTER 4

The Climate Change Conundrum

Key Takeaway—Unless HRD also sits at the table as an equal with eco-
nomics and finance, to address climate change issues meaningfully, it will
be difficult to wean the planet from the fossil fueled model.
Climate change is a real and looming issue in the world of tomorrow
we face today. It is now an undeniable scientific fact due to the long-held
use and abuse of  the unmitigated burning of fossil fuels, accumulating
since the dawn of the Industrial Age, which is generally accepted by sci-
entists as  around 1850.1 Global warming has already been accepted by
some of the biggest users and subsequent abusers, such as Exxon Mobil,
Shell, and even the US military.2 Even so, HRD must play a large part in
educating people of its reality and pending danger if fossil fuel combus-
tion is left unmitigated. People need to be informed about how this could
change their lifestyle and threaten their very existence, for the future, they
will need to consider carbon taxes, policy changes, and lifestyle changes,
all linked to their energy usage.3
Changing climate has the potential to severely alter life as we know it
on earth without any mitigation or intervention today. Being addicted to
a fossil fuel dependency, underpinned by tectonic financial forces will be a
significant challenge moving forward. If one listens to CNBC, Bloomberg,
or Fox News, there is no problem with using fossil fuels into perpetuity as
economic growth and wealth is predicated on it. Alternatives and special
TV shows on changing the fossil fuel model (such as biomass or geother-
mal) are a nice distraction, but, as previously demonstrated, these fuels

© The Editor(s) (if applicable) and The Author(s) 2017 101

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_4
102  W. HICKEY

simply cannot meet the economies of scale needed to move the world’s
economic, military, and commercial activity.
Finance and investment issues (as discussed in Chapter 3) still underpin
so much of the world’s fossil fuel activity and their derivative value is ulti-
mately determined on burning those oil and coal reserves into the future.
Especially, in regard to the derivatives traded on world financial markets
underpinned by fossil fuels and their investors. It’s a messy situation with-
out an easy answer. There is so much invested that these interests have spent
millions of dollars the past several years to create ‘consensus gap’, between
the public and scientists about the threat and reality of climate change.
They have also created a very partisan political divide on the issue, mostly
the USA, turning mainstream conservatives against any types of carbon
regulation, be it at the gas pump, airlines, or with coal-burning utilities.4
Exploration in pristine and remaining natural habitats on the planet
are now on the list for fossil fuel exploitation. Consider the Artic, the
Antarctic, the South China Sea, far Eastern Siberia, Hudson’s Bay, Papua
New Guinea, the upper Amazon Basin, and central African countries, many
of these latter jungles are considered as the earth’s ‘lungs’ by environmen-
tal and climate scientists. These places are also home to many diverse bio-
logical species that fossil fuel production could destroy or severely impair.
Consider what has happened in Ecuador, Nigeria, the Caspian Sea, and
Kalimantan (Indonesia) with substandard fossil fuel extraction efforts over
many years that have left native peoples and the environment worse for the
wear via pollutants and toxic contaminants.

HRD as a Problem Solver, Not Creator

So much has been written about climate change from environmental and
financial perspectives about the inertia of the fossil fuel industry to protect
its assets and not change direction could fill many volumes. Yet, the prob-
lem is straightforward. The planet is small and finite and people are burn-
ing far too much fossil fuel for the atmosphere and oceans to continually
absorb these outputs causing adverse reactions in the atmosphere. This is
not alarmist thinking or hyperbole, simply the facts.5 A fossil-fueled soci-
ety derives its mobility, power, and wealth from burning carbon. There is
no alternative to this and no energy alternative large enough on an econo-
mies of scale metric to change it into the near future. To recap, we con-
sider some parameters of global warming and what it means for the planet
and human development.
 THE CLIMATE CHANGE CONUNDRUM  103

The Scary Three

The problem is effectively known as the big or scary  three  of climate
change and written as 2/565/2800. What is its meaning for the planet,
2o, 565 Gigatons, 2800 Gigatons,6 is as follows.
Two degree Celsius—This is how much leeway in the world average
of warming maximum temperatures  is allowable in order to avoid the
most catastrophic effects (floods, superstorms, wildfires, drought) of fossil
fuel induced climate change. If this number is breached, then the world’s
atmosphere and changing effects will alter life as we know it. In 2012,
the IEA stated no more than a third of proven reserves of fossil fuels still
in the ground can be allowed to be burned by 2050 if the 2°C target is
to be realized. As fossil fuels all have different carbon emissions profiles,
coal is the most polluting of the reserves to being burned, natural gas the
least. Keeping the world’s increase under a 2° threshold rise gives hope
that effects of climate change may eventually be stabilized. See Figure 4.1.
565 Gigatons—Or 565 Billion tons of carbon. This second number is
related to the first; it is how much aggregate carbon emissions we can still
pump into the atmosphere without breaching the 2° Celsius temperature.
Currently, the world pumps just over 30 billion tons a year into the air.
2800 Gigatons—Or 2800 billion tons. This is the most critical num-
ber. This is how much fossil fuels are in all the energy companies’ reserves
around the world and underpin all their financial valuations. Their entire
business models are built on being able to eventually burn this carbon

Fig. 4.1  Life cycle of greenhouse gas emissions based on electricity generation
source (Source: Used with permission by HSBC)
104  W. HICKEY

sometime in the future, and as stated in our financial Chapter 3, this busi-
ness model creates an enormous wealth extension effecting stocks, bonds,
derivatives, pensions, national economic budgets and currency values.
So much of the world’s financial system and the people all interlinked to
it, direct and indirectly, are predicated on this number. Contrasted with
number two, we quickly see we don’t have enough earths atmospheres,
5 of them to be correct, to contain all the carbon released if 100 % of the
reserves were burned. It simply cannot be allowed to happen. Yet the
financial industry gives significant pushback for any attempt to lower this
number. Someone, somewhere will have to absorb the losses.
According to Bill McKibben, ‘This number describes the amount of
carbon already contained in the proven coal and oil and gas reserves of the
fossil-fuel companies [both international and state owned], and the coun-
tries (think Venezuela, Russia, or Kuwait) that act more like fossil-fuel
companies and less like nations. In short, it’s the fossil fuel we’re currently
planning to burn.’
There is also another number that is not part of the ‘scary three’, the
350 parts per million (PPM). According to NASA scientist James Hansen,
an average of 350 ppm of CO2 molecules in the atmosphere is still a safe
level to stabilize climate changes.7 Historically, the world has been at aver-
age 275 ppm. Keeping CO2 PPM levels under 350 PPM is of some para-
mount concern for climate scientists. According to Hansen et al., the only
way to keep the world’s atmosphere under 350 ppm CO2 is if,

An initial 350 ppm CO2 target may be achievable by phasing out coal use
except where CO2 is captured and adopting agricultural and forestry practices
that sequester carbon. If the present overshoot of this target CO2 is not brief,
there is a possibility of seeding irreversible catastrophic effects.8

In April 2014, CO2 levels around the world hit an average of 400 ppm
continuously for the first month in recorded human history with projected
2+ ppm increase each year, and quite possibly since the Pliocene era of the
early mammals. This is significant. As carbon levels build up in the atmo-
sphere, we are being warned they create heat-trapping gasses that will soon
reach a tipping point of no repair pushing us far past 2° to as high as a 6°
Celsius world average increase.9 Yet the dilemma between fossil fuel usage
(which is exploding) and climate change is still tolerated and justified by so
many man-made institutions (some which even agree it is happening, like
the CIA). Carbon continues to accumulate in the atmosphere at alarming
 THE CLIMATE CHANGE CONUNDRUM  105

levels. Countries are hooked on fossil fuels (even with economic slow-
downs), governments promote and subsidize them, economic planning
and investment decisions are tethered to them, culture and convenience
prioritizes them. Yet, climate related issues continue to grow worse and
will take international outcry to force real changes in fossil fuel models,
which is changing the world and no longer a mere ‘belief system’.
Government has generally been of no help. It is too compromised
with monied interests of the fossil fuel industry. US President Obama and
the US State Department (under John Kerry) have taken the political
position that while global warming is the greatest threat facing mankind
today, something like the Keystone XL pipeline might go through (even
if it obtusely adds to climate change) in order to meet the short-term
economic and political demands of many institutionalized actors (big
oil, construction labor unions, politicians up for re-election, etc.).10 In
essence, while fossil fuels are interwoven in all of the world’s economies,
global warming is considered a man-made violation of natural laws, mean-
ing physical laws or laws of nature. Additionally, destroying the planet for
future generations, while seemingly preachy, would be considered a gross
violation of human rights if measured by attrition in future generations.
Renowned scientists, the IPCC, NASA, OSHA, and other non-political
actors (though the political right have made many claims that these groups
are also political actors) have noted that a continual buildup of greenhouse
gasses is slowly destroying (or permanently altering) the planet we live on.
Yet economic growth models in all the world’s countries (as discussed in
Chapters 2 and 3) predicated on their burning even more carbon to boost
activity and consumption.
In this sense, unabated and continuous usage of fossil fuels in this day
and age, ‘enslaves’ much of the world. While both major political parties
have labored long and hard to keep the extremely contentious issues of
climate change out of national political debate, such as in the US 2012
Presidential election, and among foreign countries in order to maintain
their compromises with big oil.
Today, global warming is an immediate and clear threat to mankind. An
alarm has been sounded. It has the propensity to change the finite world as
we know it, into an overheated planet that will violate the laws of nature.
The stakes are too high. Without real changes in fossil fuel usage, the con-
sequences will not be good, and humanities story could end in tears. We
are not speaking about merely implications on a race of people or group
of nations, but about enslavement of the planet and life as we know it.
106  W. HICKEY

What today’s world needs in regard to climate change is dedicated leaders,

and the perseverance of that leadership against many odds and status quo,
bureaucratic, institutions with a resonant message conveying an urgency
for action and intensity of the battle ahead.

What This All Means for HRD and Energy

Is there a way to involve or insert HRD in this issue? The answer is yes, but
it requires some preconditions be met for effectiveness, otherwise, HRD
becomes an appendage, not a change agent. The first of which is institution-
alizing HRD as an equal player in a world of finance and energy econom-
ics. As stated in today’s world of political and commercial decisions, finance
is omnipotent and does not like to concede or share any power. Yet, civil
society and grass roots efforts are demanding, suggesting change that ben-
efits all people. We live in an information-intensive society where data and
information streams represent real power. It’s not a matter of ‘if’ finance will
eventually share power with HRD, but when? Now, when climate change
can possibly be alleviated and its destructive course changed, or later, when
the damage is done, and fossil fuel reserves are being burnt or are staying in
the ground, causing financial havoc with the markets and investors who bet
so heavily on their use? If a succession of catastrophic storms (Katrina, Sandy,
Belinda), wildfires nearing the firebombing proportions of WW II Germany
(Australia and California), and extremely deadly and unusual heat waves
(France, California, Russia, India) and so on are just the initial predictors,
what next? How bad do things have to get before policy makers will listen.
Neo-colonial models of resource extraction are still deeply entwined
in the world’s economic systems. Models that ignore human and social
development, while focusing squarely on profitability. Is the technology
available to change current energy models from fossil fuels to alterna-
tives? Absolutely. Is the political will there? Uncertain. Is the elite sup-
port to do this there? No. Not unless they are also engaged at as high a
level of ownership and control as they are under the current economically
self-enriching fossil fuel dictates.11 It means the systems, motivations, and
governance are clearly not in place to enable and regulate a global shift to
a new energy era and modernity.
Nonetheless, it is impossible not to address this concept of changing
energy models without considering the case of global warming. The threat
of climate change has in part been a modus operandi for solar panels, Tesla
electric cars, and GE Wind turbines. That countries must cooperate is also
 THE CLIMATE CHANGE CONUNDRUM  107

given, but what about countries that do not cooperate or their ‘closed bor-
ders’ to anything smacking of foreign infringement on sovereignty masks an
extreme domestic abuse of fossil fuels (such as China and India underpinning
economic growth on unscrubbed coal emissions) while giving platitudes at
world climate conferences and Group of 20 meetings about the necessity of
dealing with CO2 reductions, but having no intention to seriously deal with
these issue that impact not only their neighbors but also mankind.
It should be pointed out that any type of ‘contingent sovereignty’ then,12
such as a stronger country’s influence over a weaker country or failed state
(i.e. Kenya and Somalia, or the USA and Iraq), should be about equal ben-
efit for both and not about the strong-armed dictates of righting wrongs
and defending a given country’s definition of human rights abuses. In fact,
contingent sovereignty has been criticized as more of a device to license
invasion than to address serious domestic concerns in neighbor countries.13
There is also the concept of ‘condominium’ where two countries control
sovereignty over a given area, but this has only been used with small coun-
tries and would no doubt be anathema to big countries like India, China,
and the USA which have far too many competing interests.

Natural Law versus Positive Law

Natural laws are laws of nature and science, they are inviolable. If natural
laws are broken, punishment is usually swift and painful. Touching a hot
stove and getting burned is a natural law. Similarly, dumping enough car-
bon into the atmosphere and overwhelming its ‘natural capacity’ to absorb
and process CO2 thereby raising average world temperatures would seem
another. Positive laws are legal contrivances made by man. They may be
harmonious with natural laws or may be in apposition to them. For exam-
ple, slavery in the USA  and South America was considered a legitimate
institution by much of the world pre-1863. It was accepted as a normal,
positive law; no one questioned its value to economic viability. It was con-
sidered by the legal system as natural as breathing or eating.
Yet, today, no one would argue that slavery is a legitimate economic
institution protected by positive laws. Will they then argue tomorrow that
use of fossil fuels in the face of climate change are a plausible energy source
also protected by positivist laws? The health of the planet for future gen-
erations depends on action today with forward-looking leaders, to bring
positive law in line with natural laws. To this end, much of HRD argues
climate change in a policy and mindset reframing.
108  W. HICKEY

We have considered several constructs that underpin the rationale for

using fossil fuels unquestioningly in the modern nation-state for economic
necessity. Some of these constructs such as the Westphalian arrangement
(discussed at length in Chapter 6) of the nation-state and positive law
are considered as foundational or to some, ‘inalienable’. Nonetheless, in
the information age, and in a world of cross-border activities, these con-
structs must be revisited. Some have been or are now being reviewed,
but not for climate change or pollution, but rather for military invasion,
migration relief, or cross-border terrorism. The argument now also needs
to be extended to climate change. If the baseline assumptions cannot be
revisited and updated, if not outright changed, to address these issues,
climate change then cannot be seriously addressed in a legal context and
an enforced setting worldwide that will have consequences for all actors.

Putting a ‘Price’ on Carbon

This phrase has been uttered by many in the environmental crowd to effec-
tively get those who are polluting (automobiles, power plants, airlines,
shipping, and cement plants) to pay for the damage to the ­environment
their emissions are causing or will cause on the front end. In essence,
carbon has a price, and this price determines its usage or non-usage. The
general idea is a threefold option14:

1. Send a strong economic deterrent to get those who pollute to

reduce their emissions.
2. Get those who pollute to discontinue their polluting activity.
3. Continue to pollute, but pay higher prices for it.

There are two mechanisms to do this: an ETS or emissions trading sys-

tem (also informally called ‘cap and trade’) and a direct tax on carbon. The
ETS is an offset system via the markets. Heavy polluters buy carbon ‘cred-
its’ from lower polluters and a market exists in many countries to buy and
sell the credits based on the inputs and outputs of polluters. For example,
a coal-fired power plant produces considerably more CO2 emissions than
a nuclear power plant. Surplus credits (or allowances) are awarded to the
nuclear power plant, which can then sell them to the more heavily pollut-
ing fossil fuel-powered plant that has a deficiency in credits. The world’s
largest ETS system is the EU’s which started in 2005. It covers nearly
12,000 EU power plants whose emissions make up over 50 % of the EU’s
total energy transmission.15
 THE CLIMATE CHANGE CONUNDRUM  109

This system is not perfect however, and while the EU does enforce
fossil fuel emissions within its borders, the lack of uniform ETS around
the world doesn’t (namely US market enforcement via a strong regulat-
ing actor such as the SEC or US Treasury if any US dollars are involved
in credit transfers), and subsequently voluntary adherence can be gamed,
ignored by non-subscribing countries, and promote wrong incentives.
The code word for world enforcement is thus a legally binding ETS or
what the UN calls a certified emissions reduction unit.16
Carbon credits can be ‘gamed’ by cheating on projects to reduce emis-
sions. For example, when the carbon credit market first began in the EU
in 2005, too many surplus credits issued by the EU to their member states
diluted the credits value. It meant that initial surplus credits (allowances)
were sold too cheaply to heavy polluters which allowed them to have
windfall profits. These surplus credits are still floating around in the sys-
tem, as there is no way to ‘reign them in’ when economies need to make
adjustments such as for slowing economic activity.17
Non-subscribing countries such as India or China can continue to
wantonly pollute, without adhering to any enforced ETS system and thus
negating the entire ETS schematic if the rest of the world does not follow.
Promoting the wrong incentives, such as in China, mean that way-
ward economic planning rewarded developing countries with low emis-
sions carbon credits for not doing anything. What happened was that
certain industrial firms in China were rewarded to produce excess green-
house gas emissions in order to destroy them at the end of the process or
a ‘low-hanging fruit’ strategy as it was known to be called. In return, they
received valuable carbon offsets (or carbon credits) from the UN. The
cost of destroying the greenhouse gas was $0.20 per ton, yet the value of
the credits received by the UN on the open market was $8.80 per ton,
giving the firms a gross profit of $8.60 per ton to perversely manufac-
ture pollution and then destroy it. This behavior sparked outrage among
climate change advocates and brought the entire ETS/ CDM into ques-
tion in its current form.18 It was clearly a matter of misplaced economic
intentions and failure of UN bureaucrats to understand the system was
being gamed.
Pricing of carbon credits is another matter. Spot carbon credit prices
fluctuate widely from around $13 a ton in California to $6 a ton in China
to $9 a ton in South Korea. There is an entire school that believes carbon
trading mechanisms will work much better if a commodity carbon price
can be had and adhered to. Since different countries are playing by differ-
ent rules, unlike a commodity price for oil, which is priced in US dollars
110  W. HICKEY

Fig. 4.2  Climate change policies since 2005 (Source: Used with permission by
HSBC)

and agreed to worldwide, on a globally agreed level, this seems a long way
off for carbon abatement. See Figure 4.2.
A better method of determining the upfront value of carbon emissions
is perhaps direct taxation. This can be better enforced within the frame-
work of the sovereign and its unique economic circumstances and does
not need international cooperation or government guarantees into the
future to develop a ‘market’. In this case, the carbon price is well defined.

The USA
Much of the world then sits and waits for the USA to come onboard and
‘do something’ about climate change. Yet, despite all the impetus for glo-
balization, the USA clings tightly to its tradition of isolationism (use of the
English system, for example, in a world where most have long since con-
verted to the metric system; the world’s most popular game is soccer, but
the USA rarely engages it professionally). What the world is really seeking
when they speak of the USA ‘doing something’ about climate change is
USA’s legal muscle and political ‘enforcement’ of patchwork rules and
fines in a multipolar world that countries and regions, like the EU, cannot
enforce by themselves. If not raw physical enforcement, such as confisca-
tions and jail time, then financial enforcement via revoked licenses, per-
mits, and access to banking systems but most importantly, access to US
dollars. The USA can control much of the rest of the world via the finan-
cial mechanism as so many countries use the US dollar as the lifeblood
of their economies (as stated in Chapter 3) and this requires congruent
access to the US banking system. An infringement of US rules and laws
 THE CLIMATE CHANGE CONUNDRUM  111

can bring about penalties or outright banishment from the world’s finan-
cial system, as happened with Argentina, Iran and Russia, which has had
the consequence of bringing those countries’ economies to their knees
and continues to do so.
This type of coerced, US led ‘global enforcement’ of the rules for emis-
sions levels, carbon taxes, carbon pricing, and CDMs will give businesses,
investors, and legal systems the certainty they desire going forward. Smaller
countries like Australia, Japan, and Holland, and economic regions, such
as the EU or ASEAN, cannot alone bring the sheer economic power of the
USA to the table by themselves.
However, this big stick approach may not work in a world of media and
internet penetration as well (or as poorly) as it once did in the early twen-
tieth century. Additionally, there is nationalistic pushback from countries
such as China, India, and Russia who consider themselves equal ‘world
powers’ and don’t want to utilize a foreign financial system or be pushed
around by a neo-colonial or post-Soviet oppressor. The USA and China
are the two biggest emitters of CO2 today. Expecting the world’s largest
economy, alongside the second one, where both are heavily dependent
on the fossil fuel model (e.g. car culture, coal-fired power plants, con-
sumptionomics) to do something first, especially with the US ultrapower-
ful oil and utility lobbies (and ‘Chindia’s’ coal-fired economies), may be
misguided and essentially a dead end. Observers can all see through this
and the hypocrisy involved: An Environmental Protection Agency and an
Executive Branch promising to address climate change but highly com-
promised with a fossil fuel industry lobbyists that promote jobs, competi-
tiveness, and considerable economic growth. A Beijing or Delhi covered
in smog from burning coal, but economically tethered to this same inferno
in order to sustain the economic growth underpinning the social stability
their governments crave.
We offer no ‘better way’ forward at this time except that education and
consequently, empowerment, undergirds much of the necessary change to
confront climate change. Improvement in the world’s current systems and
that change will be necessary to get to renewable, non-fossil fuel, clean
alternatives. As stated in Chapter 2, renewable alternative energy such as
wind, solar, geothermal, and hydropower are all great ideas for a progres-
sive society that is willing and able to invest in its future, but these cannot
overcome the ‘bang for the buck’ and economy of scale that oil, gas, and
coal can provide to turbocharge economies. It’s as simple as that.
Those who say they have an answer with new clean technology, renew-
able energy, or a new system probably don’t. If they actually do, they are
112  W. HICKEY

most of the time stopped in their tracks by costs. This is also especially
true of nuclear, which generates practically no carbon emissions, but sunk
costs, land acquisitions, and spent fuel storage, all require significant state
financial backing, mostly to insure and indemnify against risks of melt-
down, plant closure, and disposal sites. Even if a private investor were to
undertake these costs, they would also be opening themselves up for vast
legal liability if anything would go wrong.
To get to ‘win’ on climate change will require nations bridging various
perspectives, in addition to overcoming the Westphalian bias of implied,
and perhaps illusory, domestic independence. Yet, US domestic demands
(such as fully enfranchised democracy building or allowing currencies to
float) pushed in other regions and countries must not be so great that they
alienate tradition, culture, and mindsets (such as the Chinese historically
wedded to the dynastic system or the Indian Hindu system of fiefdoms
and tribute); conversely, other countries must not be so restrictive in their
claim to sovereignty that they close off channels to constructively working
with neighbor countries to mitigate an effective response to these chal-
lenges before they become crises.
Thus the real conundrum with a response to global warming is getting
all players civil societies and their elites, especially heavy polluters, namely
the USA, China, and India, onboard to collectively tackle this issue head-
­on as an existential threat of today, not an abstract problem of tomorrow.
This is all a very tall order, perhaps overtly idealistic (especially in coun-
tries like China that are bereft of democratic processes and outlaw mass
organization movements) and one the world does not have the luxury of
delaying much longer.
Today’s structure of international law and political power based on
outdated Westphalian principles also raises enormous obstacles in obtain-
ing unanimous or near-unanimous consent within sovereign countries to
partake of collective international action in dealing with the public goods
problem of global warming. Failures to obtain a consensus are many, while
the successes are few. Integrating transparent solutions into the framework
of domestic institutions is the real challenge in any collective undertaking
to come to grips with climate change.19 Being continuously trapped in a
non-cooperative situation with developing countries free riding on devel-
oped country, ‘solutions’ may prove fruitless in the long term and too late
to stem the tide of climate change damaging the planet.
However, in closing, it must be pointed out that empowerment
through education and getting civil society involved is crucial and can go
 THE CLIMATE CHANGE CONUNDRUM  113

a long way toward seeding new ideas and systems that may not be appar-
ent today but will make change tomorrow. This is not to say these things
will magically happen under current educational systems. They probably
won’t. The elites and the wealth they have invested in fossil fuels have a
stranglehold on our fossil-fueled economy. It will require further educa-
tional investment, investiture of civil society, and hands-on application to
precipitate change.

Change Through HRD

Change through HRD requires institutionalizing it, similar to how eco-
nomics is institutionalized in today’s world through government, business,
and society. Societal ownership also must be promoted, past old colonial
models of extraction that benefit elites and insiders only, to promote bet-
ter resource husbandry, stewardship, and utilization. Sadly, today’s exist-
ing constructs of energy extraction and processing and their by-products
of pollution and emissions sit squarely on the table of elite ownership and
‘sovereign’ rights that do not benefit regions or the majority of countries
when a bad actor is present. As a final thought, former Vice-President and
Noble laureate Al Gore’s documentary An Inconvenient Truth actually got
it very wrong. Gore assumed in his presentation that when earth’s health
hung in the balance, humanity would choose it over a pile of gold bricks.20
Thirteen years later, that has proven not to be correct. The gold bricks,
namely finance, still carry more weight than the health of the planet.

Notes
1. The year 1850 is generally acknowledged by scientists as the beginning of
the industrial era, or baseline for anthropic global warming, AGW, which
burned fossil fuels en masse for economic growth activities.
2. https://finance.yahoo.com/news/official-ny-probes-exxon-peabody-
­­213139102.html?bcmt=comments-postbox
3. Plutzer, E., et  al, Climate confusion among U.S. teachers, Science, Vol.
351: 6274 February 12,  2016, pp. 664–665.
4. Mann, M. (2013) The Hockey Stick and the Climate Wars: Dispatches from
the Front Lines. Columbia University Press, New York.
5. Naomi Klein’s 2014 book This Changes Everything by Allen Lane, effec-
tively tells one all they need to know about what the world is up against
regarding inaction on climate change from a socio-­economic paradigm.
114  W. HICKEY

6. McKibben, B. (2012). http://www.rollingstone.com/politics/news/

global-warmings-terrifying-new-math-20120719 and Do the Math: The
Science of Climate Change, by Bill McKibben, Better Future Project, June
25, 2013.
7. http://350.org/about/science/
8. Hansen, J. et al. (2008) Target atmospheric CO2: Where should humanity
aim? Open Atmosphere Science Journal, Vol. 2, pp. 217–231.
9. Hansen, J. et al. (2008) ibid.
10. Obama rejected the Keystone XL in November 2015, but a succeeding
president or successful appeal to the US Supreme Court by its main con-
sortia company could theoretically revive it. It’s not really dead yet.
11. Machmud, N.T. (2000) The Indonesian Production Sharing Contract,
History of the PSA, p. 53
12. ‘The Role of the US Government in Humanitarian Intervention’. Stewart
Patrick, Policy Planning Staff Remarks to the 43rd Annual International
Affairs Symposium, The Suffering of Strangers: Global Humanitarian
Intervention in a Turbulent World, Lewis and Clark College Portland,
Oregon April 5, 2004.
13. Ikenberry, J. (2004) Illusions of Empire, Foreign Affairs  March/April
2004.
14. http://www.worldbank.org/en/news/feature/2014/06/11/what-does-
it-mean-to-put-a-price-on-carbon
15. See EU ETS data at: https://carbonmarketdata.com/en/products/
world-ets-database/eu-ets
16. See URL regarding UN and Certified Emission Reduction Credits or
CDM:http://www.un.org/climatechange/blog/2012/11/kyoto-protocols-
clean-development-mechanism-registers-5000th-­project/
17. http://www.theguardian.com/environment/2011/apr/28/overhaul-
europe-carbon-trading-scheme
18. http://journal.probeinternational.org/2010/07/06/paying-­
the-­polluters-the-carbon-credit-way/ Many producers are earning more
from ‘abating’ HCFC-22’s by-product, the potent greenhouse gas HFC-
23, than from producing the primary product, it is alleged.
19. Nordhous, W. (1999) Global Public Goods and the Problem of Global
Warming, Annual Lecture, The Institut d’Economie Industrielle (IDEI)
Toulouse: France.
20. Al Gore slideshow presentation in 2003 documentary An Inconvenient
Truth highlights the weight of gold bricks versus earth health. Gore, obvi-
ously, was wrong.
 CHAPTER 5

Human Resource Development: The Means

Are There

Only the enormity and economies of scale of energy resources can pro-
mulgate the revenues necessary to raise living standards for vast num-
bers of low- and semi-skilled people in the developing world. While this
problem is acknowledged, the mechanisms of how to do this efficiently
and effectively, despite numerous efforts by governments, aid programs,
NGOs, civil society, and companies are still not sufficient and sorely lack-
ing. A large amount of foreign labor and expertise is required to develop
in-country resource production, yet locals stay largely unengaged in these
businesses, with wide unemployment percentiles reflected in their societ-
ies. Localization has a host country’s citizens developed, engaged, and
meaningfully employed in the core economic drivers of their economy on
a competitive level. HRD incorporates four disciplines in its foundations:
management (including HR and Project Management), education (with
curriculum design), economics (competitiveness), and communication
(with cultural awareness). Programs, research, and policies (governmen-
tal, corporate, and NGO) that enable and foster a holistic HRD mindset
(as opposed to an engineering mindset) by way of specific human resource
performance metrics and mechanisms are paramount to help the local
population develop skills, knowledge, content, and services for extractive
resources.
It is not only about skills; it is about engagement and the level of engage-
ment via opportunities available to use the skills gained. This is human

© The Editor(s) (if applicable) and The Author(s) 2017 115

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_5
116  W. HICKEY

capital and empowerment on a relevant level.1 The human capital invest-

ment theory, simplified, states that to a point, more skills generate more
income. Nobel Prize laureate and University of Chicago professor Gary
Becker did not consider political or misallocation of capital constraints (i.e.
developing people from a capital urban area at the expense of rural people)
in his area, or disincentives to learning (such as producer subsidies for oil
and mining), and assumed that education was on a level playing field, or
linear,  where all actors had equal learning opportunities to generate grow-
ing economic activity. Other theories have stated that human capital for-
mation is the building block of social capital formation.2 Effective social
capital is measured in how best a society then trusts itself in regard to
impersonal financial capital transactions. Sustaining all forms of this type
of ‘capital’ is then what can be used to define the successful nation-state.
These theories are all economical or social in nature, and don’t deal with
HRD at the micro level, that being training and development (Figure 5.1).
If we can get past the political constraints and capital misallocation
with energy investments, HRD then becomes a very straightforward and
direct proposition that can benefit many people. Heading deeper into the
twenty-first century, with large youthful populations in mostly developing,

Fig. 5.1  The apex of human capital development is ideas, not finance or techno-
logical black boxes (Source: Hickey 2012)
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  117

equatorial countries, and with the game-changing threat of climate change

on our doorstep, this is now more important than ever. This chapter is not
about rehashing HRD methods or technical processes, as that is a field in
itself, though some reflection is in order, especially in light of economics
and contractual arrangements in developing countries. These issues can
apply to many industries from apparel to tourism to steelmaking to cell
phone manufacture, not merely energy and resources; nonetheless, it is pri-
marily the resources that investors are interested in developing countries.
In that aspect, we are at this time considering fossil fuel e­ xtractives, oil, gas,
and coal, due to their totality in both revenue and employment generation.
Alternative energies such as wind farming, geothermal and hydropower,
and even nuclear HRD competencies also have a growing presence, but
are not the same economy of scale that fossil fuels bring to the table at this
point in history and what most developing countries power themselves on.
We consider HRD then from a context in methods that are neces-
sary but underappreciated function. IT must also be considered in the
HRD mix, as it is developing new work structures and learning that are
fundamentally changing traditional jobs, mobility, and work as we know.
Technology has blurred the lines and redefined work processes that may
not be readily apparent in a developing world bereft of automated machin-
ery which calls for the  select high-tech skills to program, operate, and
maintain it.3
At its core, HRD is a very straightforward proposition. Assuming there
is work defined to be done that has a defined output criterion, for exam-
ple, running a console for oil operations at a collection point or maintain-
ing loading equipment at a mining site, a skills matching assessment or
training needs assessment (TNA) begins early in the process to determine
what the individual needs to know to fully embrace the job and perform
it at a ‘benchmarked’ or internationally accepted standard. This includes
not only the book knowledge (many developing countries train people for
cognitive skills) but also the proper skills including communication and
attitudinal interaction expected. This is the critical doorstep to begin the
cycle, engaging multiple abilities that are interrelated.
This chapter is not meant to exhaustively pursue a history and detailed
analysis of HRD, there are many experts in its specialization, Chapter 1
lists some of them in an overview, that is, Rothwell, Mager, Gilbert.4 It
is only to consider main or orthodox methods in the HRD process, the
training cycle and competency being key aspects all HRD workforces
understand and that are applied in any training/development framework.
118  W. HICKEY

HRD carries both conceptual economic and mechanistic education

definitions. Conceptually, HRD is about human development in a value-
added sense: smarter and more innovative people who can work efficiently
and effectively in any job or organizational setting in a given society.5
Mechanistically, it is about training cycles, succession planning, career plan-
ning, critical incidences, work competencies, and coaching/mentoring.6
Without political or management encumbrance, HRD in a transparent
setting is also very linear and mathematic. The human capital investment
theory (or so-called human and ‘non-market economics’7), for which
Gary Becker at the University of Chicago won a Noble prize in economics
in 1992, sums it up best when HRD is considered in its basic form: More
skills equals higher incomes. People and societies that focus on education
and skills building will be better off in the long run.
Of course, that is the ideal. The reality is that HRD can also become a
political function or management tool for fixing or blaming other things.
Sorting out what really is a skills deficiency that requires a learning fix,
and what is an impediment caused by bad management, poor, or mal-­
incentives, political problems, and adverse environmental conditions
(both small ‘e’ and big ‘E’) is not always straightforward. And as the clas-
sic HRD practitioner and writer Robert Mager pointed out, deficiencies in
learning and doing can be caused by an entanglement of learning deficien-
cies and management issues.8
First, we consider each section of the training cycle toward HRD in regard
to current practices in developing countries and how each section could be
improved for better technical prowess. Again, these corrections cannot cor-
rect political (i.e. the boss doesn’t like a certain minority) or management
(the pay is low compared to competitors) shortcomings. Second, we will
look at current trends in HRD, competency development, and talent devel-
opment9 that comes past the training cycle as it can be template for different
interrelated areas of learning: cognitive, affective, and psychometer.
The ‘training cycle’ is considered nominally in regard to each of HRD’s
four accepted main stages: assessment, design, implementation, and evalu-
ation. Each of these sections carry tremendous weight in their own right,
so any HRD effort is only as strong as its weakest field in the cycle. See
Figure 5.2.
According to Bill Rothwell, at Penn State University, ‘training’ can only
solve 10 % of an organization’s problems.10 The writer however, considers
from experience in many developing countries that training may actually
solve a higher percentage of learning deficiencies due to weak public edu-
cation systems, perhaps has high as 30 %.11
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  119

Fig. 5.2  A simplified HRD training cycle (Source: Hickey)

The rest of the problems in workforce ability are either management

issues or management/other issues such as compensation (extremely low
pay), safety (as culturally accepted despite signs), or environmental (bad
roads that can prevent people from getting work) that training simply
cannot remedy.12
TNA is usually performed to determine what educational gaps and
problems are in processes. Most think only of gaps as current negative,
but there are six of them (see Figure 5.3).
Consider the implications for each gap in terms of organizational:

• Recruitment
• Succession Planning
• Business Planning
• Compensation
• Training and Development
• Change and OD
120  W. HICKEY

Fig. 5.3  Gap assessment derived from Rothwell, 2005 (Hickey)

Nonetheless, many managers and executives think they may already

‘know’ instinctively  what their workforce needs and see any second-­
guessing their understanding of a gap assessment as an unnecessary step.
This is especially problematic in Asia and developing countries with high
contextual communication barriers,13 where management is rarely ques-
tioned, leading to off target results in the other training stages.
Once the criterion past the initial assessment identifies a bona fide edu-
cational need or ‘gap’ in HRD parlance that can be solved by an educa-
tional remedy, closing that gap will then proceed forward to incorporate
methods between what is known by the indigenous workforce and what
is the benchmark of best practice, essentially, what is not known by the
participants. There are two ways to proceed to this competency develop-
ment and instructional systems design (ISD). As ISD is the method most
utilized in HRD for overall industry workforce development, that will
be discussed first, later competency or occupational development will be
noted14 which is related more to specific jobs.
The design stage then comes second in the cycle. Much has been writ-
ten about how practices culturally designed or developed in Western coun-
tries do not easily translate into developing ones.15 Arguably, design is the
most costly and least visible aspect of HRD. Training design costs money
and is considered as ‘back office’ work.16 Managers (especially in regard to
an Asian context) like to see people with ‘one foot in the air’, not scribes in
back offices on personal computers (PCs), where unmanageable behaviors
can degenerate into Douglas McGregor’s X and Y theory issues17: surfing
the internet, card games of solitaire on company time, or general idleness
with non-utilized PC screens and participants waiting to be ‘told what to
do’. In this aspect, realigning the design or outright redoing it is perceived
as an unnecessary cost in the process. Any design will do, just get it out
there, becomes the thinking among management.
Consider an example used by a US company that had spectacular
manufacturing results with its subsidiary in Japan. The technical train-
ing design was created for Japanese workers before the initial hiring had
begun. Several years later, and with changing market conditions, the head-
quarters was expanding into China. US ethnocentric managers, along-
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  121

side local Chinese-speaking executives from Taiwan and Singapore (but

not from mainland China themselves) with the branch subsidiary, sim-
ply transferred the training content from Japan over to mainland China
in order to ‘cut costs’.18 When Chinese participants read training man-
uals in English, that lauded Japanese behavior, customs, and etiquette,
employee problems set in. The local Chinese workforce strongly resented
this and the company, perhaps not solely due to the training, began to
suffer QC  (Quality Control) and market share issues. Anyone familiar
with Chinese–Japanese relations knows the deeply historical antagonism
between the two countries.
Nonetheless, some well-meaning but no doubt historically clueless train-
ing executives in the US companies’ headquarters never saw any issues with
this from the outset, reflected on past success as a future indicator of per-
formance, and only perceived it as a cost saver. In short, the training needed
a significant redesign for another country, but as design is not afforded the
same status as say a bond issue or buying a highly technical part or appli-
ance, it was not given the same accord. Cultural issues, especially those
of high context, must be addressed in the design. It cannot be practical,
straightforward application only as used in low context, Western cultures.
Instructional design is a deeply complicated and sophisticated process, but
perhaps the most important process in the training cycle. It is only as good
as the investment in time, money, and company commitment put into it. A
large part depends on the ability of the workforce. A core assumption made
by all designers, especially ones in a cross-border setting, is that incumbents
are teachable and have a base level of understanding of their field. These are
so-called basic workforce skills19 or also called essential academic skills of
basic math, reading, and writing.20 Tests such as the Wonderlick Personality
Inventory, Kolb learning style Indicator, and Myers–Briggs Type Indicator
can be used after the needs assessment to precisely determine the type of
learners and majority makeup of the audience being taught. Such as the
difference between engineers and accountants who bear more introspective
and analytical persona versus marketing and management types who deal
more with communication and people sensing issues.
For the simplicity of this chapter, and without going into volumes of
cultural detail (context, uncertainty avoidance, power–distance, etc.),21 we
will assume the participants in developing countries have an equal ability
for, access to, and understanding of any Western counterpart in the learn-
ing process. This is an important concept to lay out as a baseline ability for
the politics of it all also.
122  W. HICKEY

The modus operandi of many investor and perhaps government offi-

cials promising/granting approval of their own workforces has, at times,
been to convolute the entire issue of human development. Rather than
engaging the broader public to take a deeper educationally sanctioned
view of their natural resources and the empowerment that goes with that
via education, they have sought to make the issue of developing locals too
arcane and complex to understand. Instead of getting to more political
solutions that address the resource curse and poverty (amid sweet oil wells
or rich coal seams), on a broad level, an endless debate on cultural, social,
religious, economic, and ethnic issues that never acknowledge the core as
a baseline but instead try to place blame on government, investors, or civil
society itself ensues.22
In other words, there is always ‘something amiss’ with the locals that
cannot be overcome by education alone, so why even try? With this think-
ing, TNA and further education would be pointless. Of course, there pos-
sibly are educational deficiencies, but mass media and the internet has
certainly narrowed that gap in many countries, particularly hard-core
frontier nations with resources, like E. Timor, Myanmar, or Congo, where
cell phone absorption is permeating their markets and their people’s world
understanding.
Consider Table 5.1, ISD methods the writer has accessed or witnessed
in the design of training and educational programs for participants:
There is also competency-based design which will be covered later in
the chapter for more key and senior positions.
The most effective design method for closing educational gaps in devel-
oping countries is via the anonymous Delphi design technique, due to cul-
tural and social interference, and is apolitical.23 In this type of design, the
criterion for most effective way to do the job is fed back to the designer
in terms of know-how, politics, and critical incident technique by top per-
formers in the area who know all the ins and outs of a specified posi-
tion and the knowledge it requires. It is also the most expensive way of
conducting training. It requires detailed interviews with high-performing
incumbents, managers, and supervisors in that area/department or scope
of work, usually on company time and away from their duties, under the
rubric of anonymity, so they are not subject to political reprisal.24
The Delphi method, developed by the Rand Research Corporation, is
costly, but most thorough to do in terms of time and length for incum-
bent positions. In the energy and resources industry (as in any industry),
there are star performers who have successfully navigated, if not gamed,25
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  123

Table 5.1  Various instructional systems design methods for designing curricula/
instruction (Hickey)
Design method Key Utility Effectiveness Cost

DACUM (Developing a Can train a large local Medium results Moderate (in
curriculum) audience many things in a house)
process based on their
feedback and various inputs
Benchmarking Uses best practices of Medium results Moderate
various operations methods (travel)
around the world to get to
optimal results
Delphi Interviews with High results Expensive
managers and supervisors to (available
understand ability, managers)
competency, and critical
incidents in certain key
positions for higher
performance.
Off the shelf Buying pre-designed Poor Cheap (in a
training available on the book/CD)
market, criterion but not
culturally referenced
Focus groups Similar to DACUM, but not Moderate (if Moderate
fully criterion based, specific topic) (availability)
depends on brainstorming
or storyboarding

the system. They know the ‘ins and outs’ to get things done timely, with
the least resistance, and without stepping on toes. These are the types of
employees who are truly ‘hi-performance’. In short, the Delphi method is
the best way to design training quickly for results performance for specific
tasks, short of a full job competency. It is also the most risky in political
terms. There will always be bosses in their position due to political inter-
ference or nepotism seeking to protect their incompetence under threat of
retribution. The Delphi method cuts through the opaqueness of politics
and deals with the exact tasks at hand to get to key results.
Other methods are politically acceptable but not as effective for human
performance. DACUM, Focus Groups, SWOT analysis, and benchmark-
ing will all yield moderate results. The methodology is criterion output
related, but due to political or proprietary concerns, participants may not
fully divulge core aspects of the job in the first two. SWOT analysis is an
124  W. HICKEY

old diagnostic tool, and subjective at times. Regarding benchmarking, the

company may seek to hide or not disclose certain advantages that could be
transferred to a competitor or host government via a state-owned entity
for later use to develop their workforce. This is a serious issue as it can run
up costs for a host government due to performance-related issues, but the
companies sometimes will refuse to divulge current information or only
provide the local workforce with old information. Economic and politi-
cal incentives mitigate the real results, and failure is built into the design
effort.
An example of this is 90° horizontal drilling in offshore oil projects.
International oil companies now have the ability to drill one well and
extend the operations outward from that one well many miles, saving
them considerable time and money from individual  ‘dry holes’ (wasted
efforts). Certain developing countries with large state-owned oil and gas
companies such as Brazil (Petrobras), Indonesia (Pertamina), and Angola
(Sonangol) have discovered large oil and gas reservoirs off their coasts in
deepwater. They also have huge populations, many in poverty, and could
employ many with attendant downstream knock-on jobs if this technology
were transferred to them. Nonetheless, this technology is very sensitive
proprietary, providing high salaries to the incumbent Western engineers
(from USA, UK, and Norway) who can utilize it, thus any skills transfer is
tightly guarded on competitiveness grounds.26
Simply, these state-owned companies in developing countries do not
have this technology, and cannot develop these fields without it. Even if
they did have the hardware, they would not be in a position to develop the
‘human software’ to operate it in lieu of a know-how transfer plan with the
foreign oil companies. Horizontal drilling requires a detailed knowledge
of geography, geology, computer modeling, geo-spatial mapping, metal-
lurgy (drill bit and conduit tolerances), and, above all, reservoir manage-
ment (RMG). It requires considerable training provided by ‘old hands’ to
make it work on a competitive level.
Oddly, as will be stated in a later chapter, under the rubric of the ‘PSC’
in oil operations, host developing countries are already paying the compa-
nies for this technology (and contributing to the experience their employ-
ees also absorb) accept that the companies are not required under these
contracts to actually train or develop host locals. Despite company press
releases about developing local engineers to the most advanced practices,27
the hosts are ‘only’ required to pay for it not for locals to really absorb,
utilize, or understand it.
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  125

Off-the-shelf training is the cheapest and most accessible training in

the design phase. All managers have to do is buy it and then administer.
It is used for ‘soft training’ design, but can be used for technical also. For
example, in many Asian countries, Stephen Covey’s 7 Habits of Highly
Effective People28 is a popular leadership training program available from
exclusively licensed vendors around the world, particularly in Asia, with
marketers from Tokyo to Singapore. It is also quite popular with invest-
ing companies in developing countries, in both energy and other indus-
tries. While important, it does not identify cultural issues (such as diversity
in China) in a given country or political issues (such as in Mongolia or
Angola) which could be a strong detriment to effective skills transfer. In
this aspect, any ‘one-size-fits all’, pre-designed training will have mini-
mal overall effectiveness in workforce development. In short, off-the-shelf
training has a low-impact value.
Once the design of the training is accepted and agreed upon, the facili-
tation is the next stage in the cycle. Who will deliver the training and how?
Some of this may already be determined in the design stage by the precise
method used in the delivery. For example, in a DACUM, focus group, or
Delphi, usually the designer will be instrumental in conveying the learn-
ing outcomes in formation of the delivery stage, as either a direct lec-
turer, facilitator in a practice format, or advisor to internal trainers or all.
Conversely, in an off-the-shelf training or design done outside the orga-
nization, any facilitator (usually lowest bidder) will do. It then becomes
about administering canned metrics and training boilerplate. Sometimes,
where a video is utilized, participation and paying attention becomes a sec-
ondary concern. What is important under this ‘least accountable design’
situation is that training is given and logged on a time sheet, a box is
ticked, and management can move on.
The best training facilitation incorporates hands-on practice, such as
with drilling and exploration of oil wells, mining development techniques,
flaring of gas monitoring, deepwater welding, or other types of OJT (on-­
the-­job training) and structured on-the-job training, SOJT, such as for
safety and standard operating procedures that are more in real time,29
with real instructional objects and dynamic as opposed to preplanned,
static training that is more about fulfilling obligations than skills transfer.
Much of what we are speaking of here is facilitation for polytechnical and
vocational skills. Facilitation for management and full job competencies
require more detailed methods of coaching, mentoring, and succession
planning. Consider some types of direct training facilitation (Table 5.2).
126  W. HICKEY

Table 5.2  Overview of various training facilitation methods

Facilitation type Method Cost (Time and Effectiveness
money)

Computer/video/Internet A video or self-directed Cheap, similar Weak. Incentives

platform such as PC or to off-the-shelf must be given
tablet used training design for it to work
Lecture/classroom A lecturer or skills- Moderate. Moderate. If
specific instructor Depending on training is off
leads. Pedagogical subject site, it is more
effective
Structured practice/OJT In the field doing or High, Best. Participant
simulation training. depending on must carry out
Demonstration. OJT structure the action
Andragogical. needed
Self-Directed

(Source: Hickey)

Once the training has been delivered, it needs to (or should) be evalu-
ated. Many energy companies in their government-approved contracts or
CSR obligations are only required to provide training. The relevance, qual-
ity, consistency, and formative/summary evaluation of that training can
become a secondary concern that shortchanges the participants. Especially,
if as noted, if there are various economic disincentives (reimbursements,
proprietary controls, and costs) or management issues in contention.30
Donald Kirkpatrick used four levels of evaluation to determine if the
training was effective or not, with each level getting consistently more
difficult to evaluate. In the past few years, especially in regard to placate
shareholders or host governments, a fifth level or ‘training return on
investment’ or ROI has been added by HRD practitioners such as Jack
Phillips (see Table 5.3).31
As most of these countries rich in resources are developing and cultur-
ally ‘high context’ societies, going along to get along becomes the norm.
Facilitators who can be the most personable and agreeable are the ones
defining training success.32 Political reasons also keep this process in place
to get the work trainers must be connected, accountable, and agreeable to
various corporate actors. Outsiders without relationships, unless installed
for specific industrial reasons, generally are not welcome. Maintaining
overall harmony is what matters.33
This is a key point of the constancy of oil and mining companies: alike
insiders, or what Edgar Schein at MIT defined as the ‘engineering mindset’
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  127

Table 5.3  Kirkpatrick’s four levels of training evaluation with ROI at fifth level
with interpretation
Evaluation level Method to assess or measure Individual/organizational
evaluation impact

1.Satisfaction A smiley face. Did the Very high for the participant
Easy to measure respondent like the way the Negligible for the organization
facilitation was administered?
2. Learning A test or administered High for the participant
Assessment required evaluation. Assessing if the Moderate for the organization
participant absorbed methods
and actions from the training
3. Job Was the learning transferred Moderate for the participant
Moderate ease of back to the participants’ job Some organizational importance
use timely or on a timeline?
4. Organization Did the job skills acquired create Some for the participant
Difficult to measure noticed change in the Crucial for the organization
department or organization?
5. ROI The incorporated changes Negligible for participant
Very difficult to produce greater revenues (capacity)
‘precisely’ measure streams and thus higher profits Very critical for the organization

(Source: Hickey)

in certain organizations. Whether competitive skills are actually imparted

or not, or even the overall health of the organization can become another
issue. Unfortunately, the main criteria used by managers in the training
process in developing countries continues to be if respondents ‘liked’ the
training (the first level of evaluation).
This is an important observation. If political and agreeableness factors
are allowed to supersede and permeate the organizations’ efficiency and
utility, it can appear to outside investors that local employees never really
learn, and that more ‘competent expatriates’ are needed to be sent in to do
the real work. This is not a new prejudice; it is referred to as ethnocentrism.
However, it also reinforces the North–South phenomena34 that people in
developing countries simply cannot get their act together to be as efficient
as ones in the West regarding value added and quality for products and
services. A patronizing mindset sets in among Western counterparts that
is difficult to change, as mentioned later, investors who get reimbursed for
the training provided use this as a pretext for not developing locals.
The middle evaluation levels of two, learning from the training, and
three, effect on the job are easier to measure for technical training than
for soft training. For example, Microsoft Excel training is learned and can
128  W. HICKEY

be applied directly to accounting or enumeration in the actor’s position.

The success of this training is easy to measure, as are statistical trainings,
defined safety programs, and English development. Unfortunately, these
type of hard trainings are the exception, and not the rule. The usual train-
ings such as leadership via Ken Blanchard’s ‘One Minute Manager’, a Phil
Kotler marketing training, or an ‘oral English’ seminar are much harder to
discern the impact of. Learning and skills transfer are marginal at best.35
The fourth evaluation level, did the training effect the organization,
like the fifth evaluation level, did the training have a ROI, become more
obscure and opaque in a definitive evaluation, due to specifically co-­
mingling of the training variable with other issues. For example, was it the
leadership training by the Swiss expert that provided the organizational
boost? Or a slick marketing campaign for clean coal, a spike in oil prices,
or political reform in double taxation?
As training can be abstract in it’s processes, many financial experts or
operations people consider this fifth level of ROI  evaluation as nothing
more than snake oil in the HRD process, simply because the training vari-
able cannot be discretely analyzed in isolation, neither can other variables
however, such as marketing, environment, operations, safety, so any over-
all revenue and investment picture could thus be due to several factors.
Training may just be one of them. Of note is that in 1996, Motorola (not
an energy company, but then operating in developing countries world-
wide) decried a return of $3 on every $1 of training administered in their
workforce or a 300 % return. This of course was an opinion among top
management, and never showed how it was empirically derived.36
Rothwell has hypothesized that training evaluation is not really a neces-
sary step in the T&D cycle as evaluation has already been built into the
front end of needs assessment.37 The more robust the initial TNA, the
more precise the outcomes and expectations to be met. Nonetheless, a
cottage industry of training providers and gurus extolling the value of
effective training ROI does thrive.

They Are Not Looking for Training, But a ‘Payoff’

As training is ethereal, meaning different things to different stakeholders
(i.e. learning, performance, job competency,  or invested returns), it can be
co-mingled with other things in the process, such as incentives. This is also
problematic in developing countries and a real cause of the marginaliza-
tion of the training process. For example, in the oil boomtown of Atryau
in Kazakhstan, if one walks up and down the main street, many shops hang
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  129

a shingle and businesses advertise training, recruitment of workers, and

contractors. The wealth of this oil town has spawned this ‘side-business’ of
HRD for many. This also means that HRD is watered down, experts are
‘only stone’s throw away’, and ‘anyone can do it’. This also presents the
HR and training department as a ripe target to process bribes, payoffs, and
political favors. As training is hard to evaluate due to its short-term ethe-
reality (but long-term payoffs when the original stakeholders are usually
long gone), a training company can hypothetically be set up by a govern-
ment minister’s wife or best friend, with the minister then having the man-
ager or executive of an oil or mining company steer contracts their way.
This happens on many occasions, when talk of the training being very
substandard or overpriced comes into play. The problem is training and
development are not held to the same standard as buying a piece of pipe, a
new work truck, or an Apple computer. Their tangible value can be read-
ily ascertained by auditors and advertised market prices, both local and
foreign, to see what price was paid, if it was not in line with market prices,
auditors can quickly identify ‘where’ the money was siphoned off usually
by who approved and signed for the order.38
As training is again ethereal and primarily accessed on the first level
of Kirkpatrick, placing a real value on it then in a non-tendered environ-
ment (as the PSC’s mandate) can bring other activity into the function
that have nothing to do with training, especially if the training budget is
large (several millions of dollars) and outcomes are politically related (did
someone ‘up top’ order it?), and  not performance related. This type of
activity can and does affect all levels of the training cycle, from steered
needs assessments to overpriced design to well-connected facilitators to a
‘box-ticked’ T&D evaluation. This is in part why HRD is not afforded the
same relevance and status as finance, accounting, or operations in develop-
ing countries. It goes to the cultural and societal root of a nation’s human
development, is it respected or not by the host country and its leaders? Do
they put their faith in human returns or merely financial ones?
However, the companies are not blameless either. Usually in oil compa-
nies under the PSC agreement, a remnant of colonial extractive processes,
training is fully reimbursed to the administering company with an admin-
istrative overhead. Technical training  that participants may not need,
may not understand, is redundant, or that they will never fully engage in,
is administered to them, at full costs backed by the host country. Again, a
theme throughout this book is that under this scenario, local citizens are
already paying the company to develop them for their natural resources,
130  W. HICKEY

but the exact outcomes are never attained, nor is the empowerment that
should be afforded to the participants for obtaining these skills.
An extension then of training that is inside the company but paid for by
the public then becomes an issue of who’s domain is it. A situational tug-­of-­
war still exists in many engineering mindset39 companies that training should
not be centralized, but at the departmental level where competent engineers
and technicians in their relevant fields exist. Turf battles have ensued, with
the ultimate outcome being the centralized HRD function only existing
for safety and generally English language/basic computer skills training.
Without transparency and a centralized HRD manager overseeing the train-
ing, costs in departments can become inflated and training redundant (other
departments administering the same thing) without any higher supervision.
This also allows organizational silos to form, where one department does
not speak with or has a rivalry with another department. The neutered HRD
department in oil and mining companies then exists as a mere employment
‘holding function’ for engineers nearing retirement, accountants who make
too many spreadsheet errors,  and permanent employees in state-owned
companies who are subpar and can’t be fired. HRD gets a bad name for
irrelevance and other department leaders control parallel T&D departments.

Competency Development for Energy Positions

Beyond merely administering linear training and educational initiatives for
skills building aspects only in their workforce, the holistic trend in employee
development in the past 20 years has been ‘competency development’. In a
full competency development for a specific occupation, such as a lead board
engineer (LBE), or mine-development  manager, the participants must
develop more than merely a few practical psychometer skills. They also must
develop varying degrees (depending on the p ­ osition) of cognitive ability
(technical and safety awareness) and effectiveness (attitude). See Figure 5.4.
A full job competency incorporates all these areas of abilities and trains
for them. Full competency development is important for key leadership,
management, and technical positions. Each position has varying degrees of
ability in each area. It requires a commitment by the company and an under-
standing by the employee of what they are actually being developed for and
how they contribute to the organization or so-called intangible rewards.40
In this aspect, competency development is holistic and two-way (andragogi-
cally delivered) as opposed to top-down (pedagogically delivered) training
directives. As it incorporates the full job, reporting relationships, there is an
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  131

Fig. 5.4  ‘KSA’ (Knowledge, Skills, Attitude) competency conceptual with tech-
nical terms (Hickey)

impact of that job on the rest of the company. A few examples should suf-
fice to explain the extremely high value of competency development for the
investors in very specific proprietary activity in oil and mining.
Some large oil companies have developed a full competency profile and
assessment for some core positions in regard to political advertisement
of local citizen advancement to the host government but also to poach
the best and brightest talent from these countries for their own corporate
talent bank portfolios. This is usually not apparent to many but the top
corporate executives.
In upstream oil, for example, two core positions emerge that can be
transferred to oil operations anywhere around the world. Reservoir man-
ager and  the LBE (Lead Board Engineer)  both of which  are also very
proprietary positions. The skills gained in both are cutting edge and carry
a high tangible value for the organization.
RMG or the reservoir management group,  is considered the ‘brain
trust’ of upstream oil operations. RMG is critical in assessing the well
size, pressure, and quality of the oil in situ or in the ground. It is one
of the most sensitive and proprietary of all an oil company’s domains, a
brain trust if one wills. Training in RMG is costly and usually high tech.
Most postings from a company’s headquarters in Houston, London, or
Milan are with training consisting of very specific computer, statistical,
and modeling skills that are held tightly as proprietary. Conservatively, this
132  W. HICKEY

­ osition is assessed at a value of over $1 million for a competently devel-

p
oped RMG engineering associate. The engineering analysts and managers
in this group then can feedback the information to finance in headquarters
who can readily determine what payoffs they can expect from any given oil
or gas well in a certain place.
Another position that does not require an academic engineering degree,
but rather strong leadership, technical, safety, maintenance, and vocational
skills is the lead board engineer or LBE. This position represents the skills,
behaviors, and know-how needed to operate most production facilities on
an accepted international level throughout an international oil company’s
benchmarked worldwide operations. A list of the LBE terminal compe-
tency is in the appendix; basically, an LBE can run refining operations,
read schematics, operate control boards, and ensure core safety proce-
dures across all facets of upstream production. This position represents the
skills, behaviors, and ‘know-how’ needed to operate a company’s produc-
tion facilities on an accepted level throughout their worldwide operations.
However, and this is important, due to the diverse properties of oil world-
wide (very deep wells, high pressure of reservoir, crude oil that is laden with
H2SO4 [sulfuric acid], etc.), LBEs can receive additional training under a
special projects budgets which are usually paid for (unknowingly) by a host
government. They then become portable technical skills that can be utilized
at other sites around the world. Based on management interviews, the LBE
position (as of 2006) carried an NPV (net present value) of $388,000, for
a projected five-year value of approximately $500,000 to the company.41
A benchmark control group in LBE development is usually on a
‘structured mentoring’, shared learning, or coaching basis, as opposed to
unstructured OJT. In structured mentoring, the trainee/s is paired with
an incumbent, competent LBE full time and has a formal curricula to
follow. However, the incumbents in many oil operations are sometimes
trained via unstructured OJT, in part as the incumbents they may pair with
are very busy running the operations themselves. Nonetheless, the opera-
tions themselves provide hands-on training opportunities for the trainee.
Of course, there are many other key positions that are served by com-
petency development, such as rotating equipment technicians, mine devel-
opment specialists, drilling and exploration people, risk assessors (both
financially and for safety), procurement specialists, and marketers, but all
in all competency development based on knowledge, skills, and attitudes
incorporates into a total occupational profile of what the job requires for
maximum performance.
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  133

Conceptually and theoretically then, and within its most linear human
capital application, that being with defined competencies and assessed train-
ing needs, there is no impediment to developing any workforce in today’s
information-intensive world to a benchmarked standard of any other work-
force in dealing people of a similar baseline intelligence to build the skills on.

HRD Effectiveness
Practically speaking though, many management and political issues can
muddy the water with the learning and development processes. Consider
some issues that were observed by the writer in mostly Asian and former
Soviet developing countries, that impinged on training and educational pro-
grams that were being utilized or about to be utilized. The following are
some actual quotations stated to the researcher anonymously since 1997,
when working as an HRD consultant in several developing countries in Asia.

• Cultural: Chinese don’t do well at critical thinking types of training

(when using KOLB learning style inventory for assessment), just
TELL THEM what to do
• Compensatory: If you have training in the company, no one will go.
Have training in another city, or even another country, the sexier the
better, such as Thailand, Malaysia, or Bali. (Russia)

and

• If they train me to do it, then I’ll have to do it, and I won’t be paid
anymore for doing it!
• Political. This training is put forward by the top managers as they
promised their friends (a vendor licensed to give McCovey’s 7 Habits)
some business. (Indonesia)
• Environmental. People don’t want to attend company training after
work as they just want to spend time with their families (and the
company won’t authorize training during normal production work
hours) (Kazakhstan),

and

• Environmental. The roads (traffic jams) are so bad, that it wastes con-

siderable time getting (across town), so I don’t want to go to this (train-
ing) (Thailand)
134  W. HICKEY

• Leadership. This training (Balanced Scorecard, Six Sigma, Cycle

Time Redux, etc.) is interesting but will never be permitted by top
management due to costs. (China)

The points above are to demonstrate that while training and develop-
ment are core to HRD in a mechanistic sense, and that most agree they are
very necessary, ‘training’ can be hindered or mitigated for all types of rea-
sons unless a few things are put into play. Many of the reasons are also par
utility from Hertzberg’s ‘hygiene factors’, or incentives of punishment, or
threat to induce particular behaviors42:

• Leadership. The leaders must be behind the training and be forth-

right that it is not for some ‘other’ reason the training is being
given.43
• Environment. The training must be accessible and conducive to get
to/attend. It should be on company time, not forced on the employ-
ee’s time. The conditions must be right.
• Compensated. If people get the training and apply it to their
jobs, it should be reflected in proper compensation or some type
of non-­ financial reward. Research has shown this works best.44
Unfortunately, training may be given as a ‘cram down’ to get the
individual to do more, without any reflection in the reward or
advancement schema.

These are just some concerns. Not all are listed. But in driving to
an effective localization effort and integration, the dross and impurities
need to be cleared off the table for effective HRD to really seed. Once it
becomes objective, is led from the top, meets the right physical conditions
for learning, and is reflected in rewards for the learning, then training can
move forward with certainty.
Unfortunately, all the above quotes were in developing countries,
mostly China, these are the countries and places most sorely in need of
human development. Non-learning encumbrances become du jour among
participants, and thus weaken the training initiatives. It is also noted that
these are all ‘micro-economic’ effectiveness issues affecting a training
effort. We will see in the localization chapter how ‘meso-economic’ issues
can affect the training on an organizational and indeed, ‘macro-economic’
national level.
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  135

The HRD Means Are There

Benchmarking, OJT, mentoring, succession planning, best practices, and
critical incident techniques can provide all the educational tools neces-
sary to develop high performance talent in any locale or in any industry.
Even a modicum of understanding can be built on toward maintenance
and operations. The HRD problems in developing countries thus do not
exist in the methods, but rather the systems.45 Do the systems allow any
motivated participant to advance and contribute, or are they stymied and
hamstrung due to cultural issues, training biases, economic disincentives,
hidden proprietary methods, or outright political interference?
To get to any effective localization effort, HRD is merely a tool. The
means are there. Using either the training cycle or competency-­development
methods, results can be derived.46 But is the empowerment also available? If
people are trained for and can do the job to accepted international standards,
are they being given the opportunity to do it? These issues supersede the
mechanisms only. Yet it goes to the core of effectiveness and performance,
success in today’s world is about knowing how to do things.47 Without real-
ized empowerment of the know-how building, much HRD is largely then
a wasted effort in a big picture. This is the deeper issue that policy makers
must confront. A possible way to ensure ‘empowerment’ is to include it in
all the investing contracts on the front end. It won’t be popular with inves-
tors, but old ways of doing things are changing, and are contexted against
the information age we all now live in, not the colonial era.
Unfortunately, neither detached governments nor profit  driven (and
especially market-share-obsessed) companies have a vested interest in pro-
moting this  human development viewpoint. It will most likely be civil
society and progressive (so called ‘grass roots’)  government that will
ensure institutionalizing development rights as they must though, if real
economic nationalization based on a nation’s competitive industry is to
happen. We will see further in Chapter 7, Localization, what political hur-
dles need to be overcome to realize these issues, and the actors who must
be accountable for this to happen.

Notes
1. Becker, G. (1993). Human capital: A theoretical and empirical analysis, with
special reference to education (2nd ed.). New York: Columbia University Press.
2. Coleman, J.S. (1990) Foundations of Social Theory. Cambridge, MA:
Belknap.
136  W. HICKEY

3. Rifkin, J. (1995) The End of Work. New York, Putnam Books.

4. Robert Mager, performance issues, and Thomas Gilbert, career ladders,
are both in the ‘HRD’ Hall of Fame.
5. Fitz-enz, J. (2000) The ROI of Human Capital, New York: Amacom.
6. Rothwell, W. and Kazanas, H.C. (1994). Human Resource Development: A
Strategic Approach, Amherst, MA: Human Resource Development Press.
7. Gary Becker, Nobel Prize facts, http://www.nobelprize.org/nobel_
prizes/economic-sciences/laureates/1992/becker-facts.html
8. Mager, R.  F. (1990) Measuring Instructional Results, 3rd Ed. Atlanta:
Center For Effective Performance (CEP).
9. Rothwell, W. (2015). Effective succession planning: Ensuring leadership
continuity and building talent from within, 3rd Ed. New York: AMACOM.
10. Rothwell, W.  J. (2005) Beyond Training & Development: The
Groundbreaking Classic on Human Performance Enhancement, New York:
AMACOM.
11. Yamada, T. (2010) Restructuring the California State University: A Call to
Action. The NEA Higher Education Journal, Fall: 91–106.
12. Mager, R. F. (1990), ibid, and Rothwell (2015) ibid.
13. Trompenaars, A. (1998). Riding the waves of culture. Homewood, IL:
Irwin.
14. Gray, K. and Herr, E. (1998). Workforce Education: The Basics, Boston: Allyn
and Bacon. See in particular: Basic Workplace skills, pp. 149.
15. Hofstede, G. (2001). in International HRM: Managing Diversity in the
Workplace, Edited by M. H. Albrecht. Malden, MA: Blackwell Publishers,
Trompenaars, A. (1998) Ibid., Hall, E.T. (1985). Hidden differences:
Studies in international communication. ­Hamburg: Gruner and Jahr. have
all written extensively on moving practices across borders.
16. Rothwell interview.
17. McGregor, D. (1960) The Human Side of Enterprise, McGraw-­Hill, and
Geil, H.; Bennis, W.; Stephens, D. (2004) Douglas McGregor, Revisited:
Managing the Human Side of the Enterprise. Canada: John Wiley.
18. Observed actual situation with Motorola expansion into China in the
mid-1990s.
19. Gray, K. and Herr, E. (1998), ibid., pp. 182–4.
20. There are three levels of essential skills necessary to develop people: Work
ethics (I), academic skills (II), and finally, occupational skills (III) or the
uniqueness to a workforce. Gray, K. and Herr, E. (1998), Ibid., p. 181.
21. Hofstede, G. (2001), Ibid.
22. This is a consistent theme of condescension toward unskilled locals by
colonial imperialists that persists to this day in a neo-colonial format. See
Easterly, W. (2006) The white man’s burden.
 HUMAN RESOURCE DEVELOPMENT: THE MEANS ARE THERE  137

23. Hickey, W. (2001). A survey of current and future training needs in Tianjin
(T.E.D.A.) China, Spring 2000. Performance Improvement Quarterly
14(2), 60–69.
24. Gray, K. and Herr, E. (1998), ibid., pp. 175.
25. Crozier, M. has written considerably on never underestimating people or
even societies to game entire systems.
26. How does directional drilling work? In Rigzone, training section, see
http://www.rigzone.com/training/insight.asp?insight_id=295&c_id=1
27. Chevron advertisement on Bloomberg, 2015.
28. Covey, S. (1989) The 7 Habits of Highly Effective People, Free Press. ISBN
0-7432-6951-9.
29. Rothwell, W. and Kazanas, H.C. (1994), ibid.
30. Mager, R. and Pipe, P., ibid.
31. Phillips, J. J. (1997) Handbook of Training Evaluation and Measurement
Methods (Improving Human Performance) 3rd Ed. Routledge, Taylor, and
Frances: London. ISBN: 978-0884153870.
32. Hickey, W. (2001) ibid.
33. Hampden-Turner, C., and Trompenaars, F. (2000). Building cross-­cultural
competence. New Haven: Yale University Press.
34. See Preece, J. ‘Lifelong learning and development: a perspective from the
“South”’ Compare: A Journal of Comparative and International Education
39.5 (2009) and see 23 Oct. 2009 and also  William Easterly’s work in
‘White Man’s Burden’.
35. Kenneth Blanchard and Philip Kotler are considered as gurus in their fields
of Organization, Behavior and Marketing, respectively, and command high
speaking fees as motivational speakers.
36. Dr. Laurie Bassi claims that Motorola training also yielded high returns on
training investments for many things, see http://www.agilevelocity.com/
blog/training-return-investment/
37. Wm. Rothwell presentation on Beyond Training and Development, Jakarta,
Shangri La Hotel, May 2009.
38. EITI or Extractive Industries Transparency Initiative has identified avenues
for corruption, see www.eiti.org
39. Schein, E. (1999) Process Consultation, 2nd Ed. Prentice- Hall. ISBN-10:
0201067366.
40. Intangible rewards are non-monetary based, but give one a feeling of
accomplishment or ‘pride in work’, see Daft, R. (2016) Management, 12th
Ed., Cengage Learning. See chapter on compensation. ISBN-10:
1285861981.
41. Interviews with Chevron and Exxon Mobil operation managers in
Kazakhstan and Indonesia, April–May 2006.
42. Hackman, J. R. and Oldham, G.  R. (August 1976). Motivation Through
the Design of Work: Test of a Theory. Organizational Behavior and
Human Performance 16 (2): 250–279.
138  W. HICKEY

43. Deming, W.E. (1986). Out of the crisis. Cambridge MA: MIT Press.
44. Lawler, E. III (1971). Pay and organizational effectiveness: A psychological
view. New York: McGraw-Hill.
45. Senge, P. (2006) The 5th Discipline: The Art of the Learning Organization,
2nd Ed., New York: Doubleday, and Senge, P. (2002). Human capital in
21st century organizations. In: Management: Inventing and delivering its
future. Cambridge, MA: MIT Press.
46. McLagan, P. (1989). Models for HRD practice. Alexandria, VA: ASTD
Press.
47. Rossett, A. (1998). A handbook for performance analysis. New  York:
Pfieffer & Co.
 CHAPTER 6

Energy Ownership

Introduction
Ownership in resources creates empowerment in them. This empowerment
devolves via control in citizen’s resources underneath their feet as opposed
to detached ownership by faraway central governments and foreign inves-
tors who have limited stake in  local outcomes. They must take control
of their resources to make the decisions that will affect them directly. It
is important to note that we are speaking mostly of non-­renewable fos-
sil fuels, coal, oil, and gas, not transient forms of energy such as a steam,
wind, fission, or sunlight that are more ambiguous in ownership structures
and constitute little of natural resource endowment. Will countries con-
tinuously burn their natural resources wantonly for fast economic gains to
engage more actively in the ‘consumption model’ of economic activity,1 or
will they take a go slow approach, realizing that the more they use impairs
their future generations both financially and environmentally?
With ownership comes responsibility. This requires some soul searching
that won’t be found on Madison Avenue, K Street, or Canary Wharf, as
it is not in their financial interest to promote citizens’ rights. Citizens and
grassroots society initiatives will require burden-sharing2 and responsible
development of fossil fuels in situ no matter how unpalatable this is to the
elites, financial services, and fossil fuel industry. In this aspect, much of the
problem of aggregated fossil fuel usage and the by-product of emission
are rooted in so-called ‘sovereignty’ of nations. A medieval construct of

© The Editor(s) (if applicable) and The Author(s) 2017 139

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_6
140  W. HICKEY

governance that still exists to this day in an age of globalization is testing

this very old concept.
Everything we do in today’s world from governance to trade to warfare
to international relations is framed around the concept of the ‘nation-­
state’ and its attendant framework of ‘sovereignty’. Most don’t give it
much more thought. Consider a definition of sovereignty from Stroud’s
Judicial Dictionary (1939),

A government which exercises de facto administrative control over a coun-

try and is not subordinate to any other government in that country or a
foreign sovereign state.

The nation-state defines who we are, it influences or is influenced by

local culture, and it creates baseline positions beyond question. Yet, exclu-
sive non-infringement of borders is not how the world works today in
the Information Age. Issues overlap: trade, migration, pollution. Merely
agreeing to ‘cooperate’ is a weak construct from which to approach these
issues if enforcement is sought. A concept rooted in the early seventeenth
century may not be the best context to address human and economic
development issues in today’s technology-driven world, but it is what
mankind is saddled with, and has to bear, for better or worse.3
Today, one considers the ‘Divine rights of kings’, ‘the sun revolves
around the earth’, ‘serfdom and slavery’, and the ‘earth is flat’ all as
extremely ridiculous propositions from a bygone era. No one would seri-
ously support such ideas or their legalities, and would be considered as a
laughingstock if they did. Yet, sovereignty and the nation-state is in itself
a medieval construct arising out of groups of nobles (not subjects or peas-
ants) seeking for an offset to the powers of monarchs. A construct that has
carried over and is accepted as a normal world governance today, enforced
with militaries, just as the Crusades and moral authority of the Pope were
enforced with the militaries of that era.

What Did the Magna Carta Really Propose and Can

We Utilize It in an Age of Burden-sharing?
The Magna Carta rights given to elite nobles in 1215 was a medieval fore-
runner of the nation-state before the Peace of Westphalia in 1648 which
eventually created the modern concept of the ‘state’ and ‘sovereignty’.
A historical discourse on both of these documents is beyond the scope
 ENERGY OWNERSHIP  141

of this work, but in short, key points emerge that clearly indicate these
laws formulated centuries ago are not in keeping with modern times in
the information society we live in today, complete with rising living stan-
dards, shrinking resources, and burgeoning populations all demanding
wealth redistribution. In both cases, the Magna Carta or ‘Great Charter’
and then later the Westphalian Peace formulated in what is now modern
Germany were not really about helping the denizens of specific locales, but
rather about protecting the rights of those with power and their wealth
in specific local. In the case of the Magna Carta, it was barons (the ‘elites’
in today’s parlance) who were questioning the ‘Divine Right of Kings’ to
rule over them unquestioningly4 (in this case, demands for higher taxes
to finance wars and land confiscation for those who disagreed, namely the
payers of the wars). The barons would have certain rights, and those rights
would be enforced by neutral courts, not monarchies.5

The Westphalian Concept of Nation-State

and Sovereignty

In the case of the Peace of Westphalia in 1648 in today’s modern Germany

(also called the Treaty of Westphalia), the rights of what were previously
baronies where enlarged to incorporate the concept of territorial integrity
of specific locations,6 which had previously been usurped by various kings,
Popes, and emperors since the end of medieval times. Ongoing wars, tur-
moil, and political instability had worked to none of the elites’ benefit. If
constantly fighting, they could never fully enjoy their riches or exercise
their rights of dominion. In a sense, Westphalia is the Magna Carta of
modern-day state formation.7
The concept then was agreed that all nations have ‘sovereignty’ (or
Staatensystem of exclusive jurisdictional rights) with no role for foreign
interlopers over their domestic territories. The Westphalian system is still
what defines today’s world order of governance. In both cases, it was the
elites that benefitted most from these constructs, in the Magna Carta,
barons, in Westphalia, a growing population of skilled guild workers and
artisans, or if one interprets it as economics, a rising middle class.8
Essentially, in Europe, the Magna Carta rendered important the rights of
the elites, while the Westphalian Peace rendered the past forms of dynastic
(kings), imperialistic (emperors), and religious governance (Popes) moot,
or introduced a system of localized elite control in a defined nation devoid
of foreign influences. A new form of governance that respected national
142  W. HICKEY

borders and was mutually reinforcing to uphold this order by all adherents
was created. Today, the concept of Westphalian nation-states system is
being openly challenged by some, however, not for promotion of ‘climate
change’ issues or assisting warn-torn countries with their refugee popula-
tions, but rather for raison d’être military interventions (ISIS), trade trea-
ties (TPP), and territorial claims (South China Sea). The elites are still in
charge. Most people have accepted the context of today’s Westphalian
system as a core given or undeniable proof. For example, every economic,
historical, and political text has framed the nation-state as the least com-
mon denominator of the last 350 years. That has not always been the
case; however, some even question if the sovereign state framework in
this Information Age era is relevant.9
Westphalia is an old concept that has gained traction mostly by enforce-
ment for elite reasons denuded from the Magna Carta in 1215 and is
very incapable of addressing the problem of a global public goods prob-
lems (climate change, refugee populations, etc.) that no one wants to take
responsibility for. Essentially then, under the Westphalian system, there
is no economic or political mechanism for resolving world encompass-
ing technological and economic realities. What happens when these issues
impinge on others’ rights outside the ‘neat and clean borders’ of a nation-­
state? This must change in the Information Age of our twenty-first century.
Peaceful relations, under North’s theory of natural state, serves to ben-
efit the elite actors of a society the most, as they then can enjoy and pro-
tect their status. The main problem with the Westphalian system today, as
with most laws written before the emerging Industrial Age, is that they
laid a foundation for colonial extractive practices of resources that specifi-
cally benefited elite interests.10 This became a logical successor to, the raw
mercantilism of the Spanish conquistadors and later the Dutch and British
East Asia companies, in that it created the concept of the state as an inde-
pendent entity, above and beyond criticism of its own domestic or internal
affairs. Whereby the internal structure shields and maintains introspection
of system as a whole, in other words, the system of nation-state exclusivity
in domestic decision-making becomes self-reinforcing.
The advent of the European Union in 1993 and the Maastricht Treaty11
whereby European countries are willing to cede some sovereignty for a
better regional cohesion is an initial attempt to break away from age-old
Westphalian dogma, yet itself is loaded with contradictions and weak spots
that the latest wave of Middle Eastern refugees has brought to a head.
Enduring unity while pushing back against diversity in old-line nation-­states
 ENERGY OWNERSHIP  143

(or what US Defense Secretary Donald Rumsfeld referred to as ‘old Europe’

in 2006) such as Italy, Germany, and France is the conundrum. Further, the
Westphalian concept is still a European invention, with the UK, Russia, and
the USA (due to its British colonial past) on the periphery, due to strong
interests outside the Continent. These three countries have all used the
Westphalian system for their advantage when conditions where right, or
ignored it outright when not to their advantage, with examples from the
US Revolutionary war to the Soviet Cold War providing fertile examples of
taxation, rebellion, alliances, and ‘realpolitik’ entanglements.
Other non-European societies and cultures, such as Persia, Sunni Islam,
Mayan ‘sun gods’, or dynastic China have long existed on a platform of
traditional order based on empire, religious homogeneity, or (perceived)
cultural superiority, albeit with their own nuances of manipulation, endur-
ance, and competitiveness. While today’s modern states have all accepted
the Westphalian system on the face (i.e. attempt traveling without a pass-
port), the substance in each of these regions tells different stories: pre-­
Islam Persia has had its own historical brand of statecraft, Mecca yields
more moral authority than any secular Muslim government, and China
has always relied on regional political hierarchies that it set the tone for,
with lesser kingdoms and vassal states playing tribute and subordinate
roles to its desires (as is reflected with the ongoing South China Sea ter-
ritorial dispute between China, Vietnam, Malaysia, and the Philippines, a
huge sea area China has claimed as its own, and with a recent land grab
reinforcing the adage that ‘possession is nine-tenths of the game’).12

Globalization and Sovereignty
We must then consider a twenty-first-century perspective of sovereignty
that is not strictly grounded in a seventeenth-century Westphalian under-
standing of ‘nation-states’ free from any foreign influence or directive and
thus totally autonomous, but rather ‘sovereignty’ in a context of today’s
‘Globalization’ issues. In short, globalization impinges severely on many
international themes and issues that cut across borders: climate change,
currency wars, beggar-thy-neighbor protectionist policies, product dump-
ing, human migration issues, and labor issues. Globalization thus affects
all facets of modern man, some in direct apposition to Westphalia.
In the long run, the context of globalization is multi-planar. It is not
merely a linear economic construct of one country impinging on (such
as China dumping cheap steel on Japan)  another, upgrading another
144  W. HICKEY

(Singapore enhancing the wealth effect in Malaysia), or utilizing another

(Mexican maquiladora’s supplying US retailers). Globalization is not a dis-
crete system. Globalization can be considered from the viewpoint of the
actor, either investor or host country along the following spectra regard-
ing ‘driver’ or motivation aspects (Figure 6.1):
Idealist–Materialist (driven by ideas or a result of convergence of new
processes). In this case, is globalization put forward by going interna-
tional, such as Aharoni’s concept of ‘Go International’ in the early 1970s
and was predicated by Japan or is driven by ripe conditions, such as ‘Blue
Oceans Strategy’ of new (but existing) markets such as Korea investing in
Mexico or Indonesia?
Individualistic–Structuralist (agency by actors or a product of in place
systems, i.e. clusters). Singapore would be considered an example in both
cases. The late founder Lee Kuan Yew as an individualist had a clear vision
of wanting to make Singapore an outpost for finance in developing Asia.

Fig. 6.1  3-D of the X, Y, Z, ‘Spectrum viewpoints of Globalization’ (Adapted

from Scholte [by Hickey])
 ENERGY OWNERSHIP  145

On the other end of this spectrum, Singapore due to its ‘structural’ strate-
gic location and hub for oil investing in Malaysia and Indonesia is home to
the third largest refinery operations in the world. We take this issue further
with HRD and energy with a case study of Sri Lanka refinery potential in
Chapter 10.
Objectivist–Subjectivist (objective knowledge or a created construct).
We could consider this as in gold mines of SA/Namibia as objective
knowledge of resources in situ and an entire community that was found
on development of this industry. Other objectivist areas to consider would
be the Middle East for oil or Central America for banana plantations.
A subjectivist construct would be Silicon Valley in California, USA, as a
technology hub ‘place to be’, another area would be the telecom cluster
in Finland that is now in decline.
The point is that all three paradigms, in the age of globalization, encom-
pass sovereign issues, and not only contribute to academic theories but
also can strongly influence all political decisions and thus policy creation
or realpolitik, which in turn influences and drives outcomes for better or
worse. These paradigms are not discrete at either anchor, there is no doubt
some in between areas, such as in the bipolar case of Singapore, where an
iconoclast leader drove one point concerning a world-class financial hub,
but also infrastructure and location was conducive for significant global oil
and gas refinery operation.
It is important to consider this construct in today’s Information Age
which supposedly supplants the nation-state as the bedrock of social orga-
nization and creator/protector of nationalization. Preparing the seedbed
or mindset then for socialization requires a deeper understanding for real
transformation to occur, again, far past limited Westphalian constructs of
sovereignty, and colonial (or neo-colonial) mindsets which tend to rein-
force a North–South thinking and thus neglect (at the least stagnation, at
the worst, incipient corruption) in most developing countries. Consider
the social issues created on these five interrelated aspects about a polarity
of old paradigms in today’s global setting versus change for new processes,
and the decision-making challenges of each for policy makers. These
groupings are discrete and not necessarily interrelated or even correlated.
Geography–Island Nations, such as Indonesia versus Block/Landlocked
Countries, such as Congo?
Production–Reshaping (outsourcing) or centrality of manufacturing
(physical cluster, like Canton).
146  W. HICKEY

Governance–Dismantling of Westphalia (Mc World) or reinforcement

of ‘sovereignty’ (China)?
Identity–Homogenous (Norway) versus Heterogeneous (Nigeria,
many ethnicities/cultures).
Knowledge Structures–Ontology/Epistemology versus Disciplinarian/
Convention.
We can see that they are all very divided aspects in regard to what
is happening with sovereignty due to globalization. In other words, no
common definition of what it is anymore. Despite wide disagreements in
governance, identity politics, and knowledge structure changes, there is
one agreement that all point to more globalization and interconnected-
ness with the world, not less. In essence, there is no going back to old
colonial models of resource extraction. Change is here to stay, is ongoing,
and must be transformative to benefit large swaths of people. All things
considered then, in a world begging for certainty, only education (again,
relevant education) has consistently improved the lots of the many in a
society, whatever viewpoint is taken. Education is core to HRD.

Competitive Theory
Without modern energy services and production, a country’s economic
competitiveness is doomed. Harvard University professor Michael Porter13
has argued that countries must use whatever competitive advantages lie at
their hands to get ahead. Especially in an age where renewable energy
remains costly/uncompetitive and seven-eighth of the world’s energy
source is still carbon based.
In lieu of HRD initiatives, consumer fuel subsidies, while long an
imperfect transfer mechanism, have become de facto most citizen’s only
tangible constitutional right then to the resources that lay beneath their
feet, relegated in positive law (legislated) and via implementation in pari
passu (meaning altogether, lockstep) distribution. There are two types of
fuel subsidies that need reflection.
Consumer subsidies are legally and structurally different than fossil fuel
producer subsidies. Consumer subsidies are the government subsidizing
retail energy purchased of oil, coal, and electricity. They are a haphazard
extension by legacy into a country’s citizens partaking of their own resources.
Producer subsidies are not devolved from constitutional law but are
instead a political contrivance using government largess, contractual
promises, and tax breaks to promote industry for a nation’s economic
 ENERGY OWNERSHIP  147

competitiveness, such as in Indonesia, Nigeria, and Venezuela, and espe-

cially in the USA. Producer subsidies are as they say, subsidies paid directly
or indirectly to energy producers.
Unfortunately, most economists do not clearly differentiate between the
two types of subsidies, nor do they consider the constitutional preroga-
tive of natural resource ownership rights reflected in them. Some devel-
oped countries with resources have bypassed consumer fuel subsidies due
to representative democracy highlighting a more public ownership in the
resources through transparency, revenue sharing, and the effectiveness of
their governmental institutions. Yet, they are few and not the norm.
The consumer fuel subsidy, however unsavory it seems, provides a
direct and instant competitive advantage in many developing countries by
keeping labor and transportation costs down14 and spurring, for better or
worse, endogenous (internal domestic) growth. This resource ‘dividend’
is enshrined and is therefore represented in the fuel subsidy. An OPEC
study in 200915 noted that removing fuel subsidies (consumer and pro-
ducer) tended to drive up unemployment and drive down national GDP
in the short term. If economies were resilient (which many developing
countries are not), it took about five years for the economy to overcome
the absence of the subsidy.
Unilateral action to remove subsidies, without other countries follow-
ing suit, thus raises competitiveness concerns in a nation. This is also in
agreement with this when countries are evaluated singularly; their eco-
nomic activity ‘declines slightly with fossil-fuel subsidy reform, but gener-
ally increases shortly thereafter’.16 The ‘generally’ reference here is of our
main concern. If countries are under external competitive pressures where
exports and labor costs are a major factor in economic success, generally
can become a rule, not an option.
In many overpopulated developing countries in the equatorial belt,
peoples’ daily livelihood depends on access to consumer fuel subsidies (see
Table 3, Appendix). They simply have too many mouths to feed, and most
people are poor. Many live on less than $2 a day, a subsistence level. In that
aspect, OPEC was correct: No studies to date have shown that removing
consumer fuel subsidies benefits the poor or increase economic activity.
A demand by OECD countries for developing countries to remove con-
sumer fuel subsidies would tend to reinforce a parroting of neo-colonial
policy and reinforce the North–South problem,17 while ignoring the fact
developing economies are not as resilient as OECD ones.
148  W. HICKEY

Worldwide, consumer subsidies for fossil fuels stand at over $400 bil-
lion.18 However, this does not take into account what undefined fuel
producer subsidies do, which, hidden politically, arguably account for con-
siderably more economic activity. Consider the 2 × 2 of what direct and
indirect produce subsidies constitute in Table 6.2.
Removing the consumer subsidy alone will not immediately promote
a ‘societal comeuppance’ to payment of ‘market prices’ without further
addressing producer subsidies also.19 It will only serve to make the most
marginalized more miserable and hopeless, those without access to educa-
tion and capital. The fact that people are willing to protest, riot, and risk
life and limb in street battles with the police when their subsidies are taken
away, on the recommendation of anonymous, supra-national ‘actors’ who

Table 6.1  Discrete social issues groupings of today’s issues facing sovereign
identity
Social issues groupings A B

Geography Island nations (Sri Lanka) Block countries (Kazakhstan)

Production Reshaping (outsourcing) Centrality (manufacturing hub)
Governance Cooperatives and unions A strict Westphalian definition
Identity Homogenous (Japan) Heterogenous (Malaysia) conflict
intolerance mitigation
Knowledge Ontological Discipline

Table 6.2  Types of producer subsidies (Source: Synthesized from Koplow et al.

2010, Mapping the characteristics of producer subsidies, OECD data, table infer-
ences constructed by William Hickey)
Producer Upstream Downstream
subsidies

Direct Production sharing Government grants for LNG/CG

contracts/tenders processing plants
Government floor supports Government tenders for foreign turnkey
on prices coal power plants and for new oil refineries
Direct pollution and tax
abatements
Indirect Pipeline easements and right New toll roads
of ways
Preferential labor/economic Larger port terminals
treatment
Military protection Expanded airports (especially for discount
air carriers)
 ENERGY OWNERSHIP  149

have no idea of the totality of the implications involved, shows this despera-
tion in action.20 Disenfranchisement of a right based on the consequence of
taking away a subsistence measure is what is the actual issue here and now,
and not an abstraction. This is the real ‘market economy’ in action: people’s
day-to-day economic survival and subsistence is immediately threatened.
The citizens of these countries are thus much more sensitively attuned
and certain of this immediate removal outcome than the experts in the
IMF, WB, UN, and IEA. These institutes suggest that governments (usu-
ally ones bereft with incipient corruption and cronyism) should abolish
the consumer subsidy and no doubt leave their citizens even further in an
economic abyss. In this case, the ‘market’ does clearly anticipate the out-
come reality: ‘cut the subsidy, and costs will rise’. Consider this comment,
for example, about need for Nigeria’s fuel subsidy in absence of other
remedies by Nigerian journalist Aneibo Nwamu.21

Were Nigerian leaders interested in the comfort of ordinary Nigerians, we

would not be living in the hell our country has become: no food, no shelter,
no jobs, no money, no electricity, no clean water, no fresh air. They have
allowed public education to collapse so that their private institutions can
thrive. New businesses are killed with multiple levies. Our leaders have not
seen the need for subsidy in any of these things that affect us directly.

Producer subsidies22 on the other hand are the unseen, the underwater
part of the iceberg, and arguably, the larger and more perfidious of the
two as their effects are more macro-economic, with large financial effects
on future generations that perpetuate the indemnity to foreign financial
interests many developing countries face. Producer subsidies come in two
forms: direct and indirect.
Direct producer subsidies, for example, are overt financial support by
a government for the coal industry to create jobs; tax exemptions and
payback concessions for the oil industry; government grants for develop-
ment of LNG processing plants; tacit military support for oil- and gas-­
producing nations, domestic and foreign.
Indirect producer subsidies foster fossil fuel dependence: larger air-
ports, five lane toll roads, taller bridges, port expansions. In other words,
infrastructure that enables and addicts societies further to the product.
Producer subsidies in total also ensure world political dependence on fos-
sil fuels. Koplow et al.23 point out that developed countries heavily utilize
producer subsidies, with the amounts largely unknown as systematically
endemic.
150  W. HICKEY

A standard argument, used by IMF, WB, OECD economists,24 and

others is that money saved by reforming subsidies may be significant and
should be used to transition to more effective policies to achieve the stated
goals of the original subsidies (e.g. job creation, education, health initia-
tives, or poverty reduction) without environmental downsides. The econ-
omist’s argument would be well accepted if the transfer mechanism from
any reduction of the fuel subsidy to a larger societal benefit was transpar-
ent and seamless,25 but unfortunately, it is not.
The reality though shows that many actors benefit from no transition
and enjoy the status quo well protected from outside influences.26 People
on the ground, due to a past precedence of mismanagement, incompe-
tence, political upheaval, and corruption, simply don’t trust their govern-
ments or leaders to make good on any future projects.27
Deeper than this is that removing fuel subsidies are not really ‘the best
economic or environmental arguments’ as they are at their core constitu-
tional arguments. Namely, who actually owns and benefits from the natural
resources under a citizen’s feet (especially when corrupt or autocratic gov-
ernments are not aligned with their people’s needs)?28 How is this own-
ership publicly reflected? Historically, from colonial times (late sixteenth
century forward), natural resources were considered as the expropriated
rights of the colonizers.29 With nationalistic movements that threw out
colonizers, especially gaining traction after WWII, constitutions enshrined
in their articles ownership of resources by all the citizens.30 This was in
part to make sure that the corporations and the foreign governments of
former colonizers would not return at some later date to lay claim to
resources that were left in situ.31
Economists and policy researchers have all written disparagingly about
consumer fuel subsidies time and again32 mostly in great empirical and
statistical detail, yet have never addressed or acknowledged the issue of the
constitutionality to the right to the resources in their consumer subsidy
removal opinions. Not a single one of these writers considers the legality
of removing consumer fuel subsidies. Fuel subsidies are considered as a
sanctioned, bad policy ‘choice’ of government for favoritism. In fact, their
arguments are clearly devoid of any constitutional perspectives, with many
rooted in anti-colonial history, and of course, the Westphalian system of
nation-state.
The assumption in their position is that the ‘state’ is always the best
actor and decider of all sovereign revenues and resource distribution,
again, a fully Westphalian ideal. In most of these constitutional arguments,
 ENERGY OWNERSHIP  151

the federal, state or provincial actor is considered as the  owner of the

resources, either in its own name or more foundationally, in the name ‘of
the people’ to utilize domestically or rent out (i.e. export) the resources33
for a greater public good.
But some might ask, is this a responsible position to be taken in an
information age, where state actors have demonstrated so many times to be
dis-aligned with the needs of their citizens, and at times highly corrupt?34
Where malfeasance, incompetence, favoritism, weak or non-­existent insti-
tutions, and so on can be quickly noticed by the public via instant media?
In other words, is the ‘state’ and its state-owned companies in many devel-
oping countries still the best modulator of the resource allocation for its
citizens?35 That may seem a very odd question, but it goes to the core
of the natural resource ownership issue. The state is seen as taking away
a right, not a privilege, from its people in the ownership artifact of the
fuel subsidy, without an ensured and legitimate mechanism for replace-
ment with equal integrity value. Consider, for example, that Kurdistan,
an autonomous region of Iraq, does not consider the state a legitimate
conveyor of its oil wealth and has begun shipping oil independently out-
side Baghdad’s dictates.36 Of course, where the current Iraqi state has
demonstrated incompetence and corruption that is damaging its society,
the Kurds have proven themselves quite efficient and autonomous.37
To understand this issue further, we consider the paradigm of an inter-
connected, information age world, similar to the way the framers of many
independent post-colonial countries following WWII and a complete
rebooting of the old system, referenced the new world they then found
themselves in.
As Haysom and Kane, in 2009 put it ‘many “first-generation” constitu-
tions of the 20th century were largely concerned with proclaiming national
sovereignty… This implied a homogeneity of the formerly colonised. With
respect to natural resources, their focus was on establishing these resources
as owned and for the benefit of the country, as opposed to their ownership
and exploitation by foreign entities or multinational corporations.’38
Five countries’ (and a US state) policies are considered which consti-
tutionally ensure the state’s (implied or directly ‘the peoples’) national
right of ownership to their resources: Indonesia, Iraq, Nigeria, Venezuela,
Norway, and US State of Alaska. The first four are also developing coun-
tries with populations that are significantly subsidized by fossil fuels (for
both the consumer and producer). Each constitutional article is also fur-
ther considered in light of its historical context, see Table 6.3.
152  W. HICKEY

Table 6.3  Constitutional Articles of five countries and US State of Alaska regard-
ing natural resources ownership (Source: Adapted from CIA Worldfacts, Hickey)

Indonesia (1945) Constitutional Article 33.3

Pop: 252 million The land, the waters and the natural resources within shall
be under the powers of the State and shall be used to the
greatest benefit of the people
Iraq (2005) Constitutional Article 111
Pop: 35 million Oil and gas are owned by all the people of Iraq in the
regions and governorates
Nigeria (1960) Constitutional Article 44
Pop: 179 million The entire property in and control of all minerals, mineral
oils and natural gas in, under, or upon any land in Nigeria
Venezuela (1999) or ‘Fifth Constitutional Article 12
Republic’ (Superseded the The mining deposits and of hydrocarbons, existing in the
1961 Venezuela Constitution) national territory, under the bed of the territorial sea, in the
Pop: 31 million exclusive economic zone and the continental platform, belong
to the Republic, are goods of the public dominion and,
therefore, inalienable and imprescriptible…The seacoasts are
public domain property
Norway (1814) Constitutional Section 19 [Administration of State
Pop: 5 million Property]
The King ensures that the properties and prerogatives of the
State are utilized and administered in the manner
determined by the Parliament [Storting] and in the best
interests of the general public.
US State of Alaska Constitutional Article 9.15
Pop: 735,000 All income from the permanent fund shall be deposited in
the general fund unless otherwise provided by law

Four of these countries were subjected to colonization (or outright

invasion as in the case of Iraq). Indonesia by the Dutch (preceded by the
Portuguese) until 1945, Venezuela until 1821 by the Spanish, and Nigeria
until 1960 (which is still a British Commonwealth country). All have sig-
nificant oil reserves, and additionally large, impoverished populations.
They all consider the resources as owned by the state (i.e. state ownership)
for the benefit of the people/public.
Norway is the control example. Oil was not discovered in the North
Sea until the early 1960s. Norway is bereft of imperial influence and took
a very transparent position with the oil industry on behalf of its citizens
from the start with development of an oil economy. There was a strong
impetus on using oil wealth to benefit future generations and institutions
for social welfare. In Norway’s case, consumer fuel subsidies were not
necessary to transfer oil wealth as ‘the best interests of the general public’
(Constitutional Section 9) were put forward by active democratization
 ENERGY OWNERSHIP  153

(via both parliamentary representation and populist mobilization) in its

resources and in accordance with its constitution.39
Further, Gylfason40 believes that Norway’s utilizing its oil resources for
its economic success lies in oil management and education initiatives that
empowered its economy by having all citizens equally gainshare sans the
influence of elite interests.41 More about Norway and its extremely effec-
tive localization of oil are discussed at length in Chapter 7, Localization.
Unlike in the continental USA, where property owners directly own the
rights to the resources under their property, Alaska (along with most coun-
tries in the world) does not recognize individual, private ownership of any
underground oil or mining resources since statehood in 1959.42 Yet, while
Alaska also has no consumer fuel subsidy, it transfers some of its vast oil and
mineral income each year by way of a paid dividend to all its citizens as indic-
ative of their constitutional ownership right. In 2015, the dividend paid to
all was over $2000,43 but will no doubt be smaller in coming years due to
collapsing prices. Nonetheless, both Alaska and the USA in general support
large producer subsidies, such as in tax e­ xemptions, pollution abatements,
preferential treatment, rights-of-way, pipeline easements, and military/coast
guard protection to make the US oil-based economy competitive.44
Developing countries in particular are under increasing market and foreign
investment pressure to reduce or eliminate their consumer fuel subsidies in
order to reflect more certain economic conditions. The issue then remains will
the people be better or worse off if the consumer fuel subsidy is removed, but
further, in lieu of removal of the fuel subsidy, what does the state propose to
replace it with to justify or indemnify their own citizens to the constitutionally
ensured access to the resources they effectively own? Perhaps no country is
experiencing this argument greater than in Nigeria, where clergy, medical doc-
tors, and lawyers have recently mounted strong protests against its removal.45
A realization then is that under the concept of positive law,46 the fuel
subsidy becomes the only obvious ‘tangible right of ownership’ to the
resources most citizens have as enshrined in their constitutions. By calling
for abolition of consumer fuel subsidies, supra-national economists are
then unilaterally dismantling a domestic issue of ownership. Thus, it is also
a legality issue, not merely a financial one. In other words, the institution
of economics has no legal precedent in overruling the positive law aspects
as is, without further adjudication or at least discussion. This can only be
rectified by constitutional amendment, if in fact ‘democratization’ is a new
political trend47 and goal of many nations.
Headlines such as in the Economist in 2013 that heralded ‘The economic
case for scrapping fossil-fuel subsidies is getting stronger’ are simply not
154  W. HICKEY

reflective of the domestic standing of the legal paradigm48 and thus mis-
guided in principal. The position then taken is vested in the mandate that
the government’s goal is to serve the majority. No matter how much waste-
ful, inefficient, or polluting that fuel subsidies violate natural laws (more
subsidies naturally mean more pollution), they are still the only ensured
artifice under positive law within the sovereign’s constitution. Furthermore,
normative law theory lends support to positive law because of its rational
nature, extended to individual micro-economic activity. In essence then,
positive law for the fuel subsidies trumps natural law as espoused by the
economists. They simply have no legal standing. Of course, a weak regula-
tory framework and compromised institutions can lend distortion to the
concept of ownership in many developing countries.49 That fact is obviously
pointed out in studies about foreign investment contributing to endemic
corruption, rent-seeking activity, and looting of a country’s resources.50
In fact, psychologically also, many feel entitled to this right of ownership
in their own resources, as per this quote in Venezuela in February, 2014.

Petrol is gifted to us in Venezuela because we are the source…We suffer

under massive inflation for everything else we need to buy; at the very least
we can benefit from our country’s own natural resources.51

Further then is the issue of global warming and climate change. There is
currently an economic disconnect between a subsistence threat to peoples’
immediate survival, which is in the moment, and climate change, which
while also a threat is more ethereal and abstract to many and can appear
an elitist concept. If citizens have an actual ownership quotient in their
resources or anything of value, they will be more inclined to husband and
conserve that resource. This also lends to the formation of trust and stew-
ardship of resources.52 So much has been written about environmental and
agricultural stewardship that this reasoning could naturally flow to the fuel
subsidy. While the entity of the sovereign state is powerful and accepted as
the common denominator in all economic arguments, we are in an infor-
mation age. When people can readily see where money is appropriated,
trust is built, leading to stronger social capital formation.53
It may well be argued that even if consumer fuel subsidies do ‘ben-
efit the rich more than the poor’,54 they can still contribute holistically
to economic activity. This creates jobs and labor mobility where there
may be none if fuel was much more expensive and demand suppressed.
A 2014 article in The Economist55 about fuel subsidies tends to demonize
the rich as benefitting unfairly and recommends cash transfer programs,
 ENERGY OWNERSHIP  155

which have been problematic with corruption in the past, as a better trade-
off. For economists to gain legitimacy on this issue, suggesting a value-
added proposition on the transfer mechanism from current ambiguous
ownership to one in defined specificity is crucial.
One other criticism of the Norway or State of Alaska revenue-sharing
model is that both places are tiny, homogenous populations that do not
have the ethnic, tribal, and cultural divides that mega-populated develop-
ing countries such as India, Nigeria, and Indonesia do. Another criticism is
that consumer fuel subsidies waste valuable state funds that could be used
in other areas. However, neither argument should preclude a citizen’s
constitutional rights or indirect dismantling of them by foreign actors, no
matter how ‘well intentioned’ the guise under a truly Westphalian system.

Fungibility of Money

If money is fungible, then by extension, so are natural resources. They are

different sides of the same coin. This concept should be considered in light of
India, which has a fuel subsidy in place that is badly straining state coffers.56
India has little oil and gas and must import these fuels. However, India has
tremendous coal reserves in Bihar–Odisha states, and high-quality iron ore as
well.57 These resources are mined, and while some are used for the domestic
economy obligations, many of the profits are spirited abroad for the benefit
of foreign investors.58 In short, monies realized from all resources should be
applied even handedly (again, pari passu) to the consumer fuel subsidy. In
other words, removing the fuel subsidy, while letting other resources be freely
exploited elsewhere in the economy, allowing for drift to foreign ownership,
does nothing to rectify or indemnify the legal issue of a constitutionally man-
dated ‘common ownership’ that can be referenced in the consumer subsidy.

The Future
At the time of this writing in early 2016, consumer fuel subsidies are being
phased out in many countries such as Nigeria, Venezuela, and Indonesia,
specifically due to pressure from foreign actors. Nonetheless, producer sub-
sidies, a systematic issue, are still intact. As the price of oil and commodities
has cratered in early 2016, the impact on national coffers has been negligible,
creating in essence a zero-sum game.59 Nonetheless, phasing out consumer
fuel subsidies does nothing to negate the constitutional ascription citizens
have in their resources. It only makes it more obligatory for a transparent shift
that the wealth from mobility to development becomes more transparent.
156  W. HICKEY

The excesses of colonization by foreign actors may have played a role in

the framer’s paradigm at the time constitutions were being formulated. In
that age, fuel subsidies and extending the resource wealth to their citizens
was envisioned as a way to correct past malpractices of resource looting,
albeit ambiguously, it was also used to secure political patronage. All the
countries listed in Appendix Table  4 were historically agrarian or with
nomadic populations but changed to commodity export economies.
Extralegal issues carry further future significance. What is the legitimate
authority of non-sovereign and supra-national actors, such as the WB, IMF,
and UN to influence or determine a country’s economic policies and share
responsibility for their success or failure? This is noted also in regard to any
legally binding international agreements such as climate change, under the
Kyoto protocol, where sovereign rights of a resources utilization may con-
flict with treaty obligations,60 and recently, the Paris Climate Conference in
late 2015, where a weak-binding consensus among nations was reached.61
As a reaction to this, politicians in developing countries are now pro-
moting a policy of economic nationalism (using their natural resources for
endogenous growth) to counter the North–South problem on their own
terms, for example, India stated it would continue to burn coal for its eco-
nomic development. How successful they may be with weak institutions
in place and incipient corruption remains to be seen. Economic national-
ism has been tried before in the twentieth century with poor results, from
Marcus Garvey in Liberia to Mao-Ze Dong’s ‘Great Leap Forward', to
Hugo Chavez nationalization of Venezuela’s oil in the early 2000s,62 the
barriers to success stemming again, from weak institutions and compro-
mised allies that generally have the elites’ wishes placed at the helm.

Summary
Industrialization has brought considerable and tectonic change to the world
and those resource-rich developing countries in particular. The construct of
the 17th century Peace of Westphalia, which was preceded by the medieval
era Magna Carta, was first about protecting elite interests and then later about
protecting their interests inside very discrete borders, devoid of religious inter-
ference or imperial overtones. That world no long exists. We are now in an
interconnected age which effects everyone across all borders, all the time.
Today, people clamor for higher standards of living worldwide. In many
developing countries with weak institutions, consumer fuel subsidies are the
only quotient that is the ‘tangible proof’ of ensured constitutional owner-
ship rights that citizens have in their country. However unpalatable this
 ENERGY OWNERSHIP  157

many seem due to a misallocation of resources that violates natural laws. It

is still the citizens’ incipient right by way of positive law that is enshrined
in their constitutions. Consumer fuel subsidies provide the poor with eco-
nomic subsistence, whereby fuel producer subsidies promote e­conomic
competitiveness in large-scale industry that tends to benefit elite actors and
their entities who control, but do not necessarily serve, those societies.
Removing the consumer fuel subsidy then based on the opinion of
non-elected economists, bureaucrats, and foreign actors (both investors
and supra-national organizations) is a usurpation of domestic power and
privilege set forth under the Westphalian construct of a ‘nation-state’
entity, that is legislated by positive law in the constitutional articles of many
countries, again as they are written, which is to empower the mainstream
based on an ownership principle of their natural resources. In other words,
what seems lost in many economists’ arguments is that the fuel subsidy
is the only ‘remnant-right’ people have in their own  resources.  Simply,
any unelected persona or advisor should not be arbitrarily or unilaterally
empowered to take away or quash this right of the people’s ownership of
their own property, no matter how ‘well meaning’ the intention.
In an era of increasing democratization, any removal of consumer fuel
subsidies then  must be brought before all the  enfranchised, and changes
enshrined by a new constitutional amendment, or at the least amendments
clarifying a ‘best governance’ of the resources. Norway is the benchmark
standard that has effectively upheld the ownership in its resources via dem-
ocratic support and mandates for transparent and robust institutions that
deliver on societal well-being, not with fuel subsidies ipso facto but with poli-
cies front ended into their resource extraction. Transferring the fuel subsidy
toward better and more responsible institutions is an integral ‘first step’ in
social capital building, but it must be transparent to be workable. This will
be the biggest challenge for many developing countries with unaccount-
able elites and their entrenched power that derives so much off the natural
resources already.
The idea then in an information age is to move away from the sanctity
of the nation-state as a sole legal arbiter, with its detached and un-­invested
supranational actors as advisors, and empower the individual in these coun-
tries when confronted with the realities of climate change, finite fossil fuel
resources, and development of their  future generations. More emphasis
should be on developing civil society, endogenous growth, and social capital
building and less on reforming compromised (i.e. corrupt) institutions, that
are historically influenced by elite interests anyway. Now is the ‘new’ order.
158  W. HICKEY

Table 6.4  Using the GTZ (Gesellschaft für Technische Zusammenarbeit, 2009)
and IEA (2011) studies on economic aspects developing nations with fuel subsi-
dies, Canada as control
Country Primary resources Consumer Fuel taxes as GDP per GINI
location (o) = fuel compared to US capita in coefficient
Offshore. (n) = subsidy petrol/diesel tax 2011 USD (WB )
Onshore rate (IEA (GTZ, 2009) (IMF 2013) Where 0 =
2011) perfect
equality

India Coal (thermal) 13.5 % Higher/lower $1400 37

Russia Oil and gas (n) 23 % Higher/higher $13,000 42
Libya Oil (onshore) 71 % Lower/lower $5700 N/A
(pre-uprising)
Nigeria Oil (offshore) 28 % Higher/higher $1500 44
Indonesia Gas and coal (o) 23 % Lower/lower $3500 37
Malaysia Oil (offshore) 20 % Lower/lower $9700 46
Angola Oil (offshore) 32 % Lower/lower $5100 59
Venezuela Oil (offshore) 75 % Lower/lower $10,600 39
Ecuador Oil and gas (n) 49 % Lower/lower $4400 47
Saudi Arabia Oil (onshore) 75 % Lower/lower $20,500 N/A
Iran Oil (onshore) 85 % Lower/lower $6400 45
Kazakhstan Oil and gas (n) 30 % Higher/lower $10,700 27 (from
2005)
Turkmenistan Gas (onshore) 65 % Lower/lower $4700 41
Uzbekistan Gas (onshore) 57 % Higher/lower $1600 37
South Africa Coal and gold (n) 7% Higher/higher $8100 65
Mexico Oil (offshore) 13 % Higher/lower $10,200 52
Canada Oil (onshore) 0% Higher/higher $51,000 32
(DEVELOPED)

Source: Compilation of GTZ (2009),63 IMF and IEA (2011) statistics regarding GDP and
fuel subsidies (Hickey)

Everyone can be heard. Everyone should be heard. Everyone must be heard

if we are going to solve pressing problems on an overcrowded planet.
Most orthodox economists and policy makers, pigeonholed in their spe-
cific disciplines, and furiously rearranging deckchairs on their respective
Titanics, seem oblivious of this new reality. Namely, the fact that the citi-
zens, not the governments and their special interests per se, are the actual
owners of the resources, challenges old methods. To remove the consumer
fuel subsidy only, without an ensured and transparent quid pro quo of equal
value with producer subsidy still in place, amounts to a theft of national
resources and an ongoing perfidious wealth transfer to elites, that the mar-
ket or civil society is well aware of and attuned to, in developing countries
with histories of corrupt and incompetent institutions (Table 6.4).
 ENERGY OWNERSHIP  159

APPENDIX

Notes
1. Nair, C. (2009) Consumptionomics: Asia’s Role in Reshaping Capitalism
and Saving the Planet. Oxford: John Wiley & Sons.
2. Moeller, J. (2010) How Asia Can Shape the World, ISEAS: Singapore.
3. North, D., Wallis, J.J.; Webb, S.  Weingast, B., (2007) Limited Access
Orders in the Developing World: A New Approach to the Problems of
Development. World Bank Working Paper Series (WPS4359), p. 20.
4. http://www.historylearningsite.co.uk/medieval-england/magna-carta/
5. Holt, J.C. (1992) Magna Carta p. 449.
6. Henry Kissinger (2014). ‘Introduction and Chapter 1’. World Order:
Reflections on the Character of Nations and the Course of History. Allen
Lane. ISBN 0241004268.
7. Risse, M. (2006) What to Say About the State, Social Theory and Practice,
Vol. 32, No. 4 (October) p. 671.
8. Risse, M. (2006) ibid.
9. Ibid., p. 698.
10. Easterly, W. (2006) The White Man’s Burden, London: Oxford University
Press.
11. http://www.cvce.eu/obj/characteristics_of_the_treaty_on_european_
union-­en-­beec7a53-4023-412d-a1ab-2c31b6a3c39d.html
12. China has recently built an airstrip capable of handling bombers in the
hotly contested Spratly islands and had warned off other countries from
approaching to near these new ‘developments’.
13. Porter, M. (1998) On Competition. Cambridge: Harvard University Press.
14. Hickey, W. (2013). Fossil Fuel Subsidies Help Asia Roar. Yale Global
Online,March,15,http://yaleglobal.yale.edu/content/fossil-fuel-subsidies-
help-asia-roar
15. IEA, OPEC, OECD, and World Bank (2010) Analysis of the Scope of
Energy Subsidies and Suggestions for the G-20 Initiative, joint report pre-
pared for submission to the G-20 Leaders’ Summit (Toronto, June 2010).
Indeed, the study showed that removing the consumer subsidy (p.8,
would cause a minus 3.4 percentage points drop in GDP, a CPI increase
of 4.3 % and an unemployment increase of 2.3 % in the first five years). See
http://www.oecd.org/site/tadffss/49006998.pdf
16. Ellis, J. (2010) Global Subsidies Initiative, Untold Billions, Geneva: Global
Subsidies Initiative, 3.
17. Sachs, J. (2010) Common Wealth: Economics for a Crowded Planet.
Penguin, New York.
160  W. HICKEY

18. IEA (2011) World Energy Outlook: Executive Summary, Paris: International
Energy Agency.
19. Koplow, Doug, Cynthia Lin, Anna Jung, Michael Thone, Lucky Lontoh,
and Chris Charles. (2010). Mapping the Characteristics of Producer
Subsidies: A review of pilot country studies. (Geneva: Global Subsidies
Initiative), August, and Ellis, J. (2010) ibid., OECD (2011), Koplow, D.
(2009) Measuring Energy Subsidies Using the Price-Gap Approach: What
does it leave out? (Geneva: Global Subsidies Initiative of the International
Institute for S­ ustainable Development), August. URL http://www.oecd.
org/env/cc/oecdandiearecommendreformingfossil-­fuelsubsidiestoimpro
vetheeconomyandtheenvironment.htm, Steenblik, R. and Wigley, K.
(1990). ‘Coal policies and trade barriers’. Energy Policy 18 (5) 351–367,
and Braithwaite, D., et al. (2010). Fossil Fuels – At What Cost? Government
support for upstream oil and gas activities in Indonesia. (Geneva: Global
Subsidies Initiative of the International Institute for Sustainable
Development). This has been a constant drumbeat from the OECD, IMF,
and WB economics crowd.
20. Trying to remove fuel subsidies in Nigeria, India, and Indonesia over the
past several years has resulted in rioting and transportation shutdowns. See
Hickey, W. (2012) Time to End Fuel Subsidies? Yale Global Online. URL
http://www.yaleglobal.yale.edu/content/time-end-fuel-subsidies
21. http://leadership.ng/columns/360949/much-fuel-subsidy.
22. Koplow, et al. (2010). ibid.
23. Koplow, et al. (2010), ibid.
24. All major international studies by (IEA, OPEC, OECD, World Bank,
2011) follow this thinking. In IEA, OPEC, OECD, and World Bank
(2010) Analysis of the Scope of Energy Subsidies and Suggestions for the
G-20 Initiative, joint report prepared for submission to the G-20 Leaders’
Summit (Toronto, June 2010).
25. 1993 Nobel Prize economist Douglas North has written about a nation’s
institutions promoting better economic development. See: North, D.
(1990) Institutions, Institutional Change, and Economic Performance.
New York: Cambridge University Press.
26. Pinto, P. and Zhu, B. (2009) Fortune or Evil? The Effects of Inward
Foreign Direct Investment on Corruption, Saltzman Institute of War and
Peace Studies (SIWPS) Working Paper No. 10.
27. This is especial problematic in Nigeria. See http://www.vanguardngr.
com/2012/01/fuel-subsidy-removal-tips-for-efcc/. Additionally, North
has written on this issue of elite actors controlling societies and institutions
from the beginning of recorded history for their interests, not denizens.
28. Ades, A. and Di Tella, R. (1999) ‘Rents, competition and corruption’.
American Economic Review 4, 9, 982–994.
29. Taverne (1996). ibid.
 ENERGY OWNERSHIP  161

30. Machmud, N. T. (2000), ibid

31. In 1946, immediately after WWII, the Dutch tried to reclaim parts of a
newly independent Indonesia, mostly for resources they felt entitled to
having been under their 300 years of colonial rule.
32. Koplow, et al., 2010, ibid.; Ellis, 2010; Steenblink et al. 1990; Braithwaite
et al., 2010; Porter, 2002; etc.
33. Resources in situ are mostly the property of the state, except in some
OECD countries (e.g. the UK, USA, Canada) where a private individual’s
ownership of resources in the ground is considered lawful. See Mc Harg,
A., Barton B., Bradbrook, A., and Godden, L. (2010) Property and the
Law in Energy and Natural Resources. Oxford University Press.
34. Pinto and Zhu, (2009), ibid.
35. Pegg, S. (2012) Social Responsibility and Resource Extraction: Are
Chinese Oil Companies Different? Resources Policy, 37(2) 160–167.
36. See http://rudaw.net/english/kurdistan/220520142.
37. The Kurds have exhibited this, no doubt, through considerable US inter-
vention, tutelage, and protection, starting with a ‘no-fly’ zone that was
installed during the first Gulf war in 1990.
38. Haysom, K. and Kane, S. (2009). Negotiating natural resources for peace:
Ownership, control and wealth-sharing, Centre for Humanitarian Dialogue,
Geneva.
39. Ryggvik, H. (2010) The Norwegian Oil Experience: A toolbox for manag-
ing resources? Oslo: University of Oslo, p. 113.
40. Gylfason, T. (2001), ‘Natural resources, education, and economic devel-
opment’, European Economic Review, 45, pp. 847–59.
41. Hatakenaka, S., Westnes, P., Gjelsvik, M., Lester, R. (2006) From Black
Gold to Human Gold. MIT Working Paper Series, MIT-IPC-06-004.
42. Berman, M. (2005) Economic Development Through State Ownership of Oil
and Gas: Evaluating Alaska’s Royalty-in-Kind Program. Institute of Social
and Economic Research, University of Alaska, Anchorage.
43. See http://www.adn.com/article/20150921/2072-2015-alaska-perma-
nent-fund-dividend-amount-announced
44. Environmental Law Institute (2009). Estimating U.S.  Government
Subsidies to Energy Sources: 2002–2008.
45. http://www.vanguardngr.com/2011/12/fuel-subsidy-removal-nba-
nma-join-opposition/
46. Laws that oblige or specify an action that establishes specific rights for
people. Kelsen, Hans (2007). General Theory of Law and State. The
Lawbook Exchange.
47. PEMEX and its changing of the Mexican Constitution to open up foreign
investment in its oil sector. See http://www.brookings.edu/research/
162  W. HICKEY

opinions/2013/12/23-mexican-energy-reform-opportunities-­­historic-
change-negroponte
48. http://www.economist.com/news/finance-and-economics/21593484-
economic-case-scrapping-fossil-­­fuel-subsidies-getting-stronger-fuelling.
49. North, D. (1990), ibid.
50. Pinto and Zhu, (2009), ibid.
51. http://www.telegraph.co.uk/news/10617632/Venezuelans-­fume-­as-
government-signals-end-to-free-petrol.html
52. Coleman, J.S. (1990) Foundations of Social Theory. Cambridge, MA:
Belknap.
53. Krishna, A. (2000) Creating and Harnessing Social Capital. Pp.71–93 in
Social Capital: A Multifaceted Perspective, edited by P.  Dasgupta and
I. Serageldin. Washington, D.C.: The World Bank.
54. Koplow, et al. (2010), ibid.
55. http://www.economist.com/news/finance-and-economics/21593484-
economic-case-scrapping-fossil-­­fuel-subsidies-getting-stronger-fuelling
56. Yet, even drastically falling oil prices in Feb. 2016 have not seen a subsidy
dividend materialize.
57. Shankar Gopalakrishnan (December 24, 2007). ‘POSCO: More a Curse
than a Blessing’. Economic Times.
58. Article 297.1  in The Constitution of India 1949 reads: 297. Things of
value within territorial waters or continental shelf and resources of the exclu-
sive economic zone to vest in the Union (1) All lands, minerals and other
things of value underlying the ocean within the territorial waters, or the con-
tinental shelf, or the exclusive economic zone, of India shall vest in the Union
and be held for the purposes of the Union.
59. Big savings on fuel costs in Indonesia, Nigeria, and India have failed to
produce any real societal benefit, though these promises were made by
incumbent politicians such as Modi and Jokowi.
60. Developing countries, according to Grubb and Depledge (2001), cur-
rently have no binding obligations.
61. Paris Climate Conference, Dec. 2015. Outcomes, see the EU’s http://
ec.europa.eu/clima/policies/international/negotiations/paris/index_
en.htm
62. From Marcus Garvey in Grant, C. (2008), Negro with a Hat: The Rise and
Fall of Marcus Garvey and His Dream of Mother Africa. New York: Oxford
University Press to Mao-Ze Dongs “Great Leap Forward” in Chang, J.
and Halliday, J. (2006) Mao: The untold story. London: A. Knopf, many
cases of industrial nationalization.
63. GTZ (Gesellschaft für Technische Zusammenarbeit, 2009) International
Fuel Prices, 6th Ed. Berlin: Federal Ministry for Economic Cooperation
and Development.
 CHAPTER 7

Localization

Localization effectiveness (or getting local citizens to do the jobs that

expatriate managers and technicians do), is of paramount concern to host
governments and investing foreign entities in developing countries today
as part of industrial nationalization policy platforms. Or is it? This chapter
is about effectively managing people resources to derive maximum benefit
from the total economic environment they are resident in, however, as we
will see, not all national governments subscribe to this ideal in substance,
there is considerable political trickery and deceit between the lines.
In today’s world, competitive advantage is denominated by skills in
the workplace, and only the employees that have them can meaningfully
­partake in the global economy. What denotes ‘meaningful skills’ can only
be solved via research of best practices and good policies. Nonetheless,
even the best skills can be mitigated if employment outcomes do not
reflect real value in the position with increasing compensation rewards,
and are subject to historical or cultural corruptive practices that must be
mitigated or contained. This issue then is not solely about education, but
empowerment and thus real economic opportunities.
‘Localization’, simply put, means finding local citizens to do the jobs that
are held by many foreign expatriates in host countries. It is also called ‘nation-
alization’ in some countries. Localization is not new,1 though it has not been
thoroughly researched. In the 1950s and 1960s, the British government was
gradually closing down the British Empire. Many former colonies in Asia and
Africa moved to independence. With varying degrees of success, the British

© The Editor(s) (if applicable) and The Author(s) 2017 163

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_7
164  W. HICKEY

administration moved to localize the administration before independence.

While much has been written on expatriate assignments and the value thereof
in transferring technology, and development of the international mindset,
the other side of ‘local’ development is not well understood.
Foreign governments usually  do not enjoy hosting large numbers of
highly paid and skilled expatriates whilst their own populace languishes or
is unemployed in a strategic domestic industry that requires large amounts
of FDI  (Foreign Direct Investment) to develop. Especially if that FDI
development is tied into some type of reimbursement package or guaran-
tee from the host government. Additionally, foreign investors seek local
goodwill, but are loathe to give up desirable technology or proprietary
systems, lest it fall into competitors or future competitors hands. A balance
must be struck. However, politically it has become expedient to buy off
local leaders so that investing companies do not have to spend long-­term
resources on human development. Unfortunately, political expedience,
engineering culture, and economics can and do encumber the talent devel-
opment initiative. Additionally, tried and true Western methodologies of
talent development (SP, HRP, HRIS, competency development, etc.) can-
not be assumed without strong consideration of these extraneous factors.
Politically, it may feel safer for an anti-democratic regime to ‘external-
ize’ the skilled elites. If the skilled elites grow to become middle-class
managers with more democratic aspirations and a social ‘revolution of
rising expectations’—the anti-democratic regime can conveniently define
them as ‘foreigners’, ‘expats’, cancel their work permits, export them, and
so on.

What Is ‘Localization’?
Localization, simply put in its most general definition, means getting local
citizens to do the jobs that are held by many foreign expatriates in a host
country. It is also called ‘nationalization’ in some countries, and is spo-
radically applied to nations by the oil and gas industry to moniker good
feelings, such as Angolization (Angola) or Yemenization (Yemen).2 It is
localized management development in regard to high-tech industry, labor-
intensive manufacturing, and resource mining (pejoratively: oil and gas
extraction) content.
Research shows that the issues of localization are increasingly significant
in today’s world. The mechanics of localization are not well understood,
nor have any world standard to model. Countries that have not truly local-
 LOCALIZATION  165

ized (such as Nigeria, Saudi Arabia, Russia, etc.) host a spectrum of social
problems and confrontational issues regarding their citizens and foreign
investment entities, at the least, pent up social instability (i.e. Venezuela);
and at worst, terrorism leading to outright civil war (i.e. Yemen, Libya).
Conversely, certain resource-rich Western countries and regions (Norway,
UK, State of Alaska) have used their considerable oil wealth for social
reform and jobs creation projects. This tends to benefit populations at
large under transparent public policies.
Countries seeking to compete for a share of the world’s high skills/
high-wage production in the information age must invest in the skills of
their people.3 This is not an optional issue. One explanation of poverty
and unemployment then is that they result from insufficient (and inef-
ficient) amounts of allocated human capital investment.4 In order to avoid
long-term impoverishment, countries need to develop their people (HR)
or human resources in areas that will ultimately give them a comparative,
if not outright competitive, advantage in today’s world economy. A macro
policy issue then is how to develop a countries management talent: either
holistically (via production, economic diversification, education, and safety
issues) or specifically (development of oil and gas professionals and techni-
cians for core knowledge content in upstream and downstream aspects).
Economically then, and, as discussed in Chapter 6, Ownership, or who
really ‘owns’ the natural resources of a country or a windfall investment?5
Elites tend to make power grabs for resources, excluding other stakehold-
ers. How accountable are the elites? Windfall revenues that accrue from
natural resources, particularly ones arising from capital-intensive industries
(i.e. oil and gas), have been associated with high levels of black and gray
market corruption, weak public institutions, and poor social policies.6 This
situation has been dubbed as ‘resource curse’.7 A partial explanation for
this is that large amounts of natural resources create leaders who are firstly
concerned about maintaining foreign investment, rather than any respon-
sibility with their constituencies.8 Consider that the converse can also be
true: countries with a paucity of natural resource endowments and high
rates of education (Japan, Ireland, Singapore, etc.), often have demon-
strated impressive rates of economic growth, and have excelled at politi-
cal transparency9 leading to democratic initiatives and more importantly,
sustained social capital.
Top management teams which are dominated by accountants and
engineers (a common HR pattern in developing country FDI projects for
energy and resources) like to prioritize cost-cutting and standardization/
166  W. HICKEY

procedures. But those priorities cannot be absolute, and are often damag-
ing to the very nature of service and service delivery that these same host
nations are trying to create. It is a major barrier to authentic development
of services management/marketing, true service culture, HR systems, and
authentic service quality.
Localization then, in a technical sense, has made host country’s citizens
developed, engaged, and meaningfully employed in the core economic
drivers of their economy at a competitive level.10 HRD incorporates four
academic disciplines in its foundations: management (including HR and
Project Management), education (with curriculum design), economics,
and communication (with cultural awareness).11
Programs, research, and policies (governmental, corporate, and NGO)
that enable and foster a holistic HRD mindset, as opposed to an engineer-
ing mindset,12 by way of specific human resource performance metrics and
mechanisms, are paramount to help the local population develop skills,
knowledge,13 and the awareness of the products and services created from
the extractive resources. It is not only about skills; it is about ­engagement,
and having opportunities available to utilize the skills gained. This is
human capital then on a very cognizant level.14
To foster development, action learning (via coaching, mentoring, self-­
directed, internships, etc.) with ensured full-time hiring placements must
be incorporated in the educational curricula. Part of this action learning15
cost must be placed on the investing entity which is unpopular among for-
eign investors.16 This will ensure a commitment to technology and know-­
how transfer, which in turn feeds empowerment. In exchange, universities
and poly-tech centers need to upgrade courses to meet market-driven skills
needs. Education is only one factor of the human development equation,
yet it is the most relevant to HRD metrics and interlinks strongly with
other areas.17

Selected Issues and History Precipitating

Localization
The more satisfactory examples of localization seem to have happened
where there were greater societal demands for transparency. A trans-
parency imperative seems to be a catalyst for better-quality localization
efforts. But in general, no satisfactory benchmarked overall models for
a coherent ‘localization’ process in developing countries have come to
light, though developed countries have them. The following developing
 LOCALIZATION  167

country examples are about localizing government, rather than business.

But, surely there has been a model with historic roots based on necessity,
or usually, political expediency.

Part 1: The British and Malaya

In the 1950s and 1960s, the British government was gradually closing
down the British Empire. Many former colonies in Asia and Africa were
moving toward independence and nationalist governments. With varying
degrees of success, the British administration then moved to localize their
administrations before independence.
We consider that in the early 1950s, in British ‘Malaya’, ‘Malayanization’
was notably well managed. This may be due to the fact:
–– Malaya was one of the most prosperous colonies in the British
Empire, with tremendous stocks of rubber, tin, and agricultural
products. Oil would be yet to have its heyday.
–– Many of the UK’s best-qualified colonial government officials
served in Singapore and Malaya. Additionally, the UK had learned
something from losing India in its crown portfolio.
–– There was strong pressure for transparency. Nationalization pres-
sures in a multiethnic Malaya were strong as were border issues
and redrawing them, particularly with Indonesia.
The British colonial administration then was fighting a very serious
communist guerilla insurgency in the 1950s, backed largely by Maoist
China. To ‘win hearts & minds’, an authentic political solution was
needed, to back up and justify the military solution. Therefore, through
the 1950s the British administration regularly and openly promised the
people of Malaya that they would soon get independence, plus national
developments to match. These promises were believed, and bought loyalty;
and correspondingly then there was a particular obligation of the British
to deliver on these promises to Malayans.
Later, these lessons would be imparted to the British hold in Hong
Kong, up until the handover to China in 1997. Did the British authorities
localize the administration of the colony of Hong Kong significantly, that
being well enough to carry over British traditions and legal administra-
tion? Did the last Hong Kong governor, Chris Patten, negotiate ener-
getically with China to preserve the localization achievements in Hong
Kong?18 These questions can be answered affirmatively.
168  W. HICKEY

Thus, political will and political responsibility of government is mani-

fest in any localization initiative. But is there any ‘strategic intent’ in
developing countries, to seriously localize development of people, infra-
structure, and economy? Along the lines of national interest such as in
nation-building?
Politically it may feel safer for any anti-democratic regime to ‘exter-
nalize’ their skilled elites. If the skilled elites grow to become a middle
class with more democratic aspirations, and a social ‘revolution of rising
expectations’—any anti-democratic regime can conveniently define them
as ‘foreigners’, ‘expats’, cancel their work permits, export them, etc.

Part 2: The Middle East and Oil

When the rulers of Dubai became aware that their oil reserves would run
out around 2010, they curtailed their spendthrift style. They started seri-
ous efforts to move away from a ‘one-horse economy’ managed by foreign
elites, toward a diversified and home-grown services economy in which all
Dubai people could work and have a stake. This has not only been Dubai,
others such as Bahrain, Saudi Arabia, and Kuwait have also realized this
need. Saudi Arabia, in particular, is trying to move ‘downstream’ with its
vast oil resources, that is creating products from oil, such as chemicals,
plastics, and medical products. This all requires tremendous educational
upgrading and upbraiding.19
Presumably, Kazakhstan’s ruler with oil, along with Turkmenistan’s
autocrats and their vast gas reserves, are still only scratching the surface of
vast oil/gas reserves, do not yet feel this need. How generalizable is this
pattern? At what stage in the evolution of poorly governed ‘gold-rush’
economies (oil/gas, gold, ores, diamonds, etc.) or arguably even casinos,
such as in the case of Macau, does a precipitate start with governments-­
who-­had-it-easy to diversification and localization are strategic national
imperatives?

Part 3: Localization Is Not Only

About Nationalism
Localization, it should be pointed out, does not only gravitate toward cash
rich products or services. Different industries have different priorities. In
production of consumer goods,  for example,  it has to do with invest-
ment to tap cheaper qualified labor in export economies for manufactured
 LOCALIZATION  169

products. Expatriate labor and staff can become extremely costly in com-
petitive industry seeking to make inroads in new markets. Consider that
fact that GE, Siemens,  Motorola, and Abbott Laboratories all had their
own ‘localization’ plans in place in China in the 1990s to utilize local
Chinese managers, and reduce expat staff, as soon as possible. In these
cases, it was not the host country seeking localization for nationalistic
reasons, but investors seeking localization for cost factors.
Again we have to consider who really ‘owns’ the natural resources of a
country, despite constitutional proclamations? Elites tend to make a grab
for resources, excluding other stakeholders. How accountable are the
elites held?
Additionally, the apartheid government of South Africa (SA)  from
1950 to 1985 had a clear policy of resisting independence (localization) in
its very large UN-mandated territory ‘South-West Africa’ (now Namibia).
In effect, South-West Africa became a fifth province of SA. This allowed
SA’s giant De Beers company to extract, at lower cost, and as a monopoly,
colossal quantities of diamonds from hundreds of kilometers of Namibia’s
beaches and the Orange River delta.
An analogous dispute started in Western Australia (WA), where the
economy was enjoying a long natural resources boom fueled mainly by
growing demand from China, Korea, India, and Japan for gas, oil, iron,
diamonds, uranium, and iron ores in huge quantities. Many of the agree-
ments were put in place, for up to 30 years.
In December 2006 the state premier of WA  (West Australia), Alan
Carpenter, sent a message to the global oil companies who were extract-
ing and exporting WA gas to the before-mentioned Asian countries.
Paraphrased, Carpenter said: ‘In the far north of our state you are very
profitably extracting and exporting our gas to Asia. We assisted you to
start up [using Australian taxpayer funding]. The scale of your operations
now are enormous, and growing. Meanwhile, in the far south of our state,
the Collie power station which supplies 90% of WA’s electricity, urgently
needs a strategic conversion from coal to gas fired. I propose that you
divert just 10% of your gas extraction and sell it, at cost, to the State of
Western Australia, as your contribution [social obligation] to our state
development. Reasonable, considering how we have welcomed you into
WA.’ The response? The WA private sector and some of the mass media
fell on Carpenter’s head like a ton of bricks. He was accused of being
‘naive’, of ‘not understanding business’, and other name-calling such as
being a socialist.20
170  W. HICKEY

There are also barriers to a clearer understanding and policy formula-

tion in complex social/political situations. Intricate, multidisciplinary situ-
ations (the norm in business) cannot be clearly ‘seen’ by the radar of most
academics or even government officials, who may be too specialized and
try to put the ‘subject’, or the definition of the situation, into a limited/
specialized box. This also reflects the excessive dominance of ‘engineers’
attitude’ or as Schein put it, the engineering mindset, where large, abstract
problems can be neatly solved by mathematical formulae or discrete vari-
ables. Social science as we know, doesn’t work that way. Nonetheless,
most leaders in developing countries, such as the CCC tend to come from
strong engineering or mathematical backgrounds, in countries where the
best and the brightest study ‘STEM’ subject, not social, psychological,
communication, or legal sciences. Social issues become a distraction and,
indeed, a threat to their political mandates. This attitude is resistant to
improvements and limits the relevance of social outputs.
In passing, this viewpoint of management culture toward development
also damages creation of service enterprises, by becoming a major bar-
rier to authentic people development, true service culture, and authentic
service quality. Likewise, top management teams, which are dominated by
accountants and engineers (the common pattern) like to prioritize cost-­
cutting, standardization, and procedures. But those priorities cannot be
absolute, and are often damaging to the very nature of service and service
delivery. At best, these priorities can produce simple cafeteria-styled ser-
vices (efficiency-centered). Enterprises which aim to deliver sophisticated,
expensive, value-adding, higher-profit services (effectiveness-centered)
need a top management culture which is appreciative of marketing, educa-
tion, and human resources. Nonetheless, finance and engineering still set
the management tempo regarding resource extraction and its overall effect
on human development.

The Mechanics of Localization

Measured Outcomes or the criterion of ‘what should be’21 are a key part
of any successful localization endeavor, as opposed to various subjective
measures which are currently desired by most foreign oil and mining com-
panies and their respective host governments. Measured outcomes are
criterion-referenced rubrics,22 and can be measured formatively (changes
made during a process) or summarily (endgame results) after a project has
been completed.23
 LOCALIZATION  171

Subjective outcomes are not strategic and can be changed at will, politi-
cally manipulated, or expediently ignored to boost profits in the short
term. An example of subjective outcomes is found in many corporate
management localization plans (Figure 7.1), as it can be seen from this
actual ‘strategic intent’ that no discernible outcomes are derived, only a
never-ending wheel of ‘development’. No summative results are gained or
embedded.
A true outcome variable of a successful localization then would be in
the actual employability of the individual across all spectrums of a multi-
national company’s operations. (I.e. sending a local Ecuadorean geolo-
gist to Exxon Mobil’s Chad field operations or a local Indonesian project
­manager to Shell’s headquarters in the Hague, for employment not more
training.) Short of these milestones, other more detailed rubrics would
be to fully develop locally skilled talent to certain prescribed interna-
tional standards of operation, for example, an API (American Petroleum

Develop sample
Focus on actual description of the
performance; Strategic Staffing right employees
flexible – Define
compensation Transfer right
requirements for people from
system and
competencies/ right places
advantages Retention Hiring
help retain hi- skills and
pot employees
Right people with
Monitor Right skills in Right Develop skills and
performance places at Right time competencies

Ranking of • Define lack of

actual competencies/
performance is
Nationalization – skills
the basis of fair Develop Mentoring • Develop
communications
payment,
leadership skills
promotion and
• Monitor
respect. • Develop national • Develop a development of
leaders within the process to skills.
Company transfer
knowledge

Fig. 7.1  Example of a typical Western energy company’s localization develop-

ment schema in a host developing country (Source: Hickey)
172  W. HICKEY

Institute) certified pipe fitter or underwater welder for upstream oil opera-
tions or TAFE (Technical and Further Education) for coal mine develop-
ment and safety planning.24 While these certifications are required to work
in a US (or Australian) field operation for safety reasons, they are not
required in Kazakhstan or Nigeria. But, in fact the companies are spend-
ing millions of dollars (see section on PSC reimbursements) on measuring
existing ‘organizational capabilities’.
These reports consistently find that while a shortage of Western man-
agement skills exists in developing countries with resources, they offer
no applicable mechanisms to close those skills gap to the international
standards. These reports are largely written by US/EU engineers and field
technicians, bereft of any HRM input or outputs, or with even an under-
standing of the local culture. At the least this is defined as g­ eocentrism,
where certain regions, such as Korea, China, and Japan are lumped
together into one ‘learning unit’ by a multinational company, at the worst,
raw ethnocentrism, where only technicians and operators from the invest-
ing country can ‘do things correctly’.
Part of the problem is that the foreign management teams assessing
these human resource deficiencies are trying to introduce a paradigm of
Western thinking into a developing country culture, without an under-
standing of that culture and its acceptance readiness. Research has pre-
viously demonstrated any HR-imposed solutions devoid of cultural
relevance will have narrow results (see Figure 7.2), have demonstrated the
power of cultural relevance in regard to increasing evaluation outcomes.25
It is of interesting note that corporate-wide management development
‘wheels’ are usually devoid of any cultural relevance and follows Model ‘A’
of a non-corybantic, ethnocentric evaluation.
Geert Hofstede’s individual/collectivist dimension is frequently cited
in most management literature as a cultural value, however in rapidly
changing international work environments, ‘collectivism’ is now an old
paradigm. More relevant and contemporary work on this has been done
by Fons Tromenpaars and Charles Hampden Sydney-Turner26 regarding
overall individual’s societal perceptions of universalism/particularism.
That being the ‘West’ carries evaluation of programs as black and white,
developing countries in particular Asia, carry more ‘gray’ areas. Much of
this has also been discussed in the long-term work of Harry Triandis et al.,
concerning the transfer of learning across varied cultural audiences.27
 LOCALIZATION  173

Fig. 7.2  Cultural training evaluation of HRD deficiencies by design, precisely,

and corybantically (Source: Hickey (2004) Performance Improvement Quarterly
17, 1, 88)

Competencies of Localization

Measured development competencies thus demonstrate results, not ‘wish

lists’ of things that might/should/could develop. However, in the case
of localization, total project outcomes, or summative results (as forma-
tive results represent constantly moving yardsticks), need to be measured
specifically in the realms of doing and enabling for some key areas. (See
Table 7.1. for drivers).

1. Technology and Know-How Transfer—Are oil and gas, mining, skills

in finance, engineering, geology, operations, maintenance and
accounting methods, and all processes from upstream to midstream
(exploration, production, refining) actually being transferred to
local citizens? If so, how is this transfer being measured and evalu-
174  W. HICKEY

Table 7.1  Matrix of localization competency drivers (both educational and

policy)
Host country localization drivers

1. Industry-specific training programs?

2. Management development programs
3. Relevant local government-sponsored retraining programs?
4. International development programs that promote localization (i.e. USAID, EU
OSCE, UN, Soros)?
5. Host government costs reimbursement or favorable financial/tax status granted to
localizing companies?
6. Local university curricula reflective of the strategic host country industry?
7. Local university partnerships with the foreign companies or universities?
8. Community development funding from the strategic industry?
9. Visa procedures and work permits clearly tied to advancing localization initiatives
and host country interests?
10. Work permit fees tied to retraining initiatives of locals (i.e. US H1-b types of visas
to re-educate citizens)
11. Government-mandated technology-transfer outcomes and milestone expectations
(i.e. regressed reduction of expats/increase local hires)
12. Interchangeability of terms in usage of contractors versus usage of full-time local
employees?
13. Accounting loopholes that define costs associated with locals as operational or
capital expenditure to offset taxation or mitigate tax rates
14. Advancement of locals to key HQ management positions abroad?
15. Narrowing of compensation ratios between expats and locals
16. Localization initiatives designed by HR professionals and educators?
17. Unemployment rate (U.N. 2013)
18. Rank on UN Corruption Index
19. GINI Coefficient (Rich/poor ‘gap’)

Source: W. Hickey

ated by these industries?28 Localization cannot be simply about ship-

ping a machine to X developing country or creating a turnkey power
plant in land Y.
2. Skills Development—Are current management, operations, market-
ing, procurement, and HR/inter-office methods being trained for?
Will employees benefit long term? Are the skills portable? Are the
skills scalable? It should be noted that major energy companies such
as Exxon, Shell, GE, BHP, Rio Tinto, and ABB, have their own ‘in
house’ universities for management and leadership development of
employees, and in-house project centers. Thus, there is no legal
 LOCALIZATION  175

mandate, meaning an acknowledged and mandated government

center or appropriate venue to train locally or to even transfer any
technology or know-how. It is all up to the companies in the how,
when, where, and why training is conducted.
3. Employability—Is full employment with specific hiring targets by
position, and with measured succession toward leadership positions
(especially middle and upper management positions), linked to the
price of oil, gas, coal, or CPO and the overall demands of the indus-
try? Are upper management positions primarily reserved for expatri-
ates, with only a few token political positions relegated to locals?
4. Compensation—Narrowing  and leveling the huge wage disparities
between locals and expatriates where technology transfer and skills
development progress occurs until the skills gaps narrow and even-
tually disappear is paramount. Huge rewards differences (the con-
cept of ‘equal pay for equal work’29) breed resentment and hurt
organizational cohesion. On average, across many extractive indus-
tries local developing country employee (Africa or Asia) earns
around $1000 a month base cash versus $300,000 a year total com-
pensation for a Western expat secondee from Houston or London.
This difference is astounding and is a looming issue; although the
trends have been falling lately in part to increased skills gains from
locals studying in Western countries and then returning home. Part
of this is also due to the neo-colonial extractive agreements, where
expatriate salaries and benefits are reimbursable, again at full costs to
the host government, and not subject to question or renegotiation.
5. Local Content—Are products and services with the required skills
inputs being developed and manufactured locally, that match up to
world-class and Western quality standards? How is ‘progress’ in this
area measured? Is it measured by GDP (overall foreign direct invest-
ment) or by GPI? While local content is an area much discussed,
mechanisms outside of taxes and fines are few. Getting to local con-
tent requires significant know-how investment few companies or
investors are prepared to either do or contribute to if the contract
does not call specifically for it. Further, companies can hide behind
the mantra of ‘proprietary information’, whereby key skills are not
transferred. The table provides know-how drivers for current local-
ization programs and initiatives.
176  W. HICKEY

Fostering Innovation and Competitiveness:

The Roadmap Is There
Strengthening local economies and mindsets is core for any innovation
effort that will lead to total localization. In this realm, the government is
not really the savior all the time. The real future of localization is in devel-
oping brainpower industries via these in situ natural resources. Several
developed countries have derived brainpower industries from their natural
resources in different stages. While fossil fuels are not the best model to
benchmark for innovation and competitiveness, they are in fact the biggest
players (by sheer size of economics and political impact), and most impor-
tantly, their best and worst practices can be benchmarked and t­ ransferred
to alternative energy forms when their economies of scale become more
apparent and sought after. Thus the oil and mining industry is an accepted
baseline for what has and needs to happen to get to effective localization
ideal and bypass malpractices that were the result of bad or non-transpar-
ent policy.
There is no sense then in writing about how HRD can be an all-­
encompassing panacea to any localization effectiveness effort if it is sty-
mied by political (PSCs or producer subsidies for oil and gas), economic
(Turnkey projects or foreign investment on purely financial, bereft of any
development terms), and systems constraints (NPPs requiring highly spe-
cialized knowledge to operate, even for many mundane tasks). Localization
is about getting the biggest host country development bang for the buck
for its citizens. HRD is the main, but not the only mechanism to get there.
In this sense, HRD has to be strategic to fit, and well integrated in order
to deliver results.
All companies in today’s resource extractive businesses in developing
countries demonstrate some type of localization plan to fulfill CSR initia-
tives. But that is usually the contractual end of their obligation. However,
and this is key, a real localization effort for results must also be enshrined in
host government policy, namely economic and educational development
in our twenty-first-century information economy. Without this, localiza-
tion initiatives become unstructured and unfocused. There is no sense in
detailing any localization plans without policy, they merely become wish
lists easily manipulated for political or payoff reasons, and mostly sitting
on shelves. As localization plans are ethereal without a policy foundation
their real value remains hidden and suspect.
 LOCALIZATION  177

But there is more than just policy. As discussed in Chapter 6, transparent

ownership of a nation’s resources fosters buy-in from the locals. A con-
structive method of demonstrating ownership in today’s Information Age
is in empowering people (again, the WB definition of empowerment) to
take part in their production, utilization, upgrade, and maintenance. These
are all large areas of employment. And a model does exist of how to do this,
as before referenced, Norway with its North Sea oil finds in 1962.30
The Norwegian experiment institutionalized sound measures to bring
the wealth of its resources demonstrably to its people, setting it on the
path to self-sufficiency in the extractives industry. However, there are
some caveats one needs to be aware of in regard to Norway that will serve
as limits to its full application to developing countries. Of course it can be
strongly argued that Norway is not a proper example to use as a roadmap
for localization in developing countries, for several reasons. Nonetheless,
to what an ideally structured localization should look like.

1. Norway is a highly developed European country in Scandinavia with

a very transparent legal system. One may argue that it was then,
before oil was discovered, in 1962 a largely agrarian society with low
education levels. Nonetheless, it also had a long history as a union
with Sweden before dissolution in 1905, with a firm foundation in
the rule of law underpinning its Scandinavian existence since 1397.
2. Norway’s population compared to most developing countries is
relatively tiny. With only 5 million people and few foreigners, about
5 % of its makeup. Its entire total population is barely half that of the
developing country capital megapolises singularly alone of Jakarta,
Lagos, or Sao Paolo.
3. Norway, despite world mobility and migration trends, is still largely
homogenous ethnically, socially, and culturally with a largely white,
culturally homogenous population. Most developing countries have
the ‘push and pull’ factors and co-existence of large ethnic, reli-
gious, and socio-economic diversity: Islam and Christianity in
Nigeria, Chinese and Malaysians in Malaya, slumdwellers and the
middle class in Brazil, the caste system in India. Significant bipolar
or omni-­polar issues exist in the developing world, whereby Norway
is shielded from them.

Norway then best serves as an educational ‘best-practice’ template melded

with effective government policy to promote a cluster industry for oil and oil
178  W. HICKEY

services. In this case, offshore oil fields and all its attendant workforce issues
of exploration, production, shipping, machinery, maintenance, and services
being translated through educational policy to promote local engagement.
Left to their own devices, original investing oil companies would have
(and actually wanted to as they previously had in the Middle East and
Asia) imported their workers and equipment from Texas, Netherlands,
and the UK to work on these industries whilst the local Norwegians raised
sheep and continued to make low-grade textiles for export, completely
bereft of what economic activity was happening off their shores, yet very
much inside Norwegian territorial waters.
The key to Norway’s localization success was that the Norwegian gov-
ernment policy mandated for investing oil companies to transfer skills and
know-how to Norwegian citizens. For example, the oil education hub of
Stavanger arose. Promoted by the government with institutes that were
oil and gas concentric for the offshore oil industry servicing Norway. Not
just any technology would do, it had to be specific, and relevant, for the
oil and gas industry in regard to how it fit Norway. The policies of the
Norwegian government from early on were tightly focused on building
domestic capacity. Yet, strategic leaders also knew that oil companies could
be capricious, that their interest in the North Sea might change over time,
and therefore, any government participation had to be balanced with the
interests of the international companies, namely financial.
The establishment of Statoil, Norway’s state-owned oil company, from
the beginning reflected this: Statoil’s prime directive was to specify licens-
ing conditions and to promote technology transfer from foreign com-
panies to domestic entities. From the initial operations, the Norwegian
government sought to reward operators and producers who were mean-
ingfully contributing to Norway’s long-term domestic capacity building.
There were economic concerns that if development of Norway’s newly
found oil reserves were left purely to the markets’ ‘invisible hand’, the
Norwegian economy could be overwhelmed and collapsed by hot money
inflows, that is, the situation of the Dutch Disease (where huge and unmit-
igated foreign money drives up the value of the local currency, everything
becomes imported, and local industry and initiative withers due to non-­
competitive currency and workers). This is also an endemic problem in
developing countries that has occurred from the outset, such as Nigeria,
Angola, Ecuador, and arguably, today’s Russia. Countries then become
one-sector energy economies subject to the market’s ups and downs of
volatile commodity prices, such as are we are seeing today.
 LOCALIZATION  179

That said, Norway sought to be involved in its oil industry’s develop-

ment for the long haul and gain technical experience in these resources.
Until the late 1990s, even the Norwegian government encouraged mul-
tiple operator ownership in different oilfields not to merely maximize
financial returns, but to foster collaboration on strategy, development
solutions, know-how, and technology transfer.
One extremely important mechanism Norway utilized on its local-
ization drive was the establishment of ‘goodwill agreements’ in order to
enhance domestic academic research for the oil industry and create capacity
­development effectiveness. Under this especially aligned policy mechanism,
international oil companies could amass ‘goodwill points’ by contracting
oil- and gas-related research and development projects with Norwegian
research institutions and universities. This enabled them to become ‘pri-
oritized participants’ for deriving concessions on future offshore oil and
gas blocks in the Norwegian fields. This policy was implemented through a
precise system of evaluating operator contributions aligned with domestic
capability building initiatives. It cannot be understated that these initiatives
to the Norwegian educational system were very large, and are still paying
back huge dividends in the form of human capital today.  Norway has in
essence, shown that beneficial localization can indeed be done.
Further, financial incentives were given for research and development, and
the transfer of know-how along with contemporary skills was rewarded more
highly. It was this policy that effectively forced national and international oil
companies to develop Norway’s oil and gas human resources and its allied
knowledge base. It should be noted that in many developing countries (and in
some developed, such as the UK) building education or research capacity with
corporate entities is not an obvious priority objective for national and regional
authorities. Possible reasons for this are that educational initiatives themselves
become prisoners of their own curricula, which is tightly controlled by legal,
regional, and ministerial functions, and an extension of that is that in some
countries, companies are not legally allowed to fund public universities.
Of course all these aspirations took political willpower and determina-
tion, and it was accomplished in five noted stages, defined as follows accord-
ing to the MIT study: Localization, Upgrading, Internationalization,
Diversification, Delocalization. Each step was important in its own way,
and could lead to long-term value-added success in any developing coun-
try if applied earnestly. These steps, while stylized, cannot be omitted, and
follow a logical progression, however, they are not always in exact order.
Some countries, either get stuck at a certain stage, or try to ‘leapfrog’ the
180  W. HICKEY

progression, with questionable or contradictory results, largely due to an

inflow of mass oil revenues.31
Low-wage, race to the bottom,  manufacturing jobs to enhance an
‘export model’ cannot create this, inasmuch as it will only stagnate and
exacerbate problems with any skills development initiatives at the policy
level. We can see this happening today with the currency wars that are ongo-
ing in so many ‘export-oriented’ developing countries right now, each try-
ing to ‘out-cheapen’ each other for a piece of a very finite economic export
pie: Malaysia, Indonesia, Thailand, Nigeria, Angola, Sri Lanka, and again,
even China with its 2 % August 2015 devaluation, after years of currency
appreciation and IMF nomination as a reserve currency. That is through a
‘weakening of currencies’ or ‘quantitative easing’ to increase exports, with-
out having to change any deep-seated structural issues (i.e. workplace per-
formance problems) in their societies. There are many code words in the
world of finance that seek to obfuscate development. A weakening currency
means to devalue or depreciate a currency’s value so it appears it is cheaper
to buy in that money. In any event, it is only a shell game, devaluation is
most brutal on economies that must import foreign components and pay
for those components in foreign currency, yet, the sales proceeds locally are
paid in local currency. ‘Export oriented’ economies mean that domestic ser-
vices are weak or non-existent, gross national product is heavily dependent
on selling finished products and commodities (like oil, gas, coal, or ores) to
wealthier foreign countries. ‘Structural issues’ means that labor rules and
regulations (hiring, firing, and education levels) are rigid or fixed, and not
easy to dismantle. ‘Currency controls’ means that investors cannot easily
take profits out of a country, never mind foreign currency. A high hidden
cost structure greets foreigners and others wanting to invest or build busi-
nesses. Yet, the real value of a workforce comes in one built with knowing
how transfer and innovation are related to a strategic national industry. In
many developing countries, it is natural resources. Know-how must be the
foundation to move these developing countries forward. It cannot be just
about ‘cheap labor’. That is only one component.
We consider each stage and how it could apply in a developing country
context with natural resources formatted to create value, and by extension,
human capital development (which leads to social capital development)
and then domestic economic value, extending to services: Namely, higher-­
paying value-added jobs for all involved in the industry with a significant
knock-on effect in downstream related industry. Again, skills development
was integrated in the entire Norwegian process.
 LOCALIZATION  181

Localization—Many invested developing countries have already reached

this stage with their mature oil (onshore and offshore) and mining sectors.
Getting past this first step, to the next one requires that the original know-­
how (skills) in the industry are transferred back to local SMEs (Small and
Medium Enterprises), partners, and entrepreneurs. Local businesses (in
particular SMEs) seek out opportunities to enter the industry, often draw-
ing on native capabilities that can be adapted to the needs of the newly
arrived firms. ‘Infant industry’ initiatives such as incubators, may further
the localization process and its penetration. However, these initiatives must
be protected and nurtured, or else they can quickly fall by the wayside of
irrelevancy and become outdated. Just arriving at this stage does not say
much. Examples include Mongolia, Nigeria, and Indonesia. They all have
some form of national localization plan in different stages of undress.
Upgrading—Localized operations mentioned above begin to take
hold domestically and emerge in the industry. At this stage many ‘iza-
tions’ occur, such Angolization, Kazakhization, Vietnazation, and so on.
Specialized curricula begin to be introduced into universities to serve core
educational areas, based on market demands, not government mandates.
The development of products and services that are unique to the region
and are designed to meet requirements of the investing industry are a criti-
cal ‘threshold step’ to success.
Countries must reach this stage next in order to validate their localization
plans. In part, entrepreneurial incentives and some education ministry coop-
eration are needed to channel it more effectively. Both of these areas derive
from a business policy that is conducive to SME investment and talent build-
ing. If one travels to Pekanbaru, Riau, in Indonesia, where Chevron Pacific
Indonesia is or to Atyrau, Kazakhstan, where Agip-Eni’s operations are
located, or to Puttalam, Sri Lanka, where the China-funded Norchocholai
coal-fired power plant32 is, one quickly notices that, while overall economic
activity is high, many of the local population are not engaged meaningfully
in these energy businesses. They are mostly contributing as low-skilled ser-
vice providers at best. Most local management, strategic decision-making,
and localized engineering functions are carried out by graduates of a capital
city universities in Jakarta, Almaty, or Colombo, so no specialized curricula
for management, technology, or upgrade of these businesses has cascaded
into local universities or technical centers, that being if there are any univer-
sities, colleges, or technical centers in the locale.
Quite possibly, this is the most important step to get the advancement
process going and a breaking point toward success. Technology transfer
182  W. HICKEY

and imprinting this transfer to locals through a robust know-how skills

transfer program is core. If upgrades cannot be introduced into the system
that will serve to hinder competitiveness and human resource enhance-
ment, much is for naught.
Most developing countries fail to get past this threshold, due to bad
or misguided policy, especially in regard to hiring, and become stuck and
stagnate at this stage, and are thus doomed to a neo-colonial status. This
means that without moving forward, subservience and dependence on
foreign technology and know-how, not realized empowerment continues.
If this summit can be reached, however, akin to pushing a snowball to
the top of a hill, many opportunities for advancement suddenly become
achievable for the resource-endowed nation-state. Developing countries
that have reached this stage, or are near to it, would be Malaysia, Kuwait,
and Saudi Arabia. The latter investing its vast oil resource money in many
economically diversified vocational education initiatives.
Internationalization—A global foreign company begins to slowly
emerge domestically. Once these skills and technology are obtained, the
local companies and expertise can now begin to partner with interna-
tional companies and work abroad on an equal-partner footing with other
companies and organizations. It is no longer a ‘junior-senior’ partner-
ship relationship. For example, many Chinese state-owned mining and
oil companies (Petrochina, CNOOC, and Sinopec), where at one point
(early 1980s) in the timeline far behind other Asian economies such as
Malaysia, Indonesia and Thailand, but now are clearly ahead at this stage.
The Chinese oil giant CNOOC is now partnering with Canadian oil com-
pany Husky Energy in Madura island (Indonesian territory) for offshore
oil projects, while China’s Frontier Mining is working on rare earths
development as an equal partner in Madagascar with Korea’s KORES
company. Malaysia is another example, with its gargantuan Petronas state-­
owned oil company working alongside domestic oil companies, in Saharan
Africa (Libya and Egypt). Most recently, China has bought into a large oil
project in Kashagan (Kazahkstan) alongside Exxon Mobil and Agip-Eni.
Chinese investment and skills transfer is a very different situation for many
emerging and developing economies we will cover in Chapter 8, China is
a one-party state that has embarked on its own path of ‘capitalism with
Chinese characteristics’.
Diversification—After drawing on their international expertise, down-
stream jobs can then be created in the home country for many different
value-added industry, such as polyvinyl extrusions, petrochemicals, and
pharmaceuticals. This is an interesting point here for many developing
 LOCALIZATION  183

countries seeking to move up the value chain. It has been successfully

done in former developing countries such as Korea and Singapore, which
at first actively partnered with foreign companies and then diversified
their core businesses into other areas. Some developing countries try to
reach this stage immediately, without going through the other stages by
upgrading of local investment protocols and education initiatives first,
and without engaging in partnership levels with international projects in
other countries. Essentially they are jumping to this step by imposing fines
and regulations on investment that does not add immediate value to their
natural resources.
Developing countries governments cannot merely dictate that value
added happen with the stroke of a legislative pen or action. It doesn’t
work that way. The law may be clearly defined but the systems and mind-
sets have not kept pace and are bereft of experience and know-how. A case
study of Indonesia’s 2000/4 Mining Law may suffice, as to what happens
when a value-added component on natural resources is forced on inves-
tors detached from any related (and mandated) human resource upgrade.
To this end, it appears that Indonesia is trying to reach the ‘diversification
stage’ by fiat alone in a political localization scheme, not going through
the heavy lifting of upgrading educational systems and institutions or by
an active internationalization program, both of which are required.

A Case Study of Misguided Value-Added Creation:

Indonesia’s 4/2009 Mining Law

Under Indonesia’s 4/2009 Mineral and Coal Law, unprocessed min-

eral resources are no longer allowed to be exported from Indonesia
on 2014. Companies are required to upgrade the resources, usu-
ally via smelters, which can be costly to build and utilize without
know-how. This is a complicated economic and political issue that
has been recently been implemented by Indonesia without a clear
understanding of what is going on and why, thus causing some con-
fusion among miners and policy makers. One question that arises,
is coal to be treated ‘as a commodity’ or ‘as an energy raw material
or source of energy’? Coal, for example, cannot be smelted, but it
can be further processed for value added such as in medicines or
even liquid fuels. In both these cases, it requires significant upgrade
inputs.
184  W. HICKEY

Essentially, Indonesia has been exporting raw ores and coal for
so long without any further value-added enhancement to these
resources in situ that is, in Indonesia, it is now difficult to change
this situation of resource over-exploitation and by allowing compa-
nies in other countries like China or Australia to process them. These
countries also need to be clearly aware that with emerging economic
nationalism, the old days are essentially over.

The Indonesia government has mandated that tiny SME or so-­

called ‘local’ smelters (i.e. industrial refiners of the raw ores) that can
be manipulated by giant mining companies (such as PT Freeport
Indonesia [PTFI] and PT Newmont Nusa Tenggara [PTNNT]
know that) (i.e. using the iron ore to make steel or using the cop-
per condensate to producer copper wire), the substance of the 2014
mining law effecting the export of unprocessed mineral resources is
reminiscent of Chinese Chairman Mao’s ‘Great Leap Forward’ in the
early 1950s.

The results of that initiative were a glowering failure, in which mil-

lions of peasants starved, not any idealized economic industrial-
ization or sudden value-added creation. Essentially, Mao thought
agrarian China could quickly ‘catch up’ to the industrialized West
in terms of a new, centrally planned, industrial policy of having all
the farmers melt their shovels, hoes, and plowshares into a collec-
tive crucible to produce high-quality Western steel. What actually
did happen though was that come harvest time, the farmers didn’t
have the right tools to do the work on hand. Millions starved due to
this misguided industrial policy that focused on outcomes only, not
processes, of which building know-how transfer was core, but sadly
omitted.
 LOCALIZATION  185

To be effective, the 4/2009 law should be rooted in reality and con-

nected not only to proper hardware and tangible outcomes (electric
supplies, infrastructure, leaching technology, tailing ponds, etc.),
but also proper software: The technology transfer of know-how and
relevant educational initiatives that go with these physical assets.
Additionally, the economic aspects must be considered, and any
unintended economic consequences (creates weird opportunities,
such as monopoly by forcing small miners who cannot upgrade to
sell their ores at fixed prices to giant international companies, at fixed
prices and terms) must be addressed, not just offset as exceptions.

Simply put, this law in its current form does not create added value
for Indonesia’s huge mineral reserves without using the right people
with the right skills. Simply mandating a value-added component on
the raw resources by increasing taxes and export duties alone can’t
and won’t do it. The same results will occur, but only more messy
with higher costs. The big mining companies threatening to move
their operations and layoff multitudes of workers (which they did
to win a step back from this law for certain companies in 2015).
Gold exports, for example, were supposed to be fully refined, but
PTNNT and PTFI, were absolved at the last moment, mostly due to
the political clout they carried with employment.

One might ask, why are the big companies so reluctant to use local
smelters on a wholesale basis? There could be several reasons: quality
of ingots produced and impurity of content, fear of losing manage-
ment control (i.e. proprietary issues) if any technology or know-
how is transferred without safeguards, entrenched corruption, and
payoffs in the commissioning part of the smelter, or fear that the
government may renege or backtrack on previous promises that pro-
vided a certainty to investors when the original contracts were made.
In the case of PTFI, these agreements were made in the 1960s, over
40 years ago in very different economic and political times, on very
generous, non-transparent terms, under a dictatorship, that cared
about promulgating itself, not the interests of its citizens.
186  W. HICKEY

But perhaps if we consider Occam’s razor rule, the most prominent

reason is simply profits: IRR from condensates (raw ores) that will
not be realized if having to refine domestically (by new players), who
do not have the skills and expertise to do this without an educational
upgrade. In other words, exporting the raw materials only leads to
the largest (and expected) profits to the investors. It is a colonial
mindset of entitlement that hasn’t really changed. Investors want
to merely gain the resources, upgrading will be done at different
locations where the investors can take advantage of efficiencies and
economies of scale, such as in Singapore, Korea, or Japan, which
have developed large processing industries of themselves to create
their own downstream industries.

But times have changed. Indonesia, with its huge, largely unskilled,
youthful population, and exhaustible resources, simply cannot afford
to give away its future under deals that were struck with unelected
dictatorships years back. Conversely, they can’t expect investors to
come and invest if the terms are bad. There has to be a balance.
Enactment of 2014 export ban had one mining institute (Fraser in
Canada) ranking Indonesia as the worst place in the world for min-
ing investment, yet mining is a core industry in Indonesia. Enforcing
a law that does not recognize the importance of human resources in
itself, and only focuses on tangible product and financial returns will
do damage to Indonesia’s economy (think the Great Leap Forward)
in the long term, however, doing nothing, and giving too many
‘exemptions’ to certain big previously mentioned mining players
only reinforces the status quo of colonialism from old times.

An article by Rachmat Gobel of the Indonesian Chamber of

Commerce (KADIN) noted the importance of cluster development
(letting businesses, not governments pick key industry in an econ-
omy) all underpinned by the critical aspects of the ‘enabling envi-
ronment’ toward developing human capital: universities, vocational,
and training institutes that create can do people. But this does not
occur in a vacuum, the training and skills must be attached to the
relevant economic cluster and to the investors and their systems that
possess know-how.
 LOCALIZATION  187

Unfortunately, Gobel then contradicts this tremendous insight by

saying Indonesia should compete with an increasingly high-wage
China by offering lower wages to do unskilled jobs!

The point should be that an enabling environment creates a higher

wage environment via empowered jobs, not discounted labor.
Indonesia has more than enough mineral, coal, and oil resources
to fund its own economy on a sustainable middle-income level if
industrial policy is reflected in a know-how society. Especially if that
workforce policy can aid in making infrastructure jumps (i.e. using
cell phones instead of land lines). That is what Indonesia industrial
policy should be focused on: gains, not catch up. It shouldn’t accept
a ‘lesser’ status to any Asian countries such as China and Korea.
Historically, Indonesia was at a considerably higher level of devel-
opment than China before 1980, with its vast foreign investment
in oil and mining going back to the days of Royal Dutch Shells
incipient operations in 1883. What happened since the 1980s was
political direction: China got serious about processes of technology
and know-how transfer, requiring investing firms to upgrade their
people, not only provide equipment, whereby Indonesia has not
kept pace. As of 2015, we are seeing that  the sustainability of an
export model of raw commodity exports only is brought into ques-
tion when global demand tapers off.

The entire issue of upgrading mineral resources is critical for

Indonesia to move up the value-added food chain. This will require
know-how sharing and skills transfer initiatives with foreign inves-
tors. The 4/2009 Mineral and Coal Law then should not only focus
on the hard outcomes of implementation for the letter of the law
(electric supply, tax revenues, smelter costs) but also the software
upgrade required to meet the substance in Indonesia’s human devel-
opment. Indonesia must consider the twenty-first-century reality of
the importance of human capital and sustainability to make a success-
ful implementation, one that will also attract investors. Economies of
scale (big smelting operations with an attendant skilled workforce in
place) make this outcome realizable (Hickey 2012).33
188  W. HICKEY

Delocalization—is the last step in the localization roadmap. As oil and

mining reserves dwindle in a home country, the strategic industry now has
the skills, industrial expertise, wherewithal, and resources to ‘go interna-
tional’ by themselves and be their own masters. Norway has reached this
step, but very few other countries have. Consider that while North Sea
oilfields are in decline, demand for Norwegian drilling engineers, reservoir
managers, exploration companies, and expertise for offshore oil produc-
tion are in demand worldwide. This is the hardest step to realize, and
should be considered more as an ideal versus an achievable mandate. Very
few developing countries have ever reached this stage, but the ones that
have are quite successful, Korea with its energy technology in nuclear and
wind farms, and Singapore with its world-class refinery systems. This level
is also measured by patents awarded, Society of Petroleum Engineers or
similar trade publications, equipment export performance, and technol-
ogy penetration, all core areas of innovation effectiveness.
The Norwegian model of the five steps toward localization is not per-
fect. The transparent governmental input and mandates required are large
stumbling blocks in corrupt and highly bureaucratic places like India,
Nigeria, Angola, and Venezuela. Norway’s North Sea oilfields are also
now in decline. Competitiveness experts such as Michael Porter have
stressed that Norway must diversify its economy and reduce its social ser-
vices and benefits, which are very generous and the envy of the world but
are now up against economic and physical realities. Further, EU mandates
and rules from the late 1990s have had the effect of watering down some
of Norway’s more robust capacity-building initiatives due to challenges
of governmental protectionism. But again, we return to the post, which
can serve as a lesson to any government in a natural resource-endowed
economy: The Norwegian government has consistently focused on local
capacity building, and research, not deviating from that objective. Simply
put, for any country with natural resources they must amass technological
capabilities deliberately and systematically in their core learning institu-
tions. See Figure 7.3 for the full stages of Norway’s localization model.
We now arrive at some conceptual issues that should be considered
in any modern localization schema, post-2015, especially as localization
initiatives before the 1990s did not consider the information explosion
of the twenty-first century of the internet and social media, where ideas
and thinking flow instantaneously and, in most countries, freely. In other
words, just as people rarely buy landline phones today, and use cellular
technology, we don’t want to encourage old localization methods in
developing countries that could put them at an extreme trend disadvan-
tage and thus negating the fruits of any localization initiative.
 LOCALIZATION  189

Fig. 7.3  The five stages of Norway’s localization planning (Source: MIT Working
Paper, Black Gold to Human Gold, IPC MIT-IPC-06-004, used with
permission)

Clusters or Hubs?
One such issue is the development of ‘clusters’, as championed by Harvard
University professor Michael Porter where fixed geographic areas that
pool talent and agglomerate industry in one region, and business must go
to them, or are regions hubs, where people, capabilities, and information
flow from one region to another depending on economic and exogenous
demands and conditions? As Gereffi and Sturgeon have noted, ‘hubs are
open to the full force of the global economy, both positive and negative,
190  W. HICKEY

in ways that clusters are not. Hubs learn faster and more broadly, but
experience the turmoil of globalization more acutely than places that are
less well connected to global value chains.’34 Perhaps the entire issue of
cluster development needs a rethink. Meaning, firms must act locally, but
strategize globally, and must be mobile with ideas and people.

Spatial Sectoring
An important part of competitiveness is where do the people come from? This
affects the energy business as much as any high-tech or pharmaceutical busi-
ness. In many developing countries, the best and brightest come from the
big cities with the highest per capita wealth, best institutions and infrastruc-
ture, and most cosmopolitan outlook on things. Think Beijing as China,
Bangkok as Thailand, or Nairobi as Kenya. Nonetheless, this outlook works
to alienate and economically disadvantage people in remote areas, usually
where the oilfield, mine site, or wind farm are located. Development of
local populations is what localization is saying. If localization is only about
developing the affluent and well off in big city capitals to order around the
less advantaged in more remote areas of a country, it misses the mark.
Spatial sectoring means that the localization effort must be truly
‘spread out’ to benefit as many people from the resources as possible.
Unfortunately, this is not being done. The best and brightest at a remote
coal mining site in SA tent to be from Cape Town, or at a gas well in
Sakhalin in Siberia are from St. Petersburg. The ideal is to empower those
that are from those areas. To spread the wealth around. This will result
poverty alleviation through well-paying, decision-making jobs that no
‘aid’ program from the UN or WB can mollify. Again, any spatial sectoring
plan must be in the investment policy, with incentives for operationalizing.

Cultural Issues
Geert Hofstede’s IBM studies from the 1970s35 clearly demarcated cul-
tures and ways of doing things in different countries along his four cultural
dimensions, even countries in the same region. However, Hofstede’s stud-
ies during that era did not touch on the developing countries in Africa,
the former USSR, China (outside Taiwan), or even India. Unfortunately,
like spatial sectoring, investors and policy makers can tend to overlook
culture as a ‘cost’ not in creating wealth from the diversity.36 A geocentric
viewpoint can result that will have negative if not disastrous results on
 LOCALIZATION  191

any localization planning. Chinese culture is not the same as Korea’s. A

‘one-size fits all’ cannot be applied to Thailand and Malaysia. Kazakh’s are
not Russians (even though they both speak Russian). Nigeria and Angola
are very different in terms of colonial past, language, and ethnic tensions.
Cultural differences are complicated and subtle but must be considered
lest offense be given. Further, beyond Hofstede, different cultures have
various perceptions of time, family, and ‘what is poverty?’ Not all people
in a given culture appreciate the value of work, or even of education. For
example, Mexican, Spanish and many South American cultures insist on
the traditional afternoon siesta, even if it distorts the daily operation of the
business. This is anathema to the work ethic of some Asian cultures, such
as Korea and Taiwan, where long continuous days are the norm.
Ancillary to this is that Westphalian nation-states are no longer the
homogenous, discrete units at the time as they were during Hofstede’s
study in the early 1970s. Populations today are highly mobile, such as
Filipinos traveling to Saudi Arabia to work with services in the energy
business. Demographics in equatorial countries are burgeoning (many
youths, largely unskilled) while shrinking in the northern hemisphere with
many older people. There are also differences in education levels, ideolo-
gies, and earning power (a German electrical engineer makes considerably
more than a Sri Lankan one, all things being equal, except for the color of
the passport) that need to be factored into any localization effectiveness
issue. ‘Investment’ now freely scours the world for cheap labor.

Conceptual Analysis
It can be readily seen then that for countries wanting to participate in
some type of localization effort, be it educational, policy, or economic, or
all the above, many factors must be considered. Additionally, localization
is not an ‘end-all, be-all’ process, it is ongoing.
The Bane of Localization Effectiveness: PSAs, Reworks, and Turnkeys
The PSA Agreement: A Contractual Disincentive for Management
Localization
There are many issues, financial, economic, business, and political
involved in the oil and gas business regarding proprietary technology
transfer and the overall development of local citizens. Oil and gas projects,
from exploration, to processing, to development, to first production then
field maturity are capital intensive and operationally demanding. What
many may not fully grasp is that the HR issues are actually negotiated
192  W. HICKEY

in these agreements between the oil companies and host governments

before work even begins, not by HRM professionals, however, but rather
by politically influenced economists, financiers, and engineering/ opera-
tion managers. Individuals who may understand the macro, but are not
actually trained in the mechanics of HRM/HRD. As such, and while gen-
erally agreed that HR issues are important, it is largely left to the investing
entities to develop locals as they see fit.
One simple reason that foreign oil companies do not use or develop
empowered local management for higher level positions is that they don’t
have to. In fact, there are more laws in some developing countries (such as
Indonesia and Kazakhstan, and other oil countries) for foreign investors to
use ‘local content’ (parts, supplies, etc.) than to use local people. Perhaps
this is best demonstrated in the lack of real change noted, for example,
in many middle and top management positions of the foreign-invested
companies.
For most investing companies, the main contract between the gov-
ernment, and the foreign oil companies is enshrined in the ‘PSA’ or the
production sharing agreement, a binding instrument that effectively splits
profits and revenues, but not always equally; most PSAs in developing
countries are confidential agreements, not open to public scrutiny, or per-
mitted even to be discussed in the local papers.37 It also may be noted that
the oil business tacitly prefers it that way, in order to protect IRR figures
from the competition. Yet, this is contrary to promoting positive societal
change and promotes an air of suspicion about foreign investment.38
As many of these PSA contracts and specific profits are strictly confi-
dential,39 there is one conflicting aspect of ‘self-regulation’ and allowable
recoverable expenditures for the oil companies. Namely, one might say
that the specific terms of the PSAs ensure that the government (and by
extension then, a country’s citizens) is forced to absorb any financial loss
suffered by the oil consortia partners as a result of a foreign company’s
lack of self-regulations or ‘over-spend’ (also known as ‘gold-plating’), or
simply, the most critical element in the PSA is the division of the hydro-
carbons produced.40
The host country is also expected to reduce its expectations (or ‘take’)
in the event of falling oil prices, which is happening today and is wreaking
havoc on national budgets that are tethered to the commodity price of oil,
in particular, Saudi Arabia, Iraq, Nigeria, Venezuela, and Russia. The fol-
lowing are all recoverable (that is: fully reimbursable) operation expenses,
plus administration charges, under normal PSA arrangements that the oil
 LOCALIZATION  193

and gas companies can claim before any profitability accrues for the local
side (meaning no revenue for local coffers until foreign investors are reim-
bursed); they also demonstrate an over-reliance on expatriates with no
incentive to create localized management structures:

• Compensation of Employees: In addition to local salaries, this also

includes salaries of all expatriate foreigners, fully reimbursable.
The foreigners also receive hardship allowances, and large per
diems. As these costs are fully reimbursed, the companies are
motivated to ‘second’ senior employees (many near retirement),
who have large salaries that can be offset against the host govern-
ment, and contractually without any objection or oversight by
that host government.
• Payments to Advisors and Consultants: This includes use of skilled
foreign specialists, without negotiation (i.e. a foreign pipeline spe-
cialist who invoices $5000 per day for consulting), whether or not the
local host side wants or even needs them, is again, fully reimbursable
under the PSA.
• Personnel Training: This means that developing countries are actu-
ally paying to train their own people, however, it is the companies
who decide who, when, where, and how this learning is done, again,
it is fully reimbursable. It should be noted that not only is Kazakhstan
paying to train its own people, but also to train new expatriates (for-
eign workers) who rotate in and out from other international oil and
gas assignments and must be brought ‘up to speed’.41
• Personnel expenses regarding companies outside the host country, where
those companies are fully or partially involved in the project (i.e. a
three-day technology presentation in December by a contracted Swiss
drilling tools representative in a skiing chalet venue in Switzerland,
would be fully reimbursed by the developing country side out of the
first production oil). This example can be interpreted as a compen-
sation perk used by top management to circumvent government-­
mandated pay ranges for high performance local employees to keep
them retained.
• Administrative overhead expenses: This can be ambiguous, it means
that cost overruns (i.e. buying a wrong-sized pipe) and many ‘over-
sight’ errors (i.e. installing something wrong) are effectively being
guaranteed by the local side. It would also mean that any documen-
tation, tax numbers, work permits and visas, even fines in certain
194  W. HICKEY

cases, and so on attributed to expatriates working for the project are

again being fully reimbursed by the local developing country side.

There is also an implied assumption here that a country’s resources

‘must’ be controlled and managed by the government for a maximum
societal benefit. But consider that in Canada (with tar sands) or UK (with
North Sea oil) there is little state presence in the day-to-day control
of these industries beyond royalty, taxes, and environmental concerns.
Opposite of that, there is no ‘production sharing agreement’ either in
those countries between company and government. The companies
are effectively ‘on their own’ (and yes, these projects do also require
significant capital outlays, but the government does not backstop their
investments).
Simply, PSCs or PSAs are not used in developed countries. On the
face of it, they appear very reasonable in developing countries, as a way
to ‘get production going’, but they are strictly avoided in the UK, US,
Alaska, CN, and Norway. Why would that be? In those places, the oil
projects must source investor capital. There is no risk ‘guarantees’ by
government. As far as reimbursements out of the ‘first production oil
(or gas)’, again, it all sounds reasonable, but the oil companies have
gotten increasingly in trouble with this in places like Sakalhin (Russian
East) where they ran up $20 billion in ‘costs’ before any revenues would
accrue to the state or the local people, in essence, a cost recovery time-
line that would take over 15–30 years to reach before any profitability.42
And with BP in Russia, where excessive hiring of expatriates at huge
salaries enraged the local side, so much that it was considered a ‘special
dividend’, to be taxable, to BP when under then BP Russia Director Bob
Dudley.
PSCs no longer reflect societies’ dependence on oil, or the fact they are
a colonial relic of the past. They are being dismantled in some developing
countries, such as Indonesia and Nigeria, in favor of royalty arrangement
and tariffs, but the international oil and gas companies are not pleased. Oil
prices generally dictate which side has the stronger hand, low prices mean
the IOC’s (International Oil Companies) are in the driver’s seat, whereas
high prices bring out the belated charge for nationalization of resources.
In both scenarios, however, little actually trickles down to the local com-
munities most of which are in need of development.
 LOCALIZATION  195

Kashagan: A Case of Potentially Enormous Oil

PSC Reimbursements

Consider a reality check: that being the enormous potential of the

Kashagan field, situated in the northern end of the Caspian Sea.
Kashagan is the largest oil field outside the Middle East and the fifth
largest in the world. Financial flows to Kazakhstan, under the PSAs
are strongly back loaded in light of the enormous investment by the
foreign consortium (led by Italian oil giant Agip/Eni) involved in
developing this field at $25–$30 billion. This is understood, since
most of the oil is ‘deep oil’ and will be technically and financially
demanding to drill. First oil production is not expected to come
online until 2009 and peak production is not expected until 2016 (as
of 2016, still delayed).43 The real question is: with such a staggering
front-end reimbursable investment at stake, can Kazakhstan afford
to let majority expatriate oil employees be the leaders, experts, and
consultants for this project? Even though KMG (KazMunaisGas,
the state oil company) owns a share of this project and will share in
the risk, there is no guarantee that any Kazakhs (outside government
officials) will be utilized, consulted, or employed in decision-making
as KMG is not the consortium operator. The project demands serious
workforce reflection. Considering that the tax regime for Kashagan
was only finalized in 2003, the workforce issue is not settled.44

Mining Reworks
Lifting costs in mining, that are for the actual cost of mining, remov-
ing, and cleaning coal or ores for shipment, are not transparent and are
closely held as proprietary information by mining companies (most nota-
bly coal and gold mining) in order to reduce taxes and obligations to local
community (CSR) sustainability projects (including local jobs creation)
and to boost profits. The higher the lifting costs, the lower the taxation
base on the resources, resulting in an increase in investor rates of returns.
‘Averaging’ of lifting costs can be used to disguise true profit margins and
crimp localization resources. For example, it may only cost $2 to lift a ton
of coal in one part of a mine, and $12 to lift a ton of coal in another part.
196  W. HICKEY

As these costs are not weighted, the average is $7/ton. The government
collects tax on the difference between the final sales price of a ton of coal
and the average ($7) total cost of production input. If most of the mine
site costs less than $7/ton to mine, the residual difference is not taxed or
assessed, meaning a hidden windfall for the mining company.
The direct effect on HRD, is made clear in a context of absolute versus
comparative advantage. Not all mining extraction on a site is equal. Mining
companies (oil companies also) farm out more difficult production areas of
their sites to contractors. The large mining multinationals and their state
partners have complete discretion over the site. They mine the easiest parts
for their own benefits, this is absolute advantage. Technologies, skills, and
outlays for this type of mining are minimal, and require low-skilled labor.
However, they tender the more difficult and challenging areas to contrac-
tors, usually foreign, who have the most up-­to-­date techniques, skills, and
technology in mining. As contractors, they employ (and import) their own
people in these sensitive proprietary areas. They are usually under no obli-
gation to hire or develop local people for the more challenging know-how
required. Considering the fact that many large producing mines in devel-
oping countries have ruling elites or government officials involved in their
ownership, it does not behoove the government regulators to investigate
and audit mine activity or processes more closely than necessary.45

Turnkey Projects
Turnkey projects are simply that, the host country contracts with a foreign
entity to build a plant, a refinery, a dam, and so on, where the client merely
goes in and ‘turns the key’ upon commissioning. Turnkey’s are also well
noted in infrastructure projects. All work processes, technology transfer, and
employment are tightly controlled by the investing entity, many times a for-
eign state actor such as a Chinese dam builder or French NPP builder. When
the project is finished, all the investor does is simply go in and turn the key
to run it. FMC or ‘Full Maintenance Contracts’ administered by foreign
corporations in developing countries would also be considered prima facie
evidence of a turnkey: all skilled labor and technicians are from the outside.
In many energy and infrastructure (roads, port building, railway) projects
in the developing world, highly skilled foreigners and costly content are uti-
lized against national budgets via soft loans, foreign government grants, and
lines of credit, from supra-national banks such as the Asian Development and
WB.46 Many of these developing countries can only repay if locals have the
 LOCALIZATION  197

skills to eventually generate the operational revenues themselves. Proprietary

contracts, collateralized credit, and in-perpetuity maintenance agreements
work against this ideal by insisting on long-term controls. Technology is
not transferred, nor are locals employed in more value-added positions. The
investing country or entity is well rewarded for its efforts and initiatives.
Standards or specifications are core to a successful local employee
engagement with foreign-funded infrastructure projects. A type of control
which the investing entity utilizes in turnkey projects is adherence to a
foreign specification. This required special expertise and know-how may
not integrate with a local standard. A general example of this is a different
railway gauge between countries. Another example is a Chinese-invested
turnkey coal-fired power plant. The standards (i.e. voltage regulation, coal
loading, operating temperatures) are set in Beijing, for what is used in
China. The plant that is built in Myanmar, Sri Lanka, or Tanzania will
utilize Chinese standards. These standards may not interface well or at
all with the local electric grid standards, if built say on a former colonial
British or Dutch system.
As local engineers are not trained in the Chinese standards (and rarely
is an effective training plan utilized), they can never respectively take con-
trol of the plant. This type of stealth control requires constant mainte-
nance and upkeep by the foreign entity. Local engineers are only needed
after the electricity leaves the plant and enters the grid. In fact, some
Chinese electrical plants have even encapsulated their workforces down
to the level of cooks, box loaders, and drivers while local employment is
dearth. Nonetheless, the electricity generated will revert billions of dollars
in payments back to China overtime that will be recouped from the local,
non-engaged citizens.47 While turnkey projects are an accepted worldwide
business transaction method, the point is that the magnitude and perpetu-
ity of these energy turnkey arrangements has a profound effect on local
employment; thereby, indenturing much of the population to investment
terms that serve to benefit elite, usually unelected, officials who approved
the project in the first place, and foreign workers, not local ones.48
On the face then, it would seem that while most countries are seeking
to perform relevant and highly necessitated localization efforts, a reading
between the lines and into contractual arrangements, shows that many
of these initiatives are partial, meaning when they cross political lines or
sacred cows, they can have ineffective results. Turnkeys are sometimes
necessary in the most impoverished of developing countries (i.e. Congo,
Laos, S. Sudan) in order to jump-start development, but unfortunately,
198  W. HICKEY

without a mandated national development plan in place, they can become

a normality in many of these countries.

Jobs Creation
The energy business in many developing countries has historically parceled
out jobs based on patronage, family connections, and political connec-
tions. This worked out just fine in a world of high energy prices and no
concerns about competency.49 But times change. High oil and coal prices
cannot be counted on to stay that way, as we are currently witnessing with
$30 a barrel oil in early 2016. Cost-cutting becomes part of competitive-
ness. Nationalization initiatives demand companies hire local workers, on
empowered levels, as opposed to importing armies of foreign workers to
do the actual work. The key component of robust localization effective-
ness then is found in local jobs creation and the scalability/ sustainability
of this initiative. There are many moving parts to jobs creation in devel-
oping countries (education, politics, investment, regulations). We should
also consider some successful case studies of jobs creation.
Education is by and far the largest baseline component in and for any
sustainable localization effort toward jobs creation. Who provides this
education, and how it is different from rote training are critical ques-
tions. Education is a long-term process, whereas training is  short term.
Nonetheless, a baseline expectation of educational ability must be set to
build on training and mentoring initiatives. However, if the baseline work-
force skills level is not in place (such as in a jungle village in Tanzania or a
hamlet in India) all kinds of problems will then emanate in getting a local-
ized workforce up to speed. For the purposes of this book, we consider
that in any working-age, localized population the majority have completed
what would be deemed a fully completed primary education, or to the 6th–
8th grade level in Western terminology as the baseline. Of course this is
recognized as the ideal, and may not be probable in the before-mentioned
scenarios. Without this assumption, however, it will be profoundly dif-
ficult to set forth any type of localized engagement with say, uneducated
tribesmen in Tanzania living atop a uranium mine or an indigenous people
group in the Amazonian rain forest in eastern Ecuador near a hydro power
station. These latter people groups will only have r­udimentary Western
levels of education if at all, never mind language skills. Simply, the cost
of fully re-educating these people groups is simply not practical. This has
been a thorn in the negotiations with foreign investors in remote places,
where the investors expect the government to assume responsibility for
 LOCALIZATION  199

advancing these people groups educationally, and the government, as part

of an investors CSR obligation, expects the investors to magically upgrade
their citizens.
Both expectations between host government and investor are mis-
placed. Without an educational baseline, localization efforts will fail.
Simply, the Information Age assumes an educational baseline is in place in
most Westphalian countries (vs. failed states, such as Sierra Leone, Libya,
and Afghanistan) in regard to foreign investments. Without this, nego-
tiations for localization can stall, projects become derailed, and armies of
foreign workers and host country citizens from more affluent areas, must
be trucked in to do the actual work. Locals around the projects are mar-
ginalized and not engaged in its operations.
What this means is that going forward, governments must become
more engaged in the educational foundations of all their people groups.
Education that is both academic and vocational (hands-on), and imparts
relevant, contemporary knowledge.50 They cannot rely on the largess of
foreign corporations to upgrade their own citizens and must seek out their
own for engagement. There can be no ‘people’s left behind’. Without this
new mindset, certain populations will continue to be marginalized and not
have an active voice in their own resources. The last chapter of this book,
Chapter 10, The Interface, considers how governments must be more
hands-on with investors. There is no getting around the necessity of educa-
tion, and having the right education in place. Sadly, this may be a lofty ideal.
Once the baseline of education is set, some other factors must be
also, be dealt with head-on before an effective localization effort can be
operationalized.
Regulations and labor laws. Many developing countries simply have
over-regulated economies especially those with a colonial past where an
enlarged bureaucracy was deigned necessary to promote and extend the
control of the colonists. This is especially problematic in Brazil, India, and
Indonesia, resource-rich countries where bureaucracies’ effect on foreign
investors is legendary. In over-regulated bureaucracies, local and central
governments still consider foreign investors as tax sources and payoff cen-
ters, not as jobs creators and economic generators. In hiring locals, many
investors must assume a large societal cost on hiring a full-time national.
In other words, it is not easy to fire an entrenched local worker. There is
no flexibility. As such, investors stall serious localization efforts by using
contractors, part-time, and contractual labor. The investors meet the letter
of the law in regard to hiring then go no further in hiring locals full time.
200  W. HICKEY

Moratoriums on local hiring become embedded in the investors’ work-

force. Of note here is that many investing energy companies go to great
lengths to convince a gullible public that they are actually increasing local
future hiring while reducing full-time expatriate labor. This is highly mis-
leading. As discussed in Chapter 3, energy and its diversification at the
upstream, midstream, and downstream levels is a complicated business.
Most major oil and mining companies are super-holding or umbrella orga-
nizations. While they are the ones that sign the contracts, and provide
the financing, it is their CCP or general contractors that do the actual
work and non-proprietary operations.51 In short, super-holding compa-
nies have the obligation to hire full-time nationals, contractors and their
sub-­contractors do not. Not many expats are needed at the super-holding
level, however, armies of expats may be required at the contractor level
depending on the complexity of the work. It is the skills of the contractors
that must be imparted to locals to get the actual work done. When local-
ization timelines and engagement charts show contractor: local employ-
ees, a very different picture emerges. One that neglects and marginalizes
locals while increasing contractor engagement over time. See Figure 7.4.
Contract and temporary labor rules the day. Without a deeper soci-
etal penetration, these floating workforces become fluid and without any
allegiance to local populations, the negative stereotypes of mining camps
and oil towns emerge, where locals are only engaged in operations at
the periphery, and outsiders funnel wealth outside communities back to
national capitals or corporate headquarters. With inaction on localization
efforts, Chinese investors in certain developing counties in Africa and Asia
(such as Sri Lanka, Sudan, and Myanmar) have exported entire vertical
Chinese communities (from cooks to engineers) to service and operate
their sites, while locals remain even further disengaged from development
in all but the most mundane of jobs (loaders, cleaners, and truck drivers).
Yet, the politics regarding resource extraction do go long and deep.
While host governments need to reduce punitive regulations on work-
force and encourage investment that engages locals by rewarding them
for human development, again, a baseline educational level is assumed.
Unfortunately, the political will for this type of societal change remains
low, as too many insiders enjoy the political status quo and the outsized
power a (usually) tiny elite can exert on an energy and resource business
that may be the most reflective driver of the overall national economy.
Without significant social upheaval these deeply rooted elitist behaviors
will not change, sadly, even when a new government comes to power,
another select group of elite interests will emerge that will seek total power
 96.5
87.2 80.2
78.1
72.6 93.2
81.1 72.4

68.2 65.7

50.0 34.8

50.0

8.3
Top Top Middle Middle Supervi- Supervi- Professi- Professi
Others Others Workers Workers Total Total
mangmnt mangmnt mangmnt mangmnt sors sors onals onals
2001 dec-2005 2001 dec-2005 2001 dec-2005
dec-2001 dec-2005 dec-2001 dec-2005 dec-2001 dec-2005 2001 dec-2005
Expats 5 7 20 30 123 87 319 270 9 0 0 0 476 394
CIS 0 0 2 0 68 33 167 145 10 10 174 97 421 285
Kaz 5 7 2 16 410 318 931 1477 263 275 745 661 2356 2754

Fig. 7.4  Actual figure of localization of positions in major central Asian energy company workforce, 2005 where:
expatriate (white), contractors (scarlett), locals (blue) (Source: W. Hickey, 2006)
LOCALIZATION 
201
202  W. HICKEY

of the resources, such as in Libya, Iraq, Venezuela, Russia, and so on.

This scenario, however, may be more of an anthropological indictment of
man’s behavior toward their fellow man, as opposed to anything regula-
tions (or lack of) may solve.52
Investors seek returns on their investments, be it financial, as in Western
companies, in market share, as in Japanese companies, or in kind, as in
Chinese state-owned companies seeking long-term strategic access to the
resources and commodities. Investors simply want to wash their hands
many times of developing locals unless it is part of their strategic and pro-
prietary advantage, which in most cases it is not. Again, this paradigm was
fair game 30 years ago, but now we are in a different era.
In all of the above scenarios, we note that certain human development
baselines must be considered before any effective localization ‘marriage’ can
occur. Strong deficiencies in any one area (education, regulations, politics,
or investor commitment) will stymie the localization by jobs creation effort,
which is only as strong as its weakest link. They all must reinforce each
other. A suggestion then is to start small, and to snowball (or cascade) the
overall commitment toward localization as opposed to grandiose localiza-
tion plans with multiple goals put forward and agreed to by both investors
and government which are too big to actually realize and WILL fail.
Some cases are proposed as a precipitate for getting sustainable localiza-
tion program going is put forward:

Stripper and Low Value-Added Oil Wells

Shut-in oil wells still contain oil and can produce but are not commer-
cially viable based on Western profitability return  ratios that are usually
pre-denominated in US dollars, an expensive currency to use in develop-
ing countries. However, strippers are usually defined as small-scale oil-­
producing fields that with lower profit expectations can provide many jobs
to locals willing to get their hands dirty with minimal skills upgrades.53 In
short, stripping, which requires significant manual labor, can make shut-in
wells productive, profitable, and create localized employment.

Depleted Mines
Mining is a capital-intensive activity. While there are many technical
nuances with mining, in general, once an underground mine, be it for coal
or ores, fills with water, it is generally left unworkable, for the machinery,
unless the water can be pumped out continuously, usually at great costs.
 LOCALIZATION  203

However, in certain cases, manual mining, especially above-ground or

open-cut mining, can be made profitable for locals, though not for foreign
expatriates and their cost structures. Today’s Western-invested mining
business is all about safety standards. Companies seek to avoid lawsuits.
These Western standards for safety are far and above developing country
standards. But these standards also come with a cost. Lowered safety stan-
dards, while a contentious issue, would also significantly lower costs and
promote larger employment for marginal ore extraction. Western safety
standards may simply be unrealistic in a backwater copper mine site such
as in Chad or a coal mine in Indonesia.
There are so many jobs at mine sites for ore (and coal) cleaning,
upgrading, shipping/ transshipment, and extractive equipment mainte-
nance, that shutting the entire operation down as it needs to conform to
Western standards of profitability and safety promotes black market activ-
ity and corruption, and further only serves to impoverish entire commu-
nities, who have neither the skills nor the legal standing to work a closed
mine. It may be appropriate to allow mine sites to absolve their Western
investors of liability if they can transfer some remedial mining skills and
allow the work to go forward with reopening the mine with a new legal
legitimacy. Of course that is the ideal, reinstituting the mine under a new
localized contractual framework would cut out certain elites in national
governments who originally authorized permission to foreign investors via
‘facilitation payments’,54 or bribes to officials, both regional and national,
to permit mining activities. Solving this issue in highly corrupt countries is
questionable, but the jobs are there.

Infrastructure and Utility T&D

Line men and pole setting provide vast amounts of manual labor jobs to
install transmission and distribution lines. It is a tremendous works project
in itself especially in regard to connecting new power generation (such as
a new coal-fired plant, dam, wind farm, or solar photovoltaic project) to
the grid.55

Renewable Energy
Conversely, renewable jobs are generally about maintenance and not the
production aspect of energy. They require strong vocational skills in order
to setup, repair, clean, and reassemble solar panels, wind turbines, biomass
plants, and mini-hydro plants.
204  W. HICKEY

Table 7.2  Skills levels required for various types of energy production projects
Source: Hickey (2015)
a
Key inputs to calculating ‘total costs’ include capital costs, fuel costs, fixed and variable operations and
maintenance (O&M) costs, financing costs, and assumed utilization rate for each energy type
US Energy Information Administration, Annual energy outlook 2015, April 2015, DOE/EIA-0383 (2015)

NP creates a tremendous amount of highly skilled jobs, especially in regard

to safety, but the educational requirements are and rigidity of certifications
toward creating a safety mindset and culture is challenging to many develop-
ing countries. See Table 7.2 in regard to skills levels for specific energy types.

Real HRD: Getting Past Jobs to Empowerment

The localization narrative is in getting to skills building leading to empow-

ered employment past the nation-state politics and short-term profit
drivers in order to promote change for a more sustainable planet that is
cognizant about the environment and alleviating poverty. In this sense,
 LOCALIZATION  205

we consider people development (HRD) that is empowered using a very

precise WB definition56:

Empowerment is the process of enhancing the capacity of individuals or

groups to make choices and to transform those choices into desired actions
and outcomes. Central to this process are actions which both build individ-
ual and collective assets, and improve the efficiency and fairness of the orga-
nizational and institutional context which govern the use of these assets.57

The methods to train and develop huge swaths of people via HRD is there
if the political will is there, and political will that is reflected by initiatives
that promote this. The Information Age has ensured that access to infor-
mation is there. Crowdsourcing and derivatives has ensured that the financ-
ing is there. All of this is possible. Consider the magnitude of jobs created
via upstream the British Government itself has encapsulated, through its
own UK Oil and gas industry (OPITO58), key facts about the significant
number and quality of jobs created in upstream oil alone. OPITO is the
UK arm for training and development in the North Sea oilfields. It could
be held as a model for most of the concepts of this research if economic
and political processes were transparent in developing countries. OPITO
also develops workers for the ‘downstream’ parts of the UK oil and gas
business and claims worldwide standards. Here is the description in their
own words ‘provides the strategic perspective for workforce planning and
skills development for the oil and gas sector across the UK, develops the
standards for those working across lifelong learning and is the voice of
employers in this industry on training issues’ (Fig. 7.5).
Finally, PSAs are not necessarily joint ventures (JVs). While the Tengiz
Chevron consortia in Kazakhstan calls itself a JV, the secrecy aspects of the PSA
would tend to mitigate a true JV arrangement. As such, the true value a PSA
provides to a host government and the localization of its management poses
some deep questions. Steensma et al., and Inkpen and Beamish have researched
extensively about the inherent instability of JV arrangements when the value of
those partnerships for the host side long-­term is called into question.59

Micro, Meso, Macro

We consider three levels of localization then with an example of best prac-
tice of each of the levels in regard to maximum value-added HRD activity
that a localization these mechanisms can provide, that is each level is prop-
erly coordinated with individual, government, and investor incentive, be it
206  W. HICKEY

‘The industry in 2010 is providing employment for 440,000 people across the whole country:
· The exploration for and extraction of oil and gas from the UKCS accounts for around 340,000 of these, comprising:
o 32,000 directly employed by oil and gas companies and their major contractors
o 207,000 within the wider supply chain
o 100,000 jobs supported by the economic activity induced by employees’ spending.
· In addition, a thriving exports business is estimated to support a further 100,000 jobs.
· Whilst the oil and gas industry provides work across the whole of the UK, Scotland benefits the most with 45% of jobs.
21% are in South East England, 6% in North West England, 5% in West Midlands and 5% in Eastern England.
· Each £1 billion spent on the UKCS supports approximately 20,000 jobs.
· Jobs in the UK oil and gas industry are highly skilled and well rewarded. 2008 salaries averaged circa £50,000 a year
across a broad sample of supply chain companies, with the Exchequer benefi“ng by £19,500 per head in payroll taxes.’

And

‘The industry helps to make the world go around. … enabling emerging economies to get off the ground. It's not just an
interesting industry. It's essential. …. Oil and gas is vital to the environment, water, food, power generation, and the
pharmaceutical and chemical sectors. In total, this industry provides employment for around 380,000 people. Many livelihoods
are dependant on the ef forts of trained and skilled technicians.’

Fig. 7.5  UK Oil and gas industry Jobs (OPITO 2011) from their own Home
webpage

Table 7.3  Meso, Macro, and Micro levels of empowerment in a ‘best practices’
localization scenario
Level Empowerment ideal Core identity

Micro Inverse succession Developing individuals for

organizational empowerment
Meso Lower cost labor differential Spatial employment for resource site
communities
Macro Investing in home education Direct investment into local society
directly via resources

domestic or foreign and can be amplified into a proper localization platform

that is tied to HRD. We consider it from micro (the ground level) to macro
(big picture) as also explored in Chap. 1 of the introduction, via the follow-
ing mechanisms: Succession, labor costs, educational returns (Table 7.3).

Inverse Succession
According to William Rothwell, in HRD parlance, SP or succession plan-
ning is all about who will replace whom or by making provision for the devel-
opment and replacement of key people over time.60 Most foreign-invested
energy and resource companies have detailed plans not only designating
which foreigner will replace another foreigner in the organization, but
also which local (sometimes a token political appointment) will replace a
 LOCALIZATION  207

foreigner. This makes good press and is good for warm feelings with gov-
ernment desperate to see its own people advancing in strategic industry.
But this is the Information Age, no  longer the twentieth century.
Appeasement is a low threshold strategy, it will not empower local popula-
tions on a long-term spatial level. We expand the strategy then spatially.
Consider a hypothetical ‘XYZ’ oil company from France that has operated
in Vietnam for the past 50 years, drawing considerable wealth and influ-
ence in Vietnam from an offshore oilfield that now represents 18 % of its
total revenue generation portfolio from all upstream projects worldwide.
In other words, XYZ has considerable stake in this operation. A closer look
at XYZ’s board of directors’ portfolio has shown various turnovers of for-
eign directors from the USA, Germany, New Zealand, and so on for the
past 50 years, many countries which have either no upstream production
or even limited downstream (gas stations) representation.  No one from
Vietnam has ever been represented on the BOD.
Here is the key to this idea: Since the upstream operation means so
much in terms of overall economic viability to XYZ, and they have set
a precedent by using directors from other third-party countries, it then
becomes a  foundational and imperative corporate policy that a director
with voting power is placed on the board who is from Vietnam, not merely
an émigré, but an actual citizen of Vietnam with interests and ties to that
country. This in its kernel, is ‘inverse succession’. Locals being developed
not merely to do a few vocational and supervisory tasks but inversely, to
run and decide on key corporate governance decisions at the highest strategic
levels. Therefore, since Vietnam plays such a large part in the investor port-
folio, this would be only normal, and accepted if XYZ had similar counter-
parts theoretically in Australia or Norway operations. What we are really
saying is that in the Information Age, the North-South problem is dead.

A Cheaper Labor Differential

Past the micro level, which is more about individualized empowerment, we
consider a wider swath of the society, at the ‘meso level’ that will empower
larger labor segments and encourage spatial sectoring (spreading the wealth
out into the rural and semi-urban areas past national capitals of mega-cities).
In oil, wells decline, and mines degrade to the point of ‘unprofitability’61
or so-called shut-in production. This means that the crude oil is no longer
profitable to lift, or coal is not same quality as rest of the seam, or gas pressures
are running low. It will require considerable labor and technological upgrade
208  W. HICKEY

to bring these back to profitability at accepted commercial levels and ‘rates of

return’ (IRR). However, we ponder on the set of profitability metrics these
sites are deigned on? If the projects profitability is defined on high-cost labor
of Australian miners and experts, or German gas engineers, of course it will be
very become very unprofitable and very quickly at that. But what if we were
considering a paradigm of local labor costs and content?
As mentioned, many mine sites are set amidst villages with little or no
involvement in the mining operations aspects beyond mere service levels
(digging, loading boxes, driving trucks, etc.). With just some minimal
competency inputs and training, HRD can impart enough selected and
specific knowledge that this very low-cost labor could potentially rework
these mines and fields to some level of localized profitability. It may not
be the very high returns the multinationals demand in order to pay their
expatriate engineers $20,000 a month, but it possibly may be profitable
enough to create several jobs in many of the rural villages surrounding
these sites, paying many local workers $200 a month. Of course the inves-
tors would need to do two things: Be willing to impart some proprietary
know-how and technology that they have been using on the site to train
locals for a certain degree of efficiency, and also to relinquish contractual
management claims to the site whereby they allow local labor leaders and
workforce into the project. It is also acknowledged that the federal elites
that approved these contracts may not be keen on this arrangement as it
would crimp and dilute their power from afar. In fact, it may very well
promote competing power factions within these rural regions. These two
issues may seem overtly idealistic, but it’s the only way communities can
shape better spatial sectoring and localized involvement. It’s important
not to lose sight of the goal, whereby what is sought is a way forward:
Socially doable, ‘yes’. Politically and corporate palatable: A reserved ‘no’.

Sovereign Returns versus HRD

Financial, or sovereign returns, are at the highest macro level of develop-
ment and have been discussed at length in the financial section, Chapter 2.
Essentially, developing countries with commodity wealth exports still chase
returns on that wealth in Western countries instead of developing their own
local people educationally for longer-term human capital returns in situ.
Poor countries stay poor and rich ones becomes magnets for elite controlled
developing country wealth. The North-South problem is reinforced. This
is a policy issue at the macro level, unlike the previous two micro and meso
development solutions, which are solvable at a management then technical
expertise level if the political willpower is there.
 LOCALIZATION  209

As such, countries will simply have to get it into their collective knowl-
edge that building current and relevant educational outlets in their own
countries with their own wealth is a much better long-term proposition than
making bankers in Swiss, USA, or on Canary Wharf richer. It is noted that
some sovereign wealth funds do declare that their intention and mandate is
to use the incipient wealth for local development and education, but they
intend to do that only off the proceeds derived (interest and dividends) from
Western investments, not touching the principal. They simply cannot afford
to play that game in today’s Information Age, they need to use the funding
to develop their people here and now, not a rainy day  far into the future.
Investments in foreign lands with high broker and transactions fees are not
sure fire either. Markets can (and do) go down, risky investments can sour,
and a deflationary world can generate less than stellar dividends, but relevant
education can and will be an incremental source of value-added activity to any
society. Holistically, then, bets on developing a societies endogenous human
capital will lead to better economic benefits than trusting a nations resource
wealth to the vagaries of the financial markets in distant Western countries.62

Summary
‘Localization’ is a pre-eminent political topic of concern among many
developing countries in the world today. Even countries rich in resources
have a negative record with developing their people to perform voca-
tional and management tasks to internationally accepted standards. Many
of these encumbrances are due to political, proprietary, and contractual
agreements which fail to mandate precise educational outcomes for local
people. ‘Competence’ then is generally not defined nor prepared by HR
professionals, but is expediently designed by politicians, economists, and
industrial technicians. Without an educationally relevant theoretical frame-
work, localization effectiveness initiatives will continue to be misguided,
costly, moving, and garner negative publicity. Historically, there is a reli-
ance on expatriates congruent with a lack of HRD mechanisms to define
the outcomes that will develop and empower local citizens.
Until recently, and now with a worldwide slump in oil and commodity
prices, resource-rich countries in a world of increasing commodity demand
were seeing rising GDP’s and living standards. Crude oil, followed by gas,
and coal/ores, are by and far the current drivers of the economies of many
resource-rich developing countries. Nonetheless, due to the secrecy and elite
control of the resource extractive business in general, most of the local popula-
tion is excluded in the decision-making or operations of this business. Work,
technical directives, and leadership aspects are controlled and delivered by for-
210  W. HICKEY

eign officers, engineers, and even foreign leaders,63 not merely from foreign
secondees, but also from their contractors. This is done to encourage invest-
ment and protect technology transfer/proprietary information but is also at
the expense of management development. Most importantly, under current
PSA regimes, investment outlays by the foreign investors are fully reimburs-
able by the host country side out of the first production or profit oil, with
little, if any, input by HRD. Yet, these reimbursables also include key HR areas
of expatriate compensation, usage of foreign contractors, personnel train-
ing, and attendant administrative overhead (including possibly fines for non-
compliance). In short, developing countries are already paying for foreigner
investors to ‘localize’ them, but without a robust say in the process, by way
of any ­forensically audited cost self-regulation or any discernible societal out-
comes. These reimbursable efforts can promote conflicts of interest without
any localization derived. Kazakhstan, Angola, Nigeria, Ecuador, and Russia
to list a few are all in a similar quandary. Namely: localization is without real-
ized outcomes; is determined by non-HRM professionals in engineering and
finance; and is still heavily dependent on foreign technology and know-how.
Engagement of HRD professionals then is paramount to any non-ethnocentric
localization initiatives, especially in today’s Information Age as a type of ‘rule
of engagement’ in developing countries with natural resources but also vast
hordes of unskilled citizens.
Development of local talent then is not a case of ‘good choices versus
bad decisions’. It is a case of meeting needs and compromise in a new world
paradigm of large population groups with a need to be more engaged in
their in situ resources. However, this demands financial support, responsi-
bility, and technology transfer with the oil majors to realize these outcomes.
By all accounts, ‘tokenism’ is seemingly apparent with many localization
initiatives politically mandated simply in order to gain public goodwill, but
without any agreed upon development goalposts. Localization must also be
considered past the individual at the micro level of development. Holistic
localization also requires community development in lagging areas at the
meso level, and economic development that is measured at the macro level.
It requires all three actors: government, investors, and locals (as individual
and community, what is also known as gemeinschaft and gesellschaft) work-
ing together to derive a robust outcome for all.
Most localization initiatives today are still stymied by age-old colonial
practices, hegemony, and contractual impediments  that tend to reward
the signers, but not the stakeholders in the contracts. Breaking old mind-
sets, especially regarding the one-dimensional world of profits and finance
versus a twenty-first-century era of people development is now more
 LOCALIZATION  211

important than ever. This is not socialism. It is about transferring know-

how and skills to locals in an Information Age context, so they can work
and contribute directly in the very strategic resource driven industries of
which their own constitutions enshrine their ownership in.

Recommendations and Implications for Management

Localization: Macro to Micro
This chapter is arguably the most important in this book in regard to
how to do an effective localization effort. It would not be complete with-
out some overarching recommendations on the how to. Many players are
involved and it takes all of them, government, community, and investors
to bring the localized engagement to fruition. Any localization effort is
only as strong as its weakest link. If all participants are robustly involved,
success will evolve. If not, it will lack. The recommendations are also use-
ful for twenty-first-century would-be business researchers because they:
–– address complexity of localization by recognizing the phenomenon
as multidisciplinary, which many mainstream academic journals do
not give credence to;
–– openly acknowledges the roles of realpolitik in the environment,
and persona in the researcher as involved in the research on a more
substantive qualitative, as opposed to quantitative analysis;
–– try to move beyond the ivory tower and financial spreadsheets to
produce something which is actionable by real decision-makers in
business and government (which are professions not sciences).
The foreign resource extraction companies must (not should) contribute
a portion of their investments to a specific local development fund for indus-
try-related managerial and technical talent development as mandated in any
investment contract, not voluntary. Namely, a percent of this investment
needs to be earmarked by the resource companies to reach criterion refer-
enced goals of empowered management outcomes. It cannot be subjected
to loopholes, ‘fines’ or self-policing actions on behalf of the oil companies.
While this is known in some countries as a ‘retraining fee’, and some coun-
tries may call it a social obligation or tax, this money is specifically marked
for localization, not other government projects. Additionally, many sover-
eign wealth funds are not transparent in their funding of disbursements. It
is recommended to enshrine this into law, in order to avoid any ambiguity.
Resource extraction companies would not be allowed to circumvent any
212  W. HICKEY

criterioned goals (e.g., in a world of rising oil prices, it is easier to pay fines
as a business cost, though right now oil prices are falling), in fact, and ironi-
cally, even under some PSA agreements, fines are considered as a fully reim-
bursable operations expense.64 Meaning, fines paid by the investing entity
will ultimately be reimbursed by the host government and it’s citizens any-
way, this is essentially robbing Peter to pay Paul.
Even without reimbursements, fines allow for a default mechanism for
the companies, and mitigate tech transfer and domestic content use at
the expense of localization initiatives. Likewise, secret usage of sovereign
wealth funds can significantly co-mingle the residuals for other things (such
as for wasteful public works projects: i.e. large statues, presidential palaces,
grand fountains, etc.). This type of spending also tends to attract significant
corruption, while neglecting necessary spending on real human resource
needs. While SWFs from oil and resources are standard investment vehicles
in many parts of the world, and it is beyond the scope of this work to discuss
them in detail, one thing that is correlated with these SWFs is that the more
transparency and public involvement, the faster relevant human and social
development funding can be obtained and utilized.65 Of course it is no coin-
cidence either the most successful SWFs (i.e. Norway) exist in established
democracies, and many developing countries are far from this ideal.
Expatriate costs for labor and services, as discussed under the current
PSA regime, are also fully reimbursable by the host government as an
‘operations expense’. This is counter-productive to any robust localization
initiative as skills then become an object of abstract value66 to the foreign-
invested resource companies: which operate on rotational shifts with their
home employees. As such, a work permit should go with the foreign worker,
never with the position.67 Whether or not the expatriate work permits will
still be as prized if locals are truly developed remains a future study, but in
short, work permits, or the right to employ their nationals, are the main tool
foreign companies covet even with a full reimbursement scheme in place.
This is most critical: as long as the resource extraction companies would be
paying this fee, and not being reimbursed, they will use considerably more
cost effective discretion in what expatriates they send.
One quid pro quo would be to attach work permit fees toward local
managerial development.68 The cost of a one-year work permit would be
approximately what it takes to develop one professional worker for the
resource extractive business. Under selected methods accounting prin-
ciples (line itemed, not aggregated), the work permits would be exempt
from any reimbursable, thus the resource extraction companies would
 LOCALIZATION  213

need to be very selective on the front end about whom they are sending
to do the overseas job. As local professionals and specialists are developed,
there would be less and less need to use these expatriate experts and man-
agers. Over time, localization would measurably occur, and at a faster pace.
This would work to the benefit of all parties concerned. Unfortunately, at
times, money from these type of programs has been diverted to govern-
ment coffers in unrelated departments to fill other financial holes. 
Additionally, and as a further incentive for the resource extraction com-
panies, it is recommended letting them have the prerogative to appoint a
certain percentage of trainers and professors to local polytechnical schools
and universities in order to train and mentor future workers to standards
they deem ‘best practice’ (This is also a hallmark of the Norwegian model
of localization: learning input from investors). These ‘foreign expert’
costs and fees might then in turn be guaranteed by the local side. Finally
any work permits should be reserved specifically for resource managerial
positions, with a high enough fee, in order to avoid any ambiguity in their
overall disbursement or value (i.e. using work permits to bring in Chinese
manual laborers, Indian road builders, Turkish construction workers, or
Sri Lankan pipe layers) short of developing the local workers.
While the governments of many countries exhibit a desire for locals to
be developed, they do not always require that those venues will be hon-
ored via any legal mandate or distribution of assets that requires funding
for a specific academic entity or technical development center with atten-
dant, employable outcomes (meaning empowered outcomes). While there
is the exception of perhaps ‘fines’ for lack of that development, as already
stated, it is usually easier for the resource extraction companies to just pay
the fines (with the possibility of a later reimbursable) in order to protect
intellectual property (IP) than to actually invest in the education of a local
wherefore adherence (control) of any IP may be compromised. Thus,
as a pretext, developing countries’ governments, with natural resources,
should be the ‘insuring’ foundation for any human development initia-
tives. It should not (and does not need to be) left to the international
business education efforts of the UNDP, WB, EU GTZ, USAID, IMF,
and other Non-governmental Organizations (NGOs) operating there.69
In fact, some research has shown that an over-reliance on these type of
NGO welfare programs may foster dependence and impede skills develop-
ment incentives70 in situ. In addition to this, and perhaps in overall con-
summation to this point, true HR professionals need to be engaged and
consulted in these issues. Shell petroleum engineers, USAID b ­ ureaucrats,
214  W. HICKEY

accountants nearing retirement,  and  former WB economists seeking a

new career,  may not be the ‘best fit’ in determining a local employee’s
overall career ladder competency with the ensured skills for employabil-
ity.  Localization, like any serious change initiative, requires experts in the
field of HRD to deliver on change and sustainability endeavors.

Notes
1. Wei, Z. & Moller, D. (2004) Localization: How Multinational Corporations
Survive and Develop in China, Accessed from http: http://www.btmbei-
jing.com/contents/en/business/2004-06/coverstory/localization on 03
Mar 2007; Fitz-enz, J. (2000) The ROI of human capital. New  York:
Amacom.
2. TCO Business Plan, (2006).
3. Becker, G. (1993) Human capital: a theoretical and empirical analysis,
with special reference to education (2nd ed.). New York: Columbia University
Press.; Thurow, L. (1999) The Future of Capitalism. New  York: Wm.
Morrow & Co; Fitz-Enz, 2000, ibid.
4. Kuralbayeva, K. (2001) The Dutch disease: symptoms and policy implica-
tions for Kazakhstani economy. Central Asian Journal of Management,
Economics and Social Sciences.
5. Research; Horton S. (1999) ‘Is Kazakhstan taking reform seriously?’
Keynote presentation delivered at the Columbia University School of
International and Public Affairs Conference ‘Kazakhstan’s Economic
Development After the Russian Crisis’, New York 29th April.
6. Southern Methodist University, 1980. Macguire Energy Institute unpub-
lished monograph on resource ownership.
7. Birdsall, N., Pinckney, T., and Sachs, R. (2001) Natural resources, human
capital, and growth in R.M.  Anty, R.M. (eds.) Resource, abundance and
economic development. Oxford: Oxford University Press.; Karl, T. (1997).
The paradox of plenty: oil booms and petro-­states. Stanford: University of
California Press.and Gelb, A. (1988) Oil windfalls: blessing or curse?
New York: Oxford University Press for the World Bank.
8. Mikesell, R. (1997) ‘Explaining the resource curse, with special reference
to mineral-exporting countries.’ Resources Policy 23, 4, 191–199.; Sachs,
J.D. and Warner, A.M. (2001) ‘The curse of natural resources.’ European
Economic Review 45, 4–6, 827–38.
9. Kuznets, P. (1988) ‘Why does overcrowded, resource-poor East Asia suc-
ceed  – lessons for the less developed countries.’ Journal of Economic
Development and Cultural Change 36, 3, Supplement (April).
10. Porter, M. (2001) On competition, 2nd Ed. Cambridge: Harvard University
Press.
 LOCALIZATION  215

11. Bennis, W. (1969) Organization development: Its nature, origins, and pros-
pects. Addison-Wesley.
12. Schein, E. (2001). Organizational culture and leadership. 3rd Ed.

New York: Jossey-Bass.
13. Gilbert, T. (1978). Human Competence: Engineering worthy performance.
New York : Pfieffer.
14. Becker, G. (1993), ibid.
15. Knowles, M. (1975). Self-directed learning: A guide for learners and teach-
ers. Cambridge University Press.
16. Kwok, C. and Taldesse, S. (2006) The MNC as an agent of change in host
country institutions: FDI and Corruption. Journal of International
Business Studies, 37, 767–785.
17. Argote, L. (1999) Organizational Learning. Norwell, MA: Kluwer

Academic Press.
18. Patten, C. (1999) East and West, Pan Books, UK.
19. Saudi Aramco, the state oil company of Saudi Arabia, has gone on an
aggressive upgrade programs to wean itself of crude oil exports only, but is
it too little too late in a world of falling oil prices? See http://www.sau-
diaramco.com/en/home/about/strategy.html
20. McLure, M. (2009) Royalties for Regions: accountability and sustainabil-
ity. Discussion Paper 09.05, Business School The University of Western
Australia and Australian Parliamentary Debates (Hansard), August  16,
2006, p. 4751.
21. Rothwell & Kazanas, (1994) ibid.
22. Gilbert, T. (1978), ibid.
23. Posavac and Carey, (1997). ibid.
24. API and TAFE are accepted benchmark standards used in oil and mining
operations worldwide.
25. Hickey, (2004), An evaluation of foreign HR consulting company effec-
tiveness in China. Performance Improvement Quarterly 17, 1, 81–101.,
and Kluckhohn, F. and Strodtbeck, F. (1961).  Variations in Value
Orientations. Evanston, IL: Row & Peterson.
26. Hampden-Turner, C., & Trompenaars, F. (2000). Building cross-­cultural
competence. New Haven: Yale University Press. And ­Hofstede, G. (1991).
Cultures and organizations: Software of the mind. Berkshire, U.K.:
McGraw-Hill.
27. Bhagat, R., Harveston, P., and Triandis, H. (2001) Cultural variations in
the cross border transfer of organizational knowledge: an integrative
framework. Academy of Management Journal 27, 204–220.
28. Argote, L. (1999) ibid.
29. Milkovich, G. & Newman, J., ( 1993)  Compensation, 4th Ed. Boston,
MA: Irwin
216  W. HICKEY

30. A large part of the baseline for forming an effective localization model is
found in the MIT working paper study: Hatakenaka, S., Westnes, P.,
Gjelsvik, M., Lester, R. (2006) From Black Gold to Human Gold. MIT
Working Paper Series, MIT-IPC-06-004 in particular pp. 18–23.
31. MIT-IPC-06-004, ibid.
32. Henan Power, from China was the main contractor on this plant, with
Poyri engineering from Finland providing oversite and risk assessment in
2009. The plant had many fits and starts before commissioning.
33. Hickey (2012) article in The Jakarta Post regarding the 2009/4 mining
law and localization, HRD.
34. Gereffi, G. and Sturgeon, T. (2004), ‘Globalization, Employment, and
Economic Development: A Briefing Paper’, MIT Industrial Performance
Center Working Paper 04-006.
35. Hofstede, G. (1991). Cultures and organizations: Software of the mind.
Berkshire, UK: McGraw-Hill.
36. Hampden-Turner, C., & Trompenaars, F. (2000). Building cross-­cultural
competence. New Haven: Yale University Press.
37. Dave, B. (2003) Kazakhstan: countries in transition. New  York: UNDP
Publication.
38. Kwok, C. and Taldesse, S. (2006) The MNC as an agent of change in host
country institutions: FDI and Corruption. Journal of International
Business Studies, 37, 767–785.
39. World Markets, (2002).
40. Easo, J. (2015) Production Sharing Agreements  – Practice and Trends,
Issue. 13: 5-10, in NOTES FROM THE FIELD: An English Law
Perspective on the Oil & Gas Market, retrieved from URL :
www.andrewskurth.com.
41. Jennings,  D., Feiten,  J., and Brock, H. (2000)  Petroleum Accounting:
Principles, Procedures and Issues (5th ed.), A Price Waterhouse Coopers
(PWC) Handbook. Denton, TX: Professional Development Institute.
42. Rutledge, I.  (2004)  The Sakalhin II PSA: a production “Non-­Sharing”
agreement. Sheffield Energy and Resource Information Services (SERIS)
43. Tsalik, S. (2003) Caspian oil windfalls: who will benefit? New York: Open
Society (Soros) Institute.
44. Johnston, D. et  al. (2001)  Kashagan and Tengiz  – Castor and Pollux.
PetroMin Magazine 15 December.
45. Birdsal N., et al. (2001) ‘Natural resources, human capital, and growth’ in
R.M.  Anty, R.M. (ed) Resource, abundance and economic development.
Oxford: Oxford University Press.
46. Stiglitz,  J. (2003) Globalization and It’s Discontents. New  York:
W.W. Norton and Co. 
47. Brautigam, D. (2009) The dragons gift: the real story of China in Africa.
Oxford: Oxford University Press.
 LOCALIZATION  217

48. Pinto, P. and Zhu, B. (2009) Fortune or Evil? The Effects of Inward
Foreign Direct Investment on Corruption, Saltzman Institute of War and
Peace Studies (SIWPS) Working Paper No. 10.
49. Mikesell, Raymond F. Explaining the resource curse, with special reference
to mineral-exporting countries. Resources Policy, Vol. 23. No. 4, 1997.
50. Altbach, P. and McGill-Peterson, P. (eds.) (2007) Higher Education in the
New Century. Washington, D.C,: Sense Publications.
51. Consider case of BP in Gulf Deepwater Horizon blowout in 2010, BP,
while ultimately held responsible, went to great lengths to distance itself
and assign blame to, its main drilling contactor, Halliburton, and their
sub-contractor, Transoceanic, who apparently did shoddy, under
inspected,casing work that caused the undersea blowout! Deepwater
Horizon Marine Casualty Investigation Report (PDF) (Report). Office of
the Maritime Administrator. 17 August 2011. Retrieved December  29,
2015.
52. Richy Lam and Leonard Wantchekon, Dictatorships As A Political Dutch
Disease, (Yale University, Center Discussion Paper no. 795, January 1999).
53. ­h ttp://finance.yahoo.com/news/strippers-suffering-low-oil-prices-
­225403708.html.
54. There are many quid pro quo’s in the extractive industry beyond the scope
of this book to discuss, as they deal with corruption. Nonetheless, mine
operations depend significantly on kickbacks and bribes to get going. The
author has no illusions to this. Simply, elites at times will rather shut down
a mine (or oil well) than work constructively with local communities to
create employment opportunities. These problems are more reflective of
the society, it culture, and its hierarchy as opposed to any secular job cre-
ation efforts. See: Dahl, Robert A. (1971) Polyarchy: Participation and
Opposition. New Haven: Yale University Press, see also Managing Bribery
and Corruption Risks in the Mining and Metals Industry (2013) Ernst and
Young Global Marketing.
55. Chaplin, D. et  al., (2012) Evaluation of the Millennium Challenge

Corporation’s Electricity-Transmission and Distribution Line-­ Extension
Activity in Tanzania: Baseline Report, Mathematica Policy Research:
Washington.
56. World Bank (2002) Empowerment Sourcebook.
57. See standardized WB economic definition of what is  ‘Empowerment’.
World Bank (2002).
58. http://www.oilandgasuk.co.uk/employment.cfm.
59. Steensma, K. et al. (2005) The evolving value of foreign partnerships in
transitioning economies. Academy of Management Journal 48, 213–235.
and Inkpen, A. and Beamish, P. (1997)  Knowledge, Bargaining Power,
and the Instability of International Joint Ventures, Academy of Management
Review 22, 177–203
218  W. HICKEY

60. Rothwell, W. (1994). Effective succession planning: Ensuring leadership

continuity and building talent from within. New York: AMACOM, p. 5.
61. Jennings D., Feiten, J., and Brock H. Petroleum Accounting: Principles,
Procedures and Issues (5th ed.), A Price Waterhouse Coopers (PWC)
Handbook. Denton, TX: Professional Development Institute, 2000.
62. Becker, G. (1993) Human Capital, Chicago: University of Chicago Press.
63. Publicly traded national resource companies such as Royal Dutch Shell,
Total, Repsol, and Eni, for example, are under considerable sway of their
home governments.
64. Rutledge, I. (2006) concerning the Sakhalin PSA, 1994, Appendix A, S4,
p. 69. ibid.
65. Tsalik, (2003), ibid.
66. Delios, A. and Beamish, P. (2001) ‘Survival and profitability: the roles of
experience and intangible assets in foreign subsidiary performance.’
Academy of Management Journal 44, 5, 1028–1038.
67. Cioni  A. (2004)  Where’s my work permit? Almaty, KZ: Salans LLP
Publication
68. This has actually been done in Sri Lanka and Indonesia to name a few
countries in regard to gaining work permits for foreigners across all indus-
tries, not merely extractive ones. Unfortunately, corruption and strong
motivations to avoid the fees can impact highly competitive business, such
as light manufacturing, and retail.
69. Easterly, W. (2007). The White Man’s Burden. Oxford University Press.
70. Gylfason, (2000) ibid.
 CHAPTER 8

China

Growth and Demand

China, with nearly 1.4 billion more affluent and job-hungry people and
a $10 trillion-plus economy which until very recently exhibited double-­
digit growth, simply cannot be ignored in world events. Currently, it is the
world’s second largest economy behind the USA and is scheduled to sur-
pass it to become the world’s most dominant and number one economy
by 2035. Its external trade balances dictate currency and budget move-
ments in many smaller countries. It exports manufactured goods to the
advanced economies while simultaneously importing millions of tons of
raw commodities from the emerging world, in particular developing Asia,
sub-Saharan Africa, and South America. As a main driver of demand in
said developing world, it deserves a chapter in itself to reflect this, but it
is not only about commodity inputs and finished product outputs. China
seeks to be a player on the world stage in its ascent, through both its finan-
cial clout and its prowess with infrastructure projects.
Nonetheless, not all is rosy. China still faces many energy hurdles with
domestic pollution issues, substandard exported energy turnkey practices
in developing countries, and utilizing Chinese workers in many foreign-­
invested projects in host countries with large unemployment issues, not
to mention attendant environmental issues such as CO2 emissions and
smog.1 If China tries to develop living standards to the same level as the
USA or EU, we would need approximately 1.5 planet earths to meet the

© The Editor(s) (if applicable) and The Author(s) 2017 219

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_8
220  W. HICKEY

demand. If India is also a factor in and uses as much energy per capita as
the USA, their combined consumption would be 14 times greater than
the USA.2 It is also noted that we have now reached a stage where the
amount of resources needed to sustain earth’s population far exceeds what
is available at current growth rates. ‘Growth at all costs’ may prove det-
rimental to the planet. It is critical that China embrace HRD early in
its growth curve, both domestically and in foreign-invested projects for
world stability. Simply, the world cannot be tested to meet the resource
demands of a ‘consumptiononomics’-based Asia, unless energy inefficien-
cies and pollution are addressed.3
Voracious Chinese demand for commodities such as oil and gas in
other developing countries has moved world energy and commodity mar-
kets forward without pause. While energy intensification has been declin-
ing in the USA and EU for several years now, due in part to smarter
efficiency choices and pollution standards, China’s carbon footprint
(mostly from fossil fuels) has grown enormously.4 China’s foreign invest-
ments increased 1000 % between the years 2005 and 2013, earning it
friends and allies worldwide because of its economic largesse. Most of
these investments were in the natural resources sector, oil, gas, and coal5
and not surprisingly, in politically unstable countries with weak economies
and repressive, autocratic regimes such as Sudan, Sierre Leone, Sri Lanka.
Countries that many Western companies tend to avoid. In fact, China is
so important in the world’s energy profile that most IEA publications
now include a separate chapter or a section on China alone, similar to this
chapter. China’s enormous appetite for resources, in a finite world where
Western countries have already obtained most of the low-hanging fruit,
has driven them to invest in some of the most undeveloped and politically
risky of the developing countries: Angola, Burma, and landlocked Bolivia,
to name a few.
Dambisa Moyo says it best about China’s commodity need ‘To satisfy
China’s population and prevent a crisis of legitimacy for their rule, leaders
in Beijing need to keep economic growth rates high and continue to bring
hundreds of millions of people out of poverty. And to do so, China needs
arable land, oil and minerals.’6
China has large stocks of coal reserves in the center of the country that
serve to meet its entire domestic demand obligation. Yet, despite being the
world’s fifth largest oil producer and producing over 4 million barrels a day,
it cannot keep up with its fast-rising demand of over 8 million barrels a day.
The sustained demand in economic growth have caused China’s oil imports
 CHINA  221

Fig. 8.1  China’s crude oil imports by source (EIA, 2013)

to surge. As of 2011, China was importing over 5 million barrels of oil a

day. See Figure 8.1. They are making the jump to hydropower and alterna-
tives namely to address this economic thirst for energy and to alleviate the
smog caused in its big cities of Beijing and Shanghai via traditional coal-
fired electricity generation. Many of these plants are very inefficient, built on
Communist standards of utility, not about energy conservation. If one travels
around China today, in many villages, towns, and small cities all over, solar
panels on roofs will be readily noticeable. However, the electric power gener-
ated by them is only enough to warm bath water or power a single lightbulb
for a few hours, but still has not reached the level to light entire households,
power air conditioners or refrigerators on a continuous level. The Chinese
energy portfolio consists of 70 % coal, 22 % oil and gas, and the other 8 % a
mix of nuclear energy and renewables (hydro, wind, and biomass).7
Overall though, China is a very special case in regards to energy and
HRD; however, that has to be line itemed separately out of the mix of
other big players in developing countries globally (such as Nigeria and
Brazil) and regionally (such as Indonesia and India) for a few reasons.
222  W. HICKEY

1. China is no longer an emerging economy. It is a ‘middle income’

economy that has progressed rapidly through the ranks of develop-
ment in a mere 35 years. The past 20 years alone have seen China’s
economic growth in double digits, a staggering rate. Many coun-
tries that were more ‘developed’ than China in 1980 if considering
its per capita GDP then ($194), such as India ($280), Bangladesh
($222), or Sri Lanka ($272), lag far behind in their own economic
development, with some still stuck in emerging country status.
Today, 2014, China’s per capita GDP is over $7500 per year, more
than the three countries previously mentioned combined at $6300
per year and on par more with the Eastern European countries of
Bulgaria, Romania, and Serbia. When one considers its huge popu-
lation in the denominator of any GDP equation, and that before
1980, China was largely considered as the ‘sick man’ of Asia; this is
a tremendous economic growth undertaking in itself in scale and
ambition. With this considered, the speed, enormity, and initiative
of Chinese development may be considered grandiose, but it is a
‘one size fits all’ economic model heavily dependent on exports,
lacking on idea generation and creativity.8
2. China is the largest emitter of greenhouse gasses on the planet,
accounting for almost 30 % of all world emissions at nearly 10 billion
metric tons of CO2 per year, with the USA in a distant second place
with 5.8 billion tons or one-sixth of total global emissions9 per cap-
ita; however, China is much lower than the energy-intensive
USA.  When taken as a unit, China emits more CO2 than many
regions such as the EU or Association of Southeast Asian Nations
(ASEAN) combined. Much, as mentioned, is generated from its vast
stocks of coal located in central China burned in low-efficiency coal-­
fired planets. This cheap but very dirty coal has also powered China’s
export model of cheap manufactured accessories and light industrial
goods.10
3. About one-fifth or nearly 20 % of the world’s entire population
resides in mainland China. Even strict enforcement of a ‘one-child’
policy for families since 1979 has only recently slowed its growth
rate in the past few years.11 With so many people seeking middle-­
income lifestyles and a rising GDP is significantly taxing the resources
of the planet, with Chinese commodity demand investment activity
form Indonesia (palm oil) to Peru (copper ore) to Australia (iron
ore), to fuel the economic growth.12
 CHINA  223

4. China had amassed a foreign exchange war chest of almost $4 tril-

lion (now down to $3 trillion at the time of this writing in early
2016 due to a slumping world economy), and thus is the world’s
largest creditor nation (contrasted with the USA which is the world’s
largest debtor nation with a national debt of over $19 trillion).
Some of this money was discussed in Chapter 3. China has now
displaced both the USA and EU as the leading financial powerhouse
in most of the developing world. Other countries now go hand in
hat to China for loans (Ecuador, Venezuela, Sudan)13; mostly, unlike
loans with the USA or World Bank, these China infrastructure loans
are not conditional on human rights, democracy building, or con-
tingent on  any domestic development initiatives. Further, China
does not collateralize its loans through standard market mechanisms
of bonds and equity, but rather through a guaranteed payout of the
commodity itself. Consider a case study of Venezuela. China is now
loaning $20 billion to them that is backed by access to oil produc-
tion under a 600,000-barrel-a-day ‘cash for oil’ deal, and a first pref-
erence for building infrastructure projects.14 Yet, the Venezuelan
economy today is under extreme duress due to its oil-dependent
economy and its leadership (as of early 2016) could collapse very
soon.
5. In reflecting on China’s ascendancy as a world economic power-
house, it is important to note that the country’s economy is still
firmly defined by state-run capitalism as guided by a single political
party.15 Despite any proclamations to the contrary, it is not a market-­
based liberal economy in many industries. In particular, energy and
energy infrastructure (coal-fired plants, roads, ports, refineries, etc.)
are all tightly controlled by the state via their apparatus of the state-­
owned company or SOE. China’s oil market, for example, is domi-
nated by four major SOE oil companies, the National Oil Company
(NOC): China National Petroleum Corporation (which includes
Petrochina) (CNPC); China Petroleum and Chemical Corporation
(Sinopec); China National Off shore Oil Corporation (CNOOC)
for offshore oil and gas exploration and production; and China
National Chemicals Import and Export Corporation (Sinochem), a
major player in downstream value-added activity for production of
fertilizer, chemicals, and storage services. This means that at their
core, the SOE’s are not defined by profitability in a monetary sense,
224  W. HICKEY

but rather in their potential to contribute resources or realpolitik to

China’s development and spread of influence.

The collective might of the SOEs (not only in China but also around
the world) is formidable. In China, the top 120 SOEs by size account
for nearly $3 trillion of state wealth, though their share in China’s GDP
has recently shrunk. It is noted that much of the utilized SOE portfolio
is energy- and utility-concentrated, including the telecom and banking
industry, which, if extended, can be considered as ‘soft’ infrastructure.
All are very content specific and complementary to any large energy and
infrastructure projects in Asia: power generation, transmission, commu-
nications, and (least not) financing. To that end, China’s state capitalism
model may be considered as providing a complete ‘vertically integrated’
structure in regard to infrastructure investment endeavors.
China’s SOEs, as mentioned, suffer significantly from HRD deficien-
cies. They can be quite top-heavy with management; redundant, nepotis-
tic, and overmanned with staffing; stuck in status quo strategies, with slow
to change operations; and overall financially under-performing. However,
their greatest virtue is in providing a source of political stability through
employment across all skills levels; as such, they justify political support and
garner preferential subsidies not given to more dynamic private businesses.
Further, working for an SOE, particularly in China, is the stated aspira-
tion of many of China’s best and brightest university graduates, includ-
ing those from schools such as BEIDA, Tsinghua, Jiaotang, or Fudan
Universities. For these graduates, working at an SOE is a career builder,
from development and SP to political office. Many large SOEs now send
their top managers to pursue MBA degrees, and many standing Central
Committee members have previously held senior positions in SOEs.

Overcapacity and Export Dependence

The Chinese government has recently tried the old playbook of devalua-
tion in August 2015 to jump-start weakening economic growth, but the
facts remain that the days of Chinese double-digit growth are a thing of
the past. According to Farok Contractor at Rutgers,16 The undervaluation
of the renminbi can be explained in one overarching social and political
objective in China: “Jobs, jobs, jobs”  – on the export front as well as
jobs in sectors protected against imports. Assumed correct, this recent
RMB (reminbi) devaluation is all about employment via increased exports
 CHINA  225

and not seriously about redressing the problems of China’s ‘structural

deficiencies’, namely redundant employment in inefficient and non-com-
petitive state-­owned industries.
Nonetheless, China now finds itself in a sort of quandary. As the world’s
factory for all things cheap, it has a severe overcapacity problem in a world
of deflationary prices and reduced demand for its products. In particular,
steel. In this situation, it cannot export its way out of its problems any-
more. This is weighing heavily on economic growth and by extension
employment. China has such a huge population and so much capacity for
manufacturing, noted economists, like Andy Xie, find it very difficult to
see where future growth will come from. China’s manufacturing capacity,
for example, is double of all other Asian countries combined. That is a
staggering amount of output in search of markets, new and existing.
The Chinese government needs a better strategy, and it may have
found one, though the jury is still out on if it will work or not: One-Belt
One-Road (OBOR) as the strategy, and the AIIB, or Asian Investment
Infrastructure Bank and the tactical concept. Providing one legitimate
vehicle to ensure Chinese domestic political stability is employment, an
issue critical to maintaining the credibility of China’s leadership and one
they can ill afford to ignore.

One-Belt One-Road
This is the new Chinese-led ‘Silk Road’ initiative in an integrated Eurasia,
similar to the medieval era ‘Silk Road’ that Marco Polo traveled on. The Silk
Road today is actually bidirectional or two-pronged. OBOR is an overland
route through Western China, India, and Central Asia onward to Turkey
and Europe, Figure 8.2. And a sea route that passes through South East
Asia, with ports of call via Myanmar, Bangladesh, and Sri Lanka into the
Middle Eastern Arab countries and Egypt and on to Europe. In the for-
mer overland case, the OBOR expansion will require huge investments in
pipelines, roads, and electrical infrastructure, and in the latter, maritime,
significant port expansion, and upgrades will be required. This behemoth
Eurasian expansion venture would connect over 4 billion people with a need
for $800 million in infrastructure improvements each year until 2020.17
226  W. HICKEY

Fig. 8.2  OBOR, One-Belt One-Road (一带一路): Across Asia into Africa and
Europe (red lines) with Ocean Trade Routes (blue line)(Map Source: CIA Factbook,
Public Domain)

The AIIB: Benefactor or Pariah?

In 2009, the Asian Development Bank (ADB) forecasted that pan-Asia
currently requires more than $8 trillion in infrastructure investment for
the next ten years. Asia, as much of the developing world, has significant
and overwhelming infrastructure problems: roads in Indonesia, electrifica-
tion in Cambodia, flooding in Bangladesh, dilapidated ports in Sri Lanka,
and derelict airports in Papua New Guinea. Sub-Saharan Africa also face
‘all of the above’ challenges. At the same time, these countries provide
some usefulness for an internationally expanding and competitive China,
including ‘Blue Ocean’ opportunities, raw resources, cheap labor, and
strategic locations. The symbiotic opportunities between China and the
developing world are evident, but will these initiatives be directed with
proper HRD?18
Due partly to political factors in the USA, and in perhaps to the
developed world’s long-entrenched North–South mentality, most infra-
structure issues in Asia and Africa have been ignored for decades by a
US-oriented WB, IMF, and even the UN. In 2015, China initiated the
AIIB. To underwrite and fund the new OBOR initiative past tradition-
ally controlled Western development bans in place by the WB and ADB,
 CHINA  227

both perceived as too slow and beholden to Western interests. China has
chosen to go its own way with its Chinese majority controlled AIIB with
a seed capital of $50 billion expected to reach $100 billion with commis-
sioning of its first projects.19 It should be noted that the AIIB however is
not the only funding mechanism for foreign-invested mega-infrastructure
projects. Funding will also be devolved from China’s Development Bank
(CDB) and its massive SWF, China Investment Corporation or CIC (see
Chapter 3) [中国投资有限责任剬司]. The point is that China will main-
tain its position as an Asian paymaster and create a regional hegemony in
Eurasian development that cannot be ignored.
As of this writing, early 2016, the AIIB has signed up nearly 60 con-
tributing participant countries, including the great Western powers of the
UK, France, and Germany, who were formerly China’s colonial masters.
The USA and Japan have up until now steadfastly refused to join, though
cracks are showing between the two holdouts. Namely, the infrastructure
demand projects will require vast amounts of machinery and expertise, and
low growth, economically stagnant developed countries would be passing
up a golden opportunity their vast industries cannot afford to squander.
The AIIB is therefore a vehicle for China to gain r­espectability to claim
global relevance and to counterbalance the IMF, WB, and ADB, all of
which China has been frozen out of the decision-making processes by a
lack of voting power. The AIIB would serve as a substitute for allegedly
discriminatory WB/IMF/ADB investment patterns that are historically
biased toward Western ‘investment’, most notably in regard to human
rights and environmental issues. In fact, there is deep concern among
environmentalists that the AIIB will green-light and approve many coal-
fired power plants in Asia that the WB has previously banned.20
Yet, despite all the altruistic exuberance and political rhetoric about
advancement of developing Asia, the creation of an AIIB addresses two
macro-economic problems that reflect on China’s emerging internal
capacity and domestic challenges. These two related issues cannot be
solved independently and serve to highlight the Chinese Communist
Parties (CCPs)’ interest in maintaining its role as a stable leader for a one-­
party state, while providing an outlet for deploying China’s massive capital
reserves. They are:

1. Full employment. This mandates an outward growth strategy that

cannot be achieved in China today due to the structural impediment
in its domestic workforce, a product of adherence to state capitalism
228  W. HICKEY

formulated under the Communist Party, and the growing unem-

ployment problem created with so many new graduates seeking
white-collar or technical jobs.21
2. The inherent difficulty of making structural economic changes.

‘Structural change’ means downsizing, readapting, and reconfigur-
ing workforces and work processes. The elevation of China to a
domestic consumption economy, as opposed to being heavily reliant
on exports and the capital investment model, simply cannot occur
within China’s current structural status quo of state capitalism.
Further, foreign dictates (via IMF, US Treasury, and WB, etc.) and
economic treatises alone (World Trade Organization, TPP, APEC,
etc.) will not be enough to influence an orthodox, engineering cul-
ture that, as previously stated, is endemic in the CCP leadership. To
realize a more consumption-driven service model, significant struc-
tural changes are needed. However, recent history has shown that
Chinese President Xi Jinping has preferred the default stance of
favoring traditionally conservative Chinese nationalistic positions,
many of which are mirrored in the SOEs.22

In this regard, the AIIB is truly an answer search of a plan, or as

Deng Xiaoping said in 1980, ‘crossing the river by feeling the stones’.
This is also known as ‘gradualism’, where previous Chinese economic
growth has been capital (exports and infrastructure investments) and not
consumption (domestic products and services) driven.23 ‘Gradualism’
addresses how to employ China’s masses (many older and uneducated,
and many younger and overeducated ), who are now trapped in a slow-
growing economy with rising labor costs amid slowing global export
demand.
China now plans to turn its capital-intensive export and infrastructure
machinery outward, to countries where labor and environmental standards
are historically low, in order to avoid dealing with any deep-seated struc-
tural problems domestically. These include problems that are all politi-
cal in nature, namely the aging and behemoth state-owned enterprises
(SOEs) that still underpin a large swath of the Chinese economy today,
an aging population, and an emerging, overeducated youth with scant job
opportunities.
For an outward-oriented growth strategy then, infrastructure develop-
ment in other countries, as an exporter of ‘services’, makes considerable
sense for China. SOEs have demonstrated a high competency in this sector.
 CHINA  229

Infrastructure is in huge demand in most developing and middle-income

economies, from Burma’s need for roads, to Nepal’s need for a stable elec-
tricity supply, to Indonesia’s need for high-speed rail. The AIIB is also an
opportunity for China to deal with its excess capacity issues, develop its
own underdeveloped regions (by utilizing reverse technology transfer),
secure resources and transport routes, foster stability against non-state
actors, and become a significant naval power in its own right. Ultimately,
it allows the country to continue on its development trajectory and quest
to become a global hegemon, while securing and ensuring the one-party
leadership system.
China has now demonstrated with many domestic projects such as
Maglev trains, huge damns, NPPs, and new toll roads, that it has the
development competence. Its SOEs are adept at commencing work
quickly, delivering on or under budget, and marshaling vast resources,
capital, and labor. Nevertheless, in international infrastructure projects,
utilization of Chinese engineers and workers, especially where local unem-
ployment conditions are high (e.g. Sudan, Angola, and Sri Lanka) would
not be politically accommodating for host country governments.
China’s AIIB then is really a significant jobs creation conduit, simi-
lar to the 1930’s New Deal or post-WWII reconstruction efforts in
Europe. The impetus is a lack of confidence in abandoning the export
economy, which China is addicted to and has currently snagged China
in a middle-income trap, and a failure to make needed structural
reforms, particularly in large state-owned companies, which for reasons
of political stability, China’s leaders have failed to or simply cannot do.
The message remains that, despite China’s arrival on the world stage,
its system is still not capitalist, it is state controlled, and that will by
extension, effect all economic decisions.24 While Chinese people and
private companies may be profit oriented, the stability of the system
holistically is not; it is at its core oriented toward maintaining socio-
political stability via full employment. This of course has serious impli-
cation for HRD.

China and HRD: An Overall Negative for Host

Developing Countries
As China’s status as a one-party state demands social stability above all
else, political survival and stability depend on constant economic growth.
This can only be accomplished by full- or near-full-term employment
230  W. HICKEY

(or with unemployment that is no more than 5.2 % of the total available
workforce). Domestic economic and political stability are thus the main
drivers and what is really at stake. Employing Chinese workers in Chinese-­
invested projects, particularly turnkey projects or power plant kits,25 run-
ning the gamut from airports to power plants to roads to bridges26 in
Indonesia to Nigeria to Sri Lanka, then becomes the ‘prime directive’ not
quarterly profits. In fact, money-losing projects have been tolerated by
China to gain political clout and influence abroad.27
The percentage of Chinese workers used alongside host developing coun-
try nationals in Africa, South America, and South Asia varies widely. What
is known is that Chinese investment in energy and infrastructure mega-
projects is daunting overall. Many factors can affect workforce utilization:
politics, local labor laws, a work permit regime, more ­importantly, enforce-
ment of the rules and regulation, sourcing of skilled labor and labor costs.
Take Sri Lanka, for example, emerging after 32 years of civil war, skilled
and literate workers are scarce and expensive. Most Sri Lankans with engi-
neering backgrounds go abroad,28 especially to the Mid-East (Kuwait, Saudi
Arabia, Oman). In Sri Lanka, as in Vietnam, Indonesia, Ecuador, and African
countries, many Chinese firms import workers from low-­skilled laborers to
highly skilled technical and managers from China. Any discussion about
Chinese investment and HRD in host countries must start with Africa, where
China is actively investing in natural resources and getting much in return.29
An extreme example, but possibly not the only one, would be China’s
workforce in Equatorial Guinea, an area rich in resources but scant in
development. This particular example was for a roadbuilding project, not
an energy project per se, but the mechanics should suffice. In this situ-
ation, 90 % or 3782 workers were all Chinese, and the other 10 % were
from regional African countries.30
Deborah Brautigam in her book The Dragons Gift has seemingly gone
to great lengths to show and aggrandize that Chinese companies invest-
ing in Africa are ‘no different than others’ and that Western governmental
propaganda is generally skewed in the negative against Chinese compa-
nies. On the face, this research may be correct, but there are a few outlier
issues to consider in how this information is being ‘spun’:

1. Risk. China has become noteworthy for investing in countries with

repressive political regimes and high-risk legal environments, which
most Western companies seek to avoid. Chinese projects are gener-
ally able to take on more risk than other Western-invested or WB-­
funded projects. The risk profile will by itself demonstrate that
certain standards have to be lowered for success.
 CHINA  231

2. Mindset. More importantly, if the Chinese government ignores

HRD in their own country (primarily due to an ethnocentric engi-
neering mindset, that flows top-down, even from the Standing com-
mittee leadership itself), how can they be expected to appreciate
human resources (more succinctly human rights) in other countries,
and also in countries under dictatorships where their own leaders
have openly demonstrated a contempt for their own people, Laurent
Kabila, Charles Taylor, Mobuto Sese Seko, quickly come to mind.
3. Accountability. Chinese investigations companies are largely state
owned enterprises (SOE’s), they are interested in the resources and are
not profit driven. This type of outcomes-based behavior can and will
dictate inputs, including HRD inputs. The macro concept of govern-
ment-backed investment, for example, can change the behaviors of the
managers as opposed to corporate invested in  a for-profit company
that may need to maintain a good image, such as for Extractive
Industries Transparency Initiative (EITI) initiatives. In other words, a
publicly traded company’s malpractice is tangible and easy to expose, a
state-owned actor however is not so much on the radar screen, and if
it is, as we have seen with other Chinese state-­owned companies being
held for liability concerns, the true owners can fade into the back-
ground and investigations are stymied or obscured by the state under
questions regarding exactly who owns what.
To add to all  this,  Deborah Brautigam places great faith in
EITI, (Extractive Industries Transparency Initiative) of which all major
Chinese enterprises subscribe. However, EITI reporting is voluntary,
and there is no mechanism to truly verify the actual data being reported.
More is covered in Chapter 9 on the EITI. It has largely been co-­opted
as an advertising tool. Some major Western oil companies, for exam-
ple, still refuse to report their outlays with the EITI, citing proprietary
issues. There is good reason for this, again, as the profit motive sug-
gests: Companies that trade publicly have to be correct in their report-
ing. They simply cannot tell the EITI one thing and then risk a
contradiction on a 10-K report later down the road of which the
US SEC (Securities and Exchange Commission) or shareholders might
take notice. Chinese state-owned companies are under no such direc-
tive, even if they trade on a stock exchange, shareholder involvement
will be muted and SEC directives not as robust in mechanisms like
ADRs (American Depositary Receipts), where a derivative represents
the underlying equity value that was issued on foreign exchange.
Dambisa Moyo takes a similar position to Brautigam’s in regard
to Chinese investment in Africa. She states in her book Winner Takes
232  W. HICKEY

Table 8.1  Chinese investment in sub-Saharan Africa

African % of Net Total Billions of $ in Commodity Financial risk
sub-Saharan FDI in country total China resource profile
country FDI

Angola >50 1.5 Oil High

Chad 33 N/A Oil/gas Very high
Congo 31 >0.100 Coal/ores High
Guinea 69 26 a Oil Very high
Mozambique 22 4.7 Ores Moderate
Niger 53 >5 Oil Moderate
Uganda 28 2.7 Oil/ores Moderate
Sierra Leone 70 2.7 Ores High
Zimbabwe 82 1.2 Minerals Very high

Source: EIA/NYT statistics, compiled by Hickey, 2016

a
Recently announced32

All that the Chinese are profiting greatly from commodities in Africa
as Western countries have not taken up the slack. She states clearly
that the Chinese are Africa’s friend, and that most Africans view
Chinese investment favorably. ‘China’s African role is wider, more
­sophisticated and more businesslike than any other country’s at any
time in the post-war period’, Moyo writes and that Western govern-
ments have largely avoided working with Africa.31 See Table 8.1.

However, both Brautigam and Moyo, and even Scott  Pegg, do not
look at China through a lens of HRD and as a potential long-term driver
of societal advancement in Africa, but rather as an outcome of respon-
sible and transparent business decisions driven by finance and investing for
commodities (and in building the necessary infrastructure necessary to get
access to those commodities).33 In other words, it is the Friedman’s trickle-­
down model blindly accepted. Nothing is written about any type of HRD
in the Chinese investment schema on the front end  with any localized
policy initiatives, that is, the preparation of workforce educational man-
dates before investment is given, beyond merely social outreach. Again,
the financial imperatives of FDI, investment, and trade seem to outweigh
all else in the investment calculus  of both sides. Unfortunately, China’s
state capitalism model will defy capitalist rules, simply because their model
of investment is not capitalist but politically driven for stability.34
In Brautigam’s view, if Chinese investment is only channeled cor-
rectly and transparently, corruption can be mitigated, beneficial stan-
 CHINA  233

dards upheld, and then good things will flow toward jobs creation. Nor
is anything mentioned about climate change or carbon reduction targets,
of which Africa is a growing and potentially gigantic contributor. Moyo
in her book, for example, only considers jobs and social development
as a third leg of an outcome of responsible Chinese investment, behind
economic imperatives and finance.35 Neither writer (perhaps due to the
economic discipline of it all) may not clearly reflect that we are in the
Information Age, competitiveness is defined by know-how and creativity,
not in how many natural resources a country has. If the latter were the
case, places like Congo and Burma would be the exemplar, not Singapore
and South Korea. Neither writer perhaps has ever lived in China to wit-
ness how runaway growth has an effect on unskilled citizens in that coun-
try under a one-party state, and how winners and losers are created with
economic development. They assume that HRD will naturally flow with
more and more investment. That may be a by-product, but it is certainly
not ensured. Jobs will only flow as long as there is commodity demand,
and set in government investment policy, and what quality of jobs will
ultimately determine a country’s place in the development order. For real
endogenous development, HRD must be mandated.
As far as can be observed, China’s resource-hungry investment model
attendant with its turnkey style of infrastructure development is not
actively promoting any information transfer in Africa (or any country) at
this time. It’s all about accessing resources with as little conflict as possible,
in areas that were previously prone to violent conflict, on China’s terms
for China’s long-term advancement. In this sense, Brautigams title of her
book The Dragons Gift may have been more prescient than ever realized.36
What we do know is that China has many hungry mouths to feed
and will for the near future. As China’s economic model of investment
via state-owned companies is about stability and not profits, a very dif-
ferent expectation of mission and vision results that is not driven by a
quarterly profit/loss statement but rather long-term access and utiliza-
tion of resources. China also has no mandated constraints unlike many
Western-backed institutions investing in developing countries from dem-
ocratic countries with governmental (International Finance Corporation
or EXIM, the Export Import Bank) or WB backing for CSR issues to
promote anything other than self-interest. It is not interested in CSR nor
development of locals, though it has issued good press.37
The Chinese government constantly stresses non-interference in other
countries’ ‘internal affairs’ (presenting a quid pro quo code for other
countries to not get to question China’s human rights record). Heavily
indebted countries with spotty human rights and environmental records
234  W. HICKEY

thus need China’s money, not the other way around. In China’s case,
that self-interest is in job creation for its (not the others) vast population
to create stability for the one-party state. The entire situation presents
an opportunity for resource exploitation without any changes in current
systems of governance or bad behaviors by unelected governments. China
needs to employ its masses, other countries have resources. On the surface,
it becomes a beneficial, symbiotic relationship. But it is certainly not bur-
densharing when one considers host country populations left behind or
locked-out of the work processes.
Chinese projects abroad, then, come with various strings attached, mostly
that being direct employment for their own SOE workers. Practically, all of
the developing countries China has invested in for both energy and infra-
structure projects have severe unemployment or underemployment issues.
Yet, their host governments continuously look askance, as they need the
development, financing, and expertise to complete the technology trans-
fer that is on the table, human resources and HRD are ignored. We con-
sider a few areas from developing regions around the world with Chinese
energy investment where the facts have been enumerated and tallied.

Ecuador
Over 1000 Chinese engineers and workers are building a dam in the
Amazon jungle with $2.2 billion in Chinese financing. Discussion is also
underway for China to build a $7 billion refinery complex in Manta on the
Pacific. Nonetheless, Ecuadorean workers have complained bitterly to the
Correa government about poor working conditions, unsafe conditions,
and low wages with no avail.38

South Sudan
South Sudan, the world’s newest country as of 2015 and flush with proven
oil reserves, accounts for 5 % of China’s total crude oil imports. China has
invested over $10 billion in South Sudan. Nonetheless, South Sudan still
remains a war-torn nation with a population of 4 million living mostly in
poverty that is constantly in need of humanitarian handouts. Its popu-
lation is largely bereft from its natural resources, and Chinese govern-
ment sees no need to intervene in this. Except for the fact that China has
recently sent 700 troops under the guise of UN peacekeepers to protect
its oil investments and workers.39
 CHINA  235

Indonesia
A better example of China’s non-transparency regarding HRD may be
found in Indonesia, which has several Chinese-financed mega-projects for
energy and infrastructure. While Indonesia is also a developing country, it
is a newly emerging democracy with a vibrant free press, that has reported
on these issues and the Indonesian government’s inability to reign them
is due to bureaucratic inertia and elite interference in projects. A large
Chinese-financed hydro in West Java has been found clandestinely employ-
ing large numbers of Chinese workers, not only engineers but also down
to the ranks of manual labor. Indonesia is a large country with significant
unemployment problems among its own people.40

Sri Lanka
In order to gain some type of hegemonistic foothold in the Indian Ocean,
and to offset Indian and US interests, China has been particularly active in
Sri Lanka under the Rajapaksa era. Key Chinese-invested projects included a
Puttalam (Norcholai) coal-fired power plant, Colombo port expansion and
new TV tower, and a  Hambantota deepwater port/international airport.
The leader who agreed to much of the Chinese investment in the mid-
2000s, Mahindra Rajapaksa, was upended in Feb. 2015 elections due to his
families’ perceived corruption and deep ties to all things China. Nonetheless,
the many projects he authorized are sunk investments by China of which
terms the original agreements are now being revisited by the new leadership.
The Norcholai coal power plant in Sri Lanka was built using a $455
million soft loan from China’s EXIM bank. Much of the construction
work was carried out by the  China National Machinery Import and
Export Corporation, an SOE. In the entire project review report, there
is not a single mention of employment for locals, technology transfer, or
training.41 After extreme criticism in the press about  a lack of employ-
ment opportunities in this project, the government responded by creating
a ‘tourism authority’ in the area to employ 15,000–20,000 locals.42 On
the economic scale, though, tourism jobs are far below the compensation
levels of any project for energy or infrastructure related employment.
What is important to note is that all the above Chinese projects listed
also utilize a plethora of Chinese labor with little quantifiable  skills
transfer into a country largely beset with high levels of unemployment.
Immigration officials, similar to Indonesian ones, were accused of look-
ing the other way while Chinese workers arrived on tourist visas and took
away needed jobs from locals.
236  W. HICKEY

China overall thus has an HRD image problem in so many countries

it has invested in for both commodities and infrastructure projects: from
Vietnam to Sudan to Sri Lanka to Ecuador to Indonesia. The short answer
is China simply doesn’t care about developing local people, or only devel-
ops them to a politically acceptable threshold to limit any host country
discontent and fallout.43 The longer answer is that China’s political leaders
largely are the outcome of engineering and mathematical mindsets from
older Communist eras who don’t consider foreign HRD in their calculus,
and certainly do not want to be held to any Western definitions of ‘human
rights’.44 It is not their problem, so they turn a blind eye to it, even if
their investment behavior props up and legitimizes unsavory regimes and
repressive leaders such as in Sudan, Venezuela, Sri Lanka, Turkmenistan,
and Congo.45 They have not really embraced the information age and still
believe all ascriptions can be solved with money and ‘non-interference’ in
a host country’s political regimes, no matter how repressive or undemo-
cratic they are. To that end, the newly created AIIB will be closely scruti-
nized for any deviance in the bylaws of the ADB and WB, which generally
bring politics, human rights, and environmental concerns to the table.
All the above projects also represent so-called  turnkey investments,
which are the bane of HRD and localization along with PSCs’ (paybacks
on project  costs) and mining reworks. These practices are neo-colonial
in essence but again, but that has not sunk in with the  Chinese lead-
ership. A note should also be included about standards, (though this is
largely an engineering issue), namely being China marches to its own
drummer.46 When a Chinese turnkey is built, standards are set largely in
Beijing. These standards may be part of the International Organization for
Standardization (ISO), but may not in turn be part of any project compat-
ibility across specific industry such as API for oil or TAFE for mining.47
Which means any turnkey project could theoretically be held into perpetu-
ity by the Chinese side with no way to meaningfully transfer skills to locals
who may have been trained to differing standards by other organizations.

China Summary
China has emerged quickly to become a giant on the world stage for
both energy consumption and, conversely, emissions of carbon. With so
many people, high growth is expected for several years to come and world
demand for commodities driven by China’s development is du jour antici-
pated, any economic slowdowns will only be temporary.
Chinese leaders with their largely engineering mindsets and insular
focus on domestic  political stability at all costs cannot afford to ignore
 CHINA  237

HRD and only consider host country politics as purely, devoid of for-
eign  interference, if they seek to be perceived as a sustainable actor on
the world stage. If China continues to do so, at the least they will be
perceived as opportunists, taking advantage of the economic woes of ‘beg-
gar nations’ with unlimited natural resources but limited know-how and
capital; with no allegiance to the host people or local culture as long as the
resources are flowing. At the worst, they will be regarded as new ‘hege-
monists’, transplanting the imperial British, and now the USA, as the new
reckoning power on the block who will use their neo-colonial practices for
maximum economic viability, including employing and developing their
own people first, in a type of inverse ‘human capital mercantilism’.
The former scenario gives some hope for HRD inputs, but the lat-
ter only reinforces the North–South problem, or should we say a new
‘East-South problem’ where developing countries are lackey nations, ripe
to be exploited  for the pickings,  by newly emerging economies with all
types of human rights, workplace, and environmental abuses. This may
sound overly harsh, but many of the leaders in China today grew up under
the  socially brutal Cultural Revolution in the 1960s, where ‘Chairman
Mao’ flippantly told US Secretary of State Henry Kissinger in 1973 that
even if 500 million Chinese were killed in a nuclear strike by the West, he
still had another 500 million to throw into battle.48 These were dark times
of political excess in China, that never were seriously addressed or revisited,
unlike the US ‘Flower Power’ generation of the early 1970s or the removal
of the Berlin Wall in Germany in 1989, with the fall of the Soviet Union.
These macro identity issues certainly then feed into micro issues of eco-
nomics, consumption, and human rights, all issues which contextually deal
with the effectiveness of HRD. In short, any serious HRD initiative in a
host country has to be underpinned by significant human rights initiatives
and, of course, an appreciation of human resources. China currently does
have the high level technology and the ability available for infrastructure
and resource extraction, all the hardware if you will, but the mindset for
an appreciation of HRD, or software, seems lacking not only in China but
also in many other developing countries.
If the overarching view among China’s leadership is that it is now China’s
time to exploit as they were exploited in the past, it doesn’t say much for
future people development, but rather a ‘get even’ national mentality that
will seek to correct past injustices. This is not exaggerated. Recent actions by
China in the South and East China Seas, and statements from hardline mili-
tary generals and political mouthpiece newspapers such as Zhongguo Remin
Ribao Zhongguo Remin Ribao, (人民日报) have shown they are willing to
challenge the world’s Western-­ordered status quo with the world powers and
238  W. HICKEY

to push the envelope with their smaller regional neighbors. The Communist

Party also goes to great lengths to deny its past (such as in any revisit, for
example, of Mao’s Great Leap Forward in the late 1950s which starved mil-
lions of peasants, or of 1989 Tianmen protests, where students and workers
were indiscriminately mowed down by tanks) and promulgate still the Cult
of Mao in order to ensure a one-party state’s stability at all costs. China was a
‘sleeping giant’ that has now been awakened and is in fact shaking the world.49
Conducing it to be a respectful actor in the Information Age is a challenge,
and embracing HRD to promote world stability among developing countries
is key. Nonetheless old habits die hard, and China’s emergence on the world
stage as a leader may not be as rosy as some envision.

Notes
1. Regarding China’s severe smog, see http://phys.org/news/2015-­11-­
china-smog.html
2. Nair, C. (2011) Consumptionomics: Asia’s Role in Reshaping Capitalism
and Saving the Planet , Oxford: John Wiley & Sons.
3. Nair, C. (2011) ibid.
4. http://www.iea.org/statistics/statisticssearch/report/?country=China&
product=indicators
5. http://www.nytimes.com/interactive/2015/07/24/business/interna-
tional/the-world-according-to-china-investment-maps.html?_r=0
6. Moyo, D. (2012) The Winner Takes All. China’s Race for Resources and
What it Means for the World. Basic Books and Brautigam URL ­http://www.
chinaafricarealstory.com/p/chinese-workers-in-­africa-anecdotes.html
7. EIA, (2013) World Energy Statistics https://www.eia.gov/beta/interna-
tional/analysis.cfm?iso=CHN
8. Citing: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?page=6
9. IEA, (2011). World Energy Statistics.
10. See Citing: http://image.guardian.co.uk/sys-files/Guardian/documents/
2011/02/10/CarbonWeb.pdf and http://www.huffingtonpost.com/
2014/12/05/a-handful-of-countries-co_n_6274064.html
11. In fact, the one-child policy has now been discontinued as of Oct. 2015 due
to a noticeable projection of a decline in the working-­age population.
12. Many sources are readily available for all these statistics: http://www.abc.
net.au/radionational/programs/ockhamsrazor/there-­are-­not-enough-
resources-to-support-the-worlds-­population/5511900 and http://news.
nationalgeographic.com/news/2014/09/140920-population-11billion-
demographics-anthropocene/ and http://news.nationalgeographic.com/
news/2014/09/140920-population-11billion-demographics-anthropo-
cene/
 CHINA  239

13. http://www.nytimes.com/interactive/2015/07/24/business/interna-
tional/the-world-according-to-china-investment-maps.html
14. http://www.theguardian.com/world/2015/jan/08/china-­venezuela-­
20bn-loans-financing-nicolas-maduro-beijing and http://thediplomat.
com/2015/01/will-china-save-venezuela/
15. State Capitalism, The Economist 1/21/2012. (7 sections).
16. Contractor, F. (March, 2014) Reminbi Undervalued? Think Again. Yale
Global Online, URL: http://yaleglobal.yale.edu/content/renminbi-
undervalued-think-again
17. China US Focus (2015) http://www.chinausfocus.com
18. Hickey, W. (April, 2015) Nations Line Up to Join China-Led Infrastructure
Bank. Yale Global Online, http://yaleglobal.yale.edu/content/
nations-line-join-china-led-infrastructure-bank
19. Ashrad, S. (2015) AIIB – the Beginning of Economic Challenge to the
U.S. ­http://www.chinausfocus.com/finance-economy/aiib-the-beginning-
of-economic-challenge-to-the-u-s/
20. The World Bank cuts off funding for coal (2013) in Washington Post, July
17 article The World Bank cuts off funding for coal. How big an impact will
that have?
21. The Economist in its formidable work on ‘state capitalism’ Special Edition,
1/21/2012, has mentioned this issue.
22. This subject is very well worn among China watchers and economists. It
has not truly happened yet. See any of former Morgan Stanley’s Asia
Chairman and now Yale Professor, Stephen Roach’s work. http://www.
project-syndicate.org/commentary/china-embraces-its-new-growth-
model-by-stephen-s--roach?barrier=true
23. Xie, A. (Dec. 2015) For China’s struggling economy, 2016 may be worse
than 2015. South China Morning Post. URL: http://www.scmp.com/
comment/insight-opinion/ar ticle/1892643/chinas-struggling-
economy-2016-may-be-worse-2015
24. Economist, (2012) ibid.
25. Interview with Poyry General Manager in Puttalam, Sri Lanka, regarding
commissioning of the Chinese built Norcholai coal-fired power plant in 2009.
26. The Suramadu Bridge, connecting east Java with Madura island in Indonesia
if from a Chinese kit and took six years to build it. In ‘Suramadu, Power
Plants, and Trade Deficit, special report: China’ TEMPO, Sept. 27, 2015.
27. This is the case in the Hambantota airport in Sri Lanka and Chinese-­
invested energy projects in Libya, where egomaniac leaders authorized
wasteful projects that China underwrote and still demands payment for.
28. Nisha Aruntilake, IPS Research fellow at a conference on Sri Lankan
Migration, Remittances, and Development 2009, in http://www.ips.lk/
events/workshops/4_5_09_development_nexus/island.pdf
29. Moyo, D. (2012) The Winner Takes All ibid.
30. Moyo, D. (2012) ibid., p. 3.
240  W. HICKEY

31. Brautigam, D. (2009) The Dragons Gift: The Real Story of China in Africa.
Oxford: Oxford University.
32. Announced in 2015, see http://venturesafrica.com/china-to-invest-
26bn-in-equatorial-guinea/
33. Pegg, S. (2012) Social responsibility and resource extraction: Are Chinese
oil companies different? Resources Policy 37(2) pp.  160–167. Sachs, J.
Common Wealth, also Moyo, D. Ibid., in URL: http://www.americanout-
look.org/dambisa-moyo-on-­china-in-africa.html
34. Again, the Economist Special Edition (1/21/2012) about State Capitalism
tends to reinforce this viewpoint.
35. Moyo, D. (2012) ibid. and http://www.ted.com/talks/dambisa_moyo_
is_china_the_new_idol_for_emerging_economies#t-8018
36. Brautigam, D. (2009) ibid.
37. Pegg, S. (2012) ibid. and Jiang, J. and Sinton, J. (2011) Overseas Investments
by Chinese National Oil Companies, IEA (Int. Energy Agency, Feb.).
38. For many developing countries, see http://www.nytimes.com/2015/
07/26/business/international/chinas-global-­ambitions-­with-loans-and-
strings-attached.html?_r=0
39. http://oilprice.com/Energy/Crude-Oil/Violence-In-South-­S udan-
Threatens-Chinese-Oil-Investment.html
40. Chinese Workers: Laboring Under Dubious Pretenses. Cover Story,
TEMPO English, Sept. 6, 2015, pp. 16–21.
41. See more on Chinese Investment in Sri Lanka since 2006, Democratic
Socialist Republic of Sri Lanka, Ministry of Plan Implementation,
Department of Foreign Aid and Budget Monitoring, Infrastructure Unit,
‘Project Review Report: Norcholai Power Plant Project’, July 27, 2006.
42. Media Center for the National Development of Sri Lanka, 2010.
43. Taylor, I. (2009). China’s New Role in Africa. Lynne Rienner Publishers.
ISBN: 978-1-58826-636-1.
44. Pegg, (2012) ibid., p. 166.
45. Tull, D. ( 2006). China’s engagement in Africa: scope, significance, and
consequences. Journal of Modern African Studies, 44(3), pp. 459–479 and
Taylor, I. (1998). China’s foreign policy toward Africa in the 1990s,
Journal of Modern African Studies 36, 3: 443–60.
46. Interview in Sri Lanka, ibid.
47. API and TAFE are the benchmarked international standards for oil and
mining projects, respectively.
48. Halliday, J. and Chang, J. (2005) Mao: The Unknown Story. Jonathon
Cape Publishers.
49. Napoleon quote to Sir Stamford Raffles (founder of Singapore) on a stop-
over at his exile in St. Helena in the South Atlantic, 1825, from Klingaman
W. and Klingaman, N. (2014) The Year Without Summer, 1816.
St. Martin’s Griffin: New York.
 CHAPTER 9

Corruption and the Client Driven

Energy Model

No discussion of energy resources and development would be complete

without a section considering corruption and the tremendous influence it yields
on the decision-making process with energy and extractive resources  from
all sides. We consider corruption in the fossil fuel industry as a framework
with the possible extension of corruption into alternative energy and renew-
ables in the future. Corruption simply cannot be wiped out. Energy, and it’s
complement, infrastructure are very complex constructs which attract large
pools of centralized money. This will not change. The types of energy and the
many faces involved may change, but the methods, economic systems, and
procedures won’t unless they are addressed and become fully transparent.
Much has been written about energy resources and its effect on corruption1
from a big picture paradigm of foreign investment and unaccountable lead-
ers enjoying easily looted resources. Less known, and the main focus in this
chapter, is corruption via training and education investments that are not
attached to any clear ‘know-how’ HRD deliverables but rather can become
well-structured payoffs for certain political results that need to be obtained.

What Are Corruption’s Costs in the Extractive

Business?
How corruption blights the fossil fuel industry in particular cannot be over-
stated. Corruption is a consequence of power concentrated in a few con-
trolling  and unaccountable hands, usually leaders and political elites in

© The Editor(s) (if applicable) and The Author(s) 2017 241

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_9
242  W. HICKEY

non-democratic countries.2 In Nigeria alone, the largest oil producer in Africa,

is it estimated that former president, Sani Abacha, embezzled up to $5 bil-
lion3 during his term; the president’s office in Kazakhstan is reported to have
deposited nearly $120 million in unknown origin funds into Swiss banks4 in
the late 1990s; Petrobras, Brazil’s national oil company, a scandal that involved
payment in Rolex watches, works of fine art, and rare wines, was mostly due
to overpaying for international oil assets and laundering the proceeds, has
reached a staggering $27 billion, but is expected to go much higher due to
layoffs, reduced consumer spending, and canceled construction projects5; the
head of the parliament in Indonesia used his position in 2015 to try to extort
ownership shares of a major international gold and copper miner;6 Venezuela
has recently reported a leviathan $300 billion gap in embezzled funds due
a complex currency exchange scheme with its national oil company in the
past decade.7 And the list goes on and on and on. These are all stupefying
amounts of money, involving the highest leaders and national wealth. Even
when global oil prices are collapsing, national budgets being cut, and curren-
cies devalued as is currently happening, the fossil fuel business continues to
generate wealth that would be the envy of other industries facing economic
slowdown. Consider the recent 2016 International Petroleum Week, a yearly
oil and gas conference held in London, where Azerbaijan, which recently
devalued its currency and faces growing civil unrest from this amidst slumping
oil prices,8 sponsored large and expensive festivities providing delicacies for
thousands of oil guests at a five star hotel.9 These resources could instead be
used for funding significant national HRD initiatives, of which they are not.10
Many of the countries richest in fossil fuels are also the most impov-
erished developing ones (Sudan, Iraq,  Congo, Angola, Turkmenistan)
specifically due to the resource curse,11 with misleading per capita GDP
and autocratic, punitive leaders. Wealth stays in the hands of an unelected
and unaccountable elite consisting of politicians, business insiders, and
those related to them either by blood or commerce.12 In many cases reve-
nues and payments from international oil companies remain unpublished,
secretive, and hidden from public scrutiny.13
Fossil fuel companies, complicit with host governments, go out of
their way to protect the identities of their subsidiaries and equity hold-
ers. Commingling of assets and ambiguous financial statements, where
line items incorporate an aggregate value for many products or services,
make it nearly impossible to monitor and account for specific payments
made to whom and for what. In this case, corruption is abetted by HRD
initiatives specifically due to lack of robust auditing policies as HRD can
 CORRUPTION AND THE CLIENT DRIVEN ENERGY MODEL  243

be un-quantifiable in its design, structure, and final costs. This is fertile

ground for corruption.
Even if an HRD deliverable is met contractually, it may be fleeting (its
only good for one aspect of the job), redundant (contractors or others
may be able to do it better, more cheaply, or both), and politically man-
dated (a leader or politician feels it’s a ‘good idea’ for their people, but
not attached to any societal outcomes), and outright irrelevant training
(no one is going to use an offshore oil training on an inland downstream
operation), or more succinctly perhaps, a room full of local Russian main-
tenance supervisors watching a video on ‘total quality management train-
ing’ in English, with W.E. Deming muttering away, will have little impact
on their daily job functions, whereby they may not even be empowered
to make decisions or inspect processes or combination of any of the afore-
mentioned factors. Of course, then, it’s not the training or education that
is being delivered, but rather the cost that is derived and the money that
can be pulled out of the project or operation. Most costs are further incen-
tivized with an allowable 10 % overhead charge that is authorized by the
host government to be paid to the investing/operating company.14 A cli-
ent driven system is ensured.

The ‘Client Driven’ Model

To bring the ‘client driven model’ into better focus and perspective, consider
that an engineer buying, say, a titanium pipe or drill bit for operations, or an
office manager buying a new desk chair or file cabinet for marketing, is easy
to audit for relevant costs. Tangible items can be quickly referenced as to
what should be paid within a given range based on market pricing. Auditing
education, however, with its potential ambiguity with ‘learning outcomes’
is not as straightforward to audit. As educational experts are generally not
finance people, not dealing with one global standard, and are not at the end
of the billing cycle, true costs can and do become foggy, underestimated, or
exaggerated, especially if that education is closed to tender by any competing
entities or not subject to serious evaluation15 due to ‘proprietary factors’.
As stated in Chapter 7, the PSC agreements insure that competitive
bidding is a non-issue. Tenders are optional or altogether ignored. The
client makes all decisions about who they want to use, and authorize the
budgets for it, never mind that the host government is the one who is
ultimately responsible for paying the bills. As to who is actually in power
in the government at a given time, and who is actually responsible for the
244  W. HICKEY

bills can also blur the lines when time comes to authorizing the actual
procurement under secretive contractual conditions.16 Additionally, cen-
tralized contract signing power in the hands of a few people or one person
without technical expertise in a field to provide any type of oversight or
checks and balances can be easily manipulated by insiders.17
This type of ‘business as usual’ system then, institutionalized under a
neo-colonial extractive mindset of little involvement of host government
(i.e. at a racist baseline translation: locals, dumb; foreigners, smart), and
without any forensic auditing (where a third party actually reviews and
evaluates what was given) or educational evaluation (see HRD evaluation
section, Chapter 5) is ripe for all kinds of mischief and perfidy. This is
not to say that training does not have its applicability for a department, it
does, but it is generally not at a knowledge function, rather a rewards and
compensation function. This is an important distinction, as using ­training
as an incentive and not criterion-referenced goal in the organizations
capability process distort outcomes and violate the legitimacy of HRD.18
As this writer was told, ‘don’t do training here [on location], because
nobody will go to it, make it in some exotic locale or far off place, then
everyone will want to go’.19 Training then becomes synonymous with paid
vacations. Nonetheless, even if everyone goes and has a good time, the
training may not be necessary for any of the aforementioned reasons. As a
ubiquitous ‘client’ makes all final and authorized management decisions,
as stated, tenders are usually non-existent under a PSC.
Furthermore, the ‘client driven model’ world of oil, gas, and coal pro-
duction, so-called lootable resources controlled by elites,20 does nothing
to seriously enlist and develop local employees, but promotes patronage
and nepotism within the current neo-colonial framework. This is especially
reinforced in developing countries.21 Processes need to be clearly audited
forensically. What is the work? Can the employee actually do the work to
a world prescribed standard? If not, can they be trained to do it?22 And
further redefined frequently to reduce opportunities for corruption. Why
is this work being done? Who was contracted for it and why? What end
value does this work provides and to whom? Could this work have been
done more cheaply somewhere else in the organization or by tendering
work out to bid?. National policies call for ensuring that HRD will pro-
mote strategic investment as opposed to abusive investment (i.e. strip min-
ing, tar sands) and limit governmental interference (mainly local/ regional
governments) in an overall national development schematic.23
 CORRUPTION AND THE CLIENT DRIVEN ENERGY MODEL  245

It should be noted that most oil and mining companies are required
by host governments to return some of their profits to the community via
CSR (corporate social responsibility)  or obligatory localization initiatives.24
Nonetheless, these plans are sorely devoid of metrics to empower or gainfully
employ local populations. They are more about public relations and ‘meeting
the letter’ as opposed to the spirit of the law. Box ticking ensues, with not real
outcomes evaluated. Without empowerment (i.e. opportunities) these plans
are about social responsibility in word only. Further, these plans can be heavily
manipulated and filtered by both the state and corporate entities involved for
political reasons whereby little development progress is actually made.25

The EITI
The issue of the EITI or Extractive Industries Transparency Initiative, should
be considered here. EITI was founded in 2006 mostly in regard to taxation,
corporate accountability, and governmental transparency, here is its guiding
principle, from its own webpage:

3.5 billion people live in countries rich in oil, gas and minerals. With good
governance the exploitation of these resources can generate large revenues
to foster growth and reduce poverty. However, when governance is weak,
it may result in poverty, corruption, and conflict. The Extractive Industries
Transparency Initiative (EITI) aims to strengthen governance by improving
transparency and accountability in the extractives sector.

Nonetheless, the effectiveness of even  the EITI in its own evaluation

report26 states the true problem tacitly. ‘A fundamental challenge is that the
EITI does not have a detailed theory of [what is] change that can explain
how it is to contribute to societal transformations’ and ‘The lack of societal
results is confirmed by testing ‘Big picture’ indicators proposed by EITI.’
This revealed that there is not any solid theory of what change actually is
behind some of the EITI aspirations, nor do data show any links at this
aggregate level.27 In short, good governance in a vacuum does not equate
to societal change.
The EITI is a voluntary organization, without enforcement powers.
Even when there are enforcement powers in a country against corruption,
EITI has pointed out that ‘The penalties in the law are very light…it is
cheaper to pay penalties than comply with a number of the requirements
of the law.’28 The EITI takes the position that transparency and audits
246  W. HICKEY

alone will translate into better civil society and by extension, develop-
ment.29 This approach, while well meaning, is misguided. HRD requires
specific goals and linkage to resources, not just platitudes.
One aspect, however, buried deep in the reports regarding EITI and
audits is that while the final numbers tally on what companies pay and
what governments actually receive may reconcile, the devil is in the details.
There are significant shortcomings, and weaknesses in the types of finan-
cial accounting used in the processes. These deficiencies in law, taxation,
cost accounting, and PSAs can lead to short changing the society. All
meaning inadequate public management of the data with outdated or mis-
understood IT causes informational deficiencies. Of a special note is the
‘high unit costs’ of production in resource extraction. This gets to the core
of the PSA discussed in Chapter 7, where reimbursements on expensive,
untendered parts and services, including training, question the real value
to the host country of these expenses.30

Minimizing Corruption
Corruption is not going to go away or disappear anytime soon, no matter
how good the public initiatives or slogans to stamp it out are. The money
is just too large, especially in regard to energy mega-projects with secre-
tive financial terms to handicap corruption opportunities. The old adage
of crime pays rings true. However, the most brazen corruption (bribery,
rent-seeking, graft, nepotism)31 can be minimized or ring-fenced if proper
containment is in place that reduces the opportunities for corruption, see
Figure 9.1. HRD must not be used as a conduit enabling corruption to
flourish via ethereal and ambiguous practices, but rather as a guiding force
for human development.
This book expresses a different path forward than the EITI in deal-
ing with corruption in addition to the ‘naming and shaming’ initiatives
and through publication of financial transactions (following the money),
that is, having mandated and educational initiatives and empowered ­hiring
outcomes embedded in all investment contracts with initial workforce
assessments. Of course this can only be via a national policy promoting
this. As stated in Chapter 7, Norway had utilized this model creating a
strong policy that ensures relevant know-how transfer via aligned institu-
tions, investors, and local hiring outcomes for a ‘Norwegians first’ policy.32
Without an implemented policy to promote localization, much of the dis-
cussions in this book are pointless and it becomes an idealistic treatise. It
 CORRUPTION AND THE CLIENT DRIVEN ENERGY MODEL  247

Fig. 9.1   Ringfencing to mitigate opportunities for corruption in energy

(Source: Hickey 2015)

simply cannot be the same old business as usual model being promulgated in
today’s information world. Educational outcomes and hiring empowerment
must go hand in hand, they cannot be detached, exclusive silo domains, or
corruption will maintain its foothold (i.e. participants get the education, but
are still passed over for insiders with ‘connections’) as corruption seeks out
gaps and thrives on information deficiencies in a well-protected and insular
system. As mentioned consistently in this work, outcomes can only be had
or insisted upon if a knowledgeable educational expert also sits at the table
as an equal during the contract negotiations with the leaders, engineers, and
finance people. This is the only way forward in the information age as was
discussed in Chapter 7. Proxies for education alone can’t do this, the infor-
mation age demands that education directly be heard.
Empowerment means there is an ensured hiring placement once the
skills are derived and obtained. This is a ‘defined outcome’. Skills in this
case means not only cognitive and psychometer skills, but also the affec-
tive (attitude) skills that round out the job competency. In this case, the
248  W. HICKEY

companies cannot default and claim they simply cannot find anyone quali-
fied due to cultural differences, or other subjective reasons, and so on that
are essentially ascribed to affective differences  in culture, when the real
goal all along is not bringing in qualified people but in securing in-house
proprietary advantages. In the long run, this will also have significantly
more impact than playing the same financial game of aggregate unaudited
line-item expenditures (which can be manipulated) on a balance sheet.33
Thus while transparency is important to identify where the money is going,
to be truly effective it must be formatively audited with the workplace actions
in processes as ever changing metrics and subject matter validity are constant.
Transparency alone is not enough, nor is education, both must be under-
pinned by empowerment, namely an ensured job placement once the skills 
(affective, cognitive, and psychometer) are demonstrated. If employees are
truly hired based on skills and technical proficiency then, it will increase orga-
nizational efficiency and lower operating costs. Of course this is the ideal, and
entrenched interests with old ways of doing business (and enjoying the many
perks from these old ways) will not want to update this or change the ways of
the ‘client driven model’ in any form if they simply don’t have to.

Summary
To sum up then, corruption is as old as mankind, it cannot be stopped
overnight, or with any well-intentioned programs bereft of mandates and
enforcement. Left unchecked or unmitigated, corruption has horrible
consequences. It shortchanges societies. It benefits a few well-connected
insiders (elites) but fuels inequality and conflict over resources, trapping
large and uneducated population groups in a never-ending vicious cycle
of demoralizing poverty. The sums of money involved, and gaps in pro-
cedures and authority will always provide opportunities for corruption or
the blurring of ethical lines. HRD, due to its ethereal nature under lead-
ers with a mindset of engineering and finance, cannot simply be allowed
as another channel for other non-technical ‘activities’ in an organization.
Only with a robust national policy initiative where HRD (educators and
development people) sit at the negotiation table as equals with finance, regu-
lators, and engineering can HRD be prioritized and appreciated. Norway is
one such model that prioritized HRD and localization. On the world’s least
corrupt country index, Norway sits very high. Publishing financial transac-
tions in an index, such as EITI initiatives, is only one way to minimize cor-
ruption. Education is also a valid design. To truly ‘ringfence’ corruption, in
 CORRUPTION AND THE CLIENT DRIVEN ENERGY MODEL  249

particular for HRD, relevant education that is clearly aligned with business
drivers must be utilized,34 and then empowered hiring outcomes ensured by
policy. That being, people with the appropriate job competencies and skills
are assured an actual job placement in the organization and not passed over
due to cultural or political issues. Then the overall system becomes more
transparent and fair to all. Trust is built, which leads to social capital forma-
tion, eventually driving corruption into the corner.

Notes
1. Michael Ross, ‘Does Oil Hinder Democracy?’ (World Politics (53: 3), April
2001), pp. 325–61, Karl, T. (1997). The Paradox of Plenty: Oil Booms and
Petro-States. Stanford: University of ­California Press., and Mikesell, R.
(1997) Explaining the Resource Curse, with Special Reference to Mineral-
Exporting Countries’, Resources Policy 23(4).
2. Leonard Wantchekon, ‘Why do Resource Dependent Countries Have
Authoritarian Governments?’ (Yale University Research Papers, December
12, 1999); and  Gelb, A.  et al.  (1988) Windfall Gains: Blessing or
Curse? (New York: Oxford University Press).
3. EITI, (2011). Achievements and Strategic Options. Final Report,
Scanteam: Oslo, Norway, p. 170.
4. Dave, B. (2003) Kazakhstan: Countries in Transition. UNPAN Report,
p. 3.
5. See: http://www.nytimes.com/2015/08/09/business/international/
effects-of-petrobras-scandal-leave-brazilians-lamenting-a-­l ost-dream.
html?_r=0 and http://www.forbes.com/sites/kenrapoza/2015/04/04/
how-much-of-brazils-economy-got-lost-in-petrobras-­scandal/#469863
75432c.
6. Freeport and international copper and gold producer, has large operations
in Indonesia. Recently its president and speaker of the Indonesian house
were implicated in a corruption scandal. In Tempo English, url: http://
en.tempo.co/read/news/2016/01/19/056737369/Freeport-Indonesia-
President-Director-Maroef-Sjamsoeddin-Resigned.
7. See: http://www.reuters.com/article/us-venezuela-politics-idUSKCN0VB26F.
8. Azerbaijan devaluation: http://www.theguardian.com/world/2015/
dec/22/azerbaijan-currency-plummets-oil-price.
9. The largess is questionable. Even with collapsing oil prices below $28 a
barrel, the good times continue: http://www.bloomberg.com/news/
articles/2016-02-12/the-oil-industry-got-together-and-agreed-things-
may-never-get-­­better.
250  W. HICKEY

10. Gylfason, T. (2001), ‘Natural resources, education, and economic devel-

opment’, European Economic Review, 45, pp. 847–59.
11. Much has already been introduced about the ‘resource curse’ in Chapters
1 and 3.
12. Ross, M. 2001, ibid.
13. EITI, (2011), ibid. The EITI has came about to discern and transparently
publish under their Publish What You Pay (PWYP) initiative, what money
goes where, but many companies still claim secrecy due to ‘proprietary
information’ clauses.
14. Hickey, W. August, 2012. Stop Reimbursements in Indonesian Oil PSCs.
The Jakarta Post. URL: http://thejakartapost.com/news/2012/08/27/
stop-reimbursements-indonesian-oil-pscs.html.
15. The HRD Chap. 5, considers the five levels of training evaluation by
Kirkpatrick and later, Jack Phillips. They are rarely carried out in resource
projects, however.
16. See EITI (2011) ibid., p. 182.
17. Various management interviews with oil company contractors in

Kazakhstan and Indonesia about the PSA and bidding processes, 2006.
18. As the great HRD guru Robert Mager said, ‘if you’re not sure where you’re
going, you’re liable to end up some place else’ in Mager, R.  F. (1997).
Preparing instructional objectives a critical tool in the development of effec-
tive instruction (3rd ed.). Atlanta, Ga.: Center for Effective Performance.
pp. v–vi.
19. Interview with marketing manager of a major U.S. oil company invested in
Central Asia in 2005.
20. Nigmet Ibaldildin, borrowing heavily off of Ross,2001, Karl,1997 and
Mikesell, 1997 sums up much of the ‘client driven model’ best in a 2003
monograph ‘Oil and Authoritarianism in Kazakhstan’, as follows on page
3: ‘The case of a small group controlling oil and, consequently, financial flows
facilitates the flourishing of corruption. The absence of a positive spill-over
effect on local and national industry may again invoke disappointment and
resentment among the population.’ Johnston and Johnston is also a de facto
apologist for the ‘client driven model’ in developing countries, here:
Johnston, D. & Johnston, D., 2001 Kashagan and Tengiz, Petroleum
Accounting and Financial Management Journal, (Fall-Winter, 2001).
21. Ibaldidin, (2003), ibid.
22. Rothwell, W. & Kazanas, H.C. (1994). Human Resource Development: A
Strategic Approach, Amherst, MA: Human Resource Development Press;
and Rothwell, W. (1996). Beyond training and development. New  York:
Amacom Publications.
23. Pinto, P. and Zhu, B. (2009) ‘Fortune or Evil? The Effects of Inward
Foreign Direct Investment on Corruption’, Saltzman Institute of War and
 CORRUPTION AND THE CLIENT DRIVEN ENERGY MODEL  251

Peace Studies (SIWPS) Working Paper No. 10 and Pinto and Zhu, 2009;
and see Luo, Y. (2006) ‘Political Behavior, Social Responsibility, and
Perceived Corruption: A Structural Perspective’, Journal of International
Business Studies, 37: 747–766.
24. Some mining and oil companies are required to give back a portion of their
profits to local communities. Nonetheless, oversight can be lax, and cor-
ruption ensues. For example, one tribal chieftain because the conduit for a
major coal companies entire social obligation disbursement. This can cre-
ate patronage and kickbacks.
25. Papua province in Indonesia is home to rich mining resources, the govern-
ment under President Jokowi has stressed development of this area and
people power, however regional authorities in this area are not always so
inclined to honor these central government mandates. See: http://www.
thejakartapost.com/news/2015/12/30/jokowi-presses-ahead-with-
papua-tour-despite-violence.html
26. EITI, p. 8.
27. EITI, p. iv.
28. Civil Society Legislative Advocacy Centre.
29. EITI, (2011) Final Report, p. 193 Scanteam, Norway.
30. EITI, ibid., p. 190 and p. 185 concerning PSCs. And Rutledge, I. (2004)
The Sakalhin II PSA: A Production ‘Non-Sharing’ Agreement. Sheffield
Energy and Resource Information Services (SERIS). URL (consulted July
2011): http://www.bothends.info/mfi/dos3-SakhalinPSA.pdf.
31. Ades, A., and Di Tella, R. (1999) ‘Rents, Competition and Corruption’.
American Economic Review 4(9): 982–994.
32. Gylfason, T. (2008). ‘Norway’s wealth: Not just oil’ URL: http://www.
voxeu.org/index.php?q=node/1199.
33. http://www.transparency.org/topic/detail/oil_and_gas.
34. This comes from Porter’s Diamond model, where HR is one facet of clus-
ter competitiveness. Porter, M. (1998) On Competition. Cambridge:
Harvard University Press.
 CHAPTER 10

The Interface

We have considered up until now how to localize, so what is next? We now

must tie the loose ends together and reposition it for a new way forward,
bereft of past bad habits, colonial mindsets, and corrupt/nepotic practices
that have largely been to the benefit of a few elites and oligopolies of unac-
countable leaders. This time is different. We live on a finite planet, with
finite resources, and a finite atmosphere, but with booming, and hungry,
populations. The age of unlimited growth in both people and resources
has drawn to a close, even with productivity improvements, we are reach-
ing capacity thresholds.
We have examined the main pillars of development with the types of
energy (Chapter 2), the skills transfer (HRD, Chapter 5), and the financ-
ing ability of it all (Chapter 3) and with all of them underpinned by own-
ership (Chapter 6) and the human roadmap for a localization imperative
in Chapter 7, contexted in a business historically bereft with corruption
(Chapter 9), and now with the added awareness of an emerging and game-­
changing China in play with new rules and standards (Chapter 8).
Elite interests have always been part of the fabric of society throughout
recorded human history.1 Revolution, democracy or Marxism could not
remove them or restructure them, and Friedman’s trickle-down economics
alongside free markets could not sate them. The elites will always be there
with us to demand a chair at the head of the table, and when they are absent,
others will quickly fill the void. Perhaps, however, they can be convinced
that their interests are also congruent with those of the society at large,

© The Editor(s) (if applicable) and The Author(s) 2017 253

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6_10
254  W. HICKEY

and that societal gainshare aligns with their long-term interests as well. The
interface consists of a new rework of the energy business for better human,
environmental, and eventual social capital development.2 An interface cre-
ates a new, first-step roadmap toward viewing energy as a strategic and rich
prerogative toward societal development that must be front and center of
an advanced socio-dynamic mindset. The interface is about integration of
change into processes, in this case, energy and human development  in the
context of today’s Information Age.
Simply put, like DNA strands, human resources needs to be intertwined
with energy resources in today’s world, as it is more urgently needed than ever
before. As previously stated, only energy can deliver the necessary economies
of scale needed to lift the vast billions in poverty on our overcrowded planet
due to its enormous revenues and all-encompassing nature. In this case, this
energy source is still overwhelmingly, for better or worse, fossil fuels. As 88 %
of the world’s energy is still sourced from burning the carbon centered mol-
ecule, all economic and development issues  and activity must inculcate all
aspects of fossil fuels, from gas to coal. At least for now. Renewables and
nuclear energy simply cannot deliver the aggregate baseload power reliably
that the world, and in particular developing countries, demand.

Competitive Advantage of the Nation-State

As a ‘reframe’, the paradigm today is that the only way forward in the
Information Age, is through the alignment in cluster development (or
‘hubs’ if the society is mobile and educated enough) with the strategic
resources, or services, that reside in situ in a given nation-state or region.
To understand competitiveness a little better, we need to reflect on what
exactly is the ‘nation-state’ and will it benefit an overpopulated world with
cross-border issues of poverty, migration, economics, and climate change,
or is a new order in the offing?
As stated in Chapter 6, in regard to the construct of today’s national
sovereignty that was interpreted and defined at the Peace of Westphalia in
1648, a new order of countries that created self-determination amidst the
co-existence of countries whereby interference in a country’s ‘domestic
affairs’ would not be tolerated, and a new balance of power emerged. This
construct carries forward into modern times, but has shown its inability
to encompass and incorporate regional and world changes in technology,
mobility, migration, and differentiations in work processes and its products
and services: imports, exports, outsourcing, and all the  side issues those
 THE INTERFACE  255

areas bring with it. Westphalia is simply inadequate to deal with competition

against national products and labor, product dumping and energy exports,
races to the bottom, cross-border air and water pollution, fishing and live-
stock rights, and currency wars with beggar-thy-­neighbor economic issues.
In short, these laws and their  frameworks have not kept up with the
furious pace of change particularly in developing countries. This has cre-
ated a huge problem for governments seeking to create jobs and wealth
in countries practicing different domestic standards with weak labor and
safety laws, especially in countries over-burdened by regulations, colonial
policies, or persistent structural issues regarding employment: unions, pen-
sions, social services, and hiring and firing laws. A new mindset is needed
that promotes SMEs, entrepreneurism, and better empowerment  pro-
cesses. Governments of course laud these ideas but have no real intention
of giving up their regulatory frameworks and monopoly SOEs.
Economics, elitism, and power however are so incipiently vested in
the concept of nation-state that this won’t go away easily, however, in an
overpopulated world, with many ‘have nots’ who continue to be ignored,
and with a worsening plight in an information era, it may all implode.
Not all nation-states are equals, no matter how much the UN or WB
seeks to ‘cheerlead’ and frame this old and compromised Westphalian con-
cept. Some like the USA and France have outsized power and influence in
everything they do, they are not questioned, and the same international
rules do not apply to them.
On the opposite end of the spectrum, countries such as Laos, Yemen,
and S. Sudan, border on failed states, the concept of a nation-state does
them little good, it is merely semantical. They all have very weak rule
of law, and institutions, and are pushed around or  easily  controlled by
their neighbors and regional powers (Thailand, Saudi Arabia, and Sudan,
all respectively in order). These states cannot defend their territory and
the weakness of their currencies in general defines their status as types of
‘beggar nations’. Nonetheless, many of these places do have oil, gas, and
other resources that can be exploited, and looted by elites and the power-
ful. They do have wealth, but not in a transparent sense. Certainly not in
regard to lifting living standards or developing their own citizens.
As North et al. put it, the nation-state arises past a primitive social order
and is defined by groups of elites who then use this construct of coopera-
tion for mutual advantage to pursue their own objectives and keep order
on their terms. They enlist ‘violence specialists’ to ensure the order of this
contractual arrangement and it’s security.3 Most developing countries today
256  W. HICKEY

are limited access order or a natural state and have not moved into open-
access rule of law societies. This means transactions (contracts) are based on
personal relationships, not on a rule of law that enforces those contracts.4
Of course this construct by no way benefits the majority of society, only
selected people who have the ‘right’ then to form the contractual arrange-
ments that are recognized by the state (this is the situation most developing
countries find themselves in). In other words, it is the elites and their vested
interests (and military, as a complementary partner) that gain the most to
keep the social order of the nation-state in place in developing countries.
Perhaps a new formulation of governance and the governed will be the
result of future changes. It is highly possible that in a few centuries, many will
look back on the millennia of the developing nation-state and reconsider what
people thought about failed governance and self-determination then.
The problem with the nation-state then is in a system that forces them
to look inwards as opposed to outwards politically, socially, and economi-
cally. It doesn’t consider what its neighbors are doing in any collaborative
effort, but rather as a competitive one, for all things considered: money, mil-
itary power, resources, exports, and even currency values. Perhaps a reason
ASEAN and by extension the EU periphery states, like Hungary and Baltics,
are fundamentally weak is that they fail to address different motivations in
outside nation-states by tying them altogether in a regional cooperative.
For energy and HRD then to be predicated on a foundation of the
developing country nation-state contexted in an information-intensive
and mobile world may be working at cross-purposes. Again, this is not
expected to change anytime soon, and we make no illusions of that, but if
we are speaking of grandiose change to alleviate vast differences in much of
the world (poverty, skills, climate change initiatives) we must address root
causes, sometimes falling outside the system, but very much reinforces
it. Much of this is defined in Peter Senge’s groundbreaking book The
5th Discipline,5 where systems are extremely difficult, if not impossible, to
change without any outside intervention.

Systems Thinking, Feedback, and Reinforcement

People or nations working inside a system may all be doing the best job
they possibly can, but predetermined outcomes contained by the system,
will negate all their hard work every time. Senge’s work was pretexted by
W.  Edwards Deming 1986 seminal work on systems Out of the Crisis,6
whereby workers (extended to citizens) are largely held blameless, it is the
management (extended to government) that is at fault. These of course
 THE INTERFACE  257

are very simple analyses of these great works and shouldn’t be taken out of
context, they were originally written for business management.
The idea of systems thinking, however, is not new to resource extrac-
tion and economics issues. It was founded by Dr. Jay Forrester at MIT in
the 1950s who was later invited to the Club of Rome to ask if this system
could be used for modeling to predict availability of oil resources with eco-
nomic growth into the future.7 Namely, systems thinking states that the
structure of any system is just as important in predicting behavioral out-
comes as the individual actors themselves. The world is currently rooted in
a consumption-based system that heavily depends on fossil fuel resources
for all economic activity and future growth.
This is not idealism or hyperbole in any sense, but  simply for real
change and cooperation to occur, the concept of the ultimate precon-
ception denominators of nation-state will eventually have to be put to
the test and challenged. Competitive advantage forces the zero-sum game
­imperative (I win/you lose), as it pits countries against each other on a
national sense. The ‘Occupy’ movement of the past few years has ampli-
fied this issue of losers and winners.8 A question is, can we afford in the
world that we live in today to be training and educating people to ‘race
to the top’ or should we be educating people to ‘work together’ in a
very finite physical world with limited resources that is facing considerable
legacy problems of inequality and environmental degradation?9 ‘Working
together’ means effectively integrating HRD at the ‘micro level’ into the
system on a big picture ‘macro level’. This is done via the ‘meso level’ of
economic development. In other words, we are defining where exactly the
rubber of HRD meets the road of macro-economic activity. 

The Tangibles

The Information Age
With the above said, we are now in the golden age of instantaneous infor-
mation. Information is power. Information is disruptive.  Information is
dangerous. Ideas and media can be conveyed ‘virally’ from one corner of
the globe to the next instantaneously. People know all about politics, living
standards, culture, corruption, currency values, even blue prints for nuclear
bombs, and so on right away. Nothing is hidden in this era, if it is, it is not
obscured for long. There are no ‘Black Boxes’. Methods for making Apple
cell phones, Intel semiconductors, even Pfizer pharmaceuticals, like Viagra,
Celebrex, or Lipitor can quickly be disassembled, broken down, and re-
258  W. HICKEY

engineered with the methods and information broadcast instantaneously

and simultaneously, to investors, cheaper labor plants, even households
looking to get a better price for a new vacuum cleaner. Patents can only
protect so much, for so long. Google, Facebook, Linked In, Twitter, Yahoo,
and YouTube have produced a ‘do it yourself’ information overload soci-
ety. People know what is going on and quickly. All this has led of course
to an information supernova. Classes held at Harvard or MIT can easily be
conveyed virtually to the rest of the world via the internet or by ‘MOOC’s’
(Massive Open Online Courses).10 Information abounds, organizing and
interpreting it however is another matter, it needs to be understood.
The Information Age has forced transparency. Secretive methods,
middlemen, and high-priced nontransparent  services have been equal-
ized to where people now have choices. ‘Crowdsourcing’, alongside social
media, has allowed large and diverse groups of disparate people to partake
in funding or information drives for problem solving or to confront recal-
citrant actors. Consider the plight of recent Syrian refugees heading to the
EU: Most of them are very internet savvy; all have smartphones and power
banks to keep them fully operational. They know the most efficient transit
points, where the guards are, where their friend and contacts are, where
resources can be gained, how to contact the police, and places (and what
human traffickers) to avoid/or use. It has certainly made their journey
more accommodative from a know-how perspective. Even without higher
education or static academic degrees, the tools of information access are
learned quickly and utilized more prevalently by all than ever before.
Of course all of this has a significant and notable impact on the energy
business which is traditionally very conservative  and secretive in nature.
Energy companies like to protect and obfuscate their vast profits in order
to minimize tax and social obligations and maximize shareholder (and
management control) returns. If the information and know-how is shared
with others, anyone might be able to do it, or learn how to do it, competi-
tion would be the result, and profits would be severely squeezed. In fact,
many learning processes and jobs in the energy business with applied HRD
initiatives could be transferred back to able-bodied people in developing
countries with moderate intelligence levels, at no doubt much lower labor
costs if tendered to a large group of motivated people. It’s not a matter
of training then, but of political empowerment set in policy and will. The
information is there, and the channels necessary to build these skills via
HRD (training cycle or competency development) methods are also there.
Ideally then, there is no technical reason to perpetuate a North–South
phenomena or any neo-colonial mindset in the information era of today,
 THE INTERFACE  259

though there may be political ones. Nonetheless we are not oblivious to

the fact that this is what is still happening, even in 2015, especially in
places like Namibia, Peru, and East Timor. Companies consistently say
they must use internal talent and know-how that the general population
‘doesn’t have’, and the elites (who have approved their investments) under
the rubric of ‘sovereignty’ protect that economic model, usually without
question. Just to reinforce then that the information is there, this book
demonstrates under ‘Ownership’ in Chapter 6, that needs of burgeoning
hungry masses of humanity must trump proprietary methods and ‘busi-
ness as usual’ attitudes. Again, this is anchored in the system. The system
cannot promote and tolerate change in and of itself, if it has an ‘it’s always
been done that way’ mindset, but the reality is the Information Age is
forcing a deep reflection of methods that may not hold water any longer
and are merely being kept in check by old constructs of governance and
the elites that enforce them. Simply, the world can no longer afford these
restrictive practices.

Global Warming
Which brings us to the high-noon  showdown with climate change, the
looming elephant in the room in regard to changing old energy habits
versus the tried and true economic playbook of exporting raw materials
from developing to developed countries for value-added finished products
and services in place. The year 2015 was the hottest year in recorded
human history, and as of January 2016 the hottest January ever recorded.
As stated in Chapter 4, the world is hopelessly addicted to the fossil fuel
model and it’s all encompassing system, which is slowly and most assur-
edly destroying our planet, that is if we believe what the climate and envi-
ronmental scientists, not the politicians, are telling us. It’s not only them
telling us, even  the major oil companies, insurers, and militaries of the
developed world are preparing for it.
Nonetheless, while the skills and urgency are there to develop renewable
and alternative sources of energy, the political willpower and investment/
financial crowd is lacking in its participation beyond merely ‘show efforts’
for publicity. In practically every developing country with resources, the
predominate FDI clamors for access to the natural resource business, not
investments in T-Shirt factories, handbag boutiques, or beach hotels.
They simply don’t care about those businesses on an economy of scale
level. Manufacturing highly competitive plastic accessories cannot nearly
generate the magnitude of profit an oil reservoir or open pit coal mine
260  W. HICKEY

can, when it comes to billion dollar investments. Money drives the mood,
urgency, and necessity.
The all-encompassing mindset of ‘financial returns’  then dictates the
pace and investment terms in energy resources predominantly. Oil and
coal are still being burned in enormous quantities every day, with more
demand expected. All of this is working at cross-purposes to climate
change initiatives, and the fact that the world is on its way to quickly burn-
ing through its carbon bank and blowing past 2o C. It is not being talked
about in IPCC circles either that 2.7 C is a now more realistic target as
most nations simply cannot slow down their fossil fuel addiction and are
betting their development on it anew.
Recently, an idea among the IMF, UN, and OECD that has been floated
is a carbon tax, with the proceeds going to help developing countries pre-
pare and deal with climate change. As discussed in Chapter 4, a possible
mechanism for dealing with global warming is a tax on carbon. On the
surface, this is an excellent idea. However, there are a few further caveats
that bear notice. Many developing countries have high levels of corruption.
Further, the trend is towards human development for the information age.
For a tax to be truly reflective and supportive of this issue, it must go to skills
building, not to high salaries and overhead administration for bureaucrats,
nor recycled back to Wall St. and other Western financial vehicles for ‘greater
returns’ as is happening with SWFs. Any climate change tax proceeds then
must have education specialists sitting at the table as equals, to ensure that
skills transfer for the development and awareness of climate change initia-
tives reach as many people as possible. Unfortunately, in countries with high
levels of corruption this may be too idealistic and unworkable. Additionally,
those in developed countries paying the tax have been well apprised of the
corruption in developing countries, such as Nigeria and Venezuela, and
would be loathe for their money to go to fund more malbehaviors and out-
right corruption. In fact the issue may be dead in the water.
As long as money and the status quo of the nation-states’ competitive-
ness depends on more exports of fossil fuels it will be perhaps impossible
to integrate new and renewable energies, with attendant mindset changes,
on a broad capacity scale. It’s certainly not a skills deficiency. People can
be trained to service and maintain these businesses to an exemplary level,
with many knock-on effect jobs, but the political willpower is still lacking.
Unfortunately, integrating this segment of new energy with people may
require several catastrophic events with a large loss of life to convince lead-
ers they MUST change their old ways.
 THE INTERFACE  261

Labor Costs
Finance is all about showing one (and investors) the money. Development
of projects has been curtailed in some locales due to high development
costs. This is a tricky issue. Most of the world’s ‘easy’ oil and gas has
already been had over the past 50 years. Now, we are dealing with ‘tight’
(hard to get at) oil and unconventional oil and gas projects. Additionally,
much of the oil is in politically and environmentally inhospitable places.
For example, Mahakam, Tupi, and Sakhalin are all high-cost fossil fuel
megaprojects under the PSC (Production Sharing Contract) concept in very
remote areas near large, impoverished populations. Mahakam11 is a giant gas
block off the coast of eastern Kalimantan (formerly Borneo), Indonesia.
Tupi is the pre-salt deepwater offshore discovery in the Brazilian territory
of the Atlantic Ocean.12 Sakhalin in far Eastern Siberia near Kamchatka is a
major gas project, administered by Royal Dutch Shell.13 All three employ, or
will employ, high-cost, specialized, foreign labor that will be used to develop
and operate these projects. This foreign labor, under the PSC arrangement
will, business as usual, be reimbursed fully out of the production oil. Very
little money will flow straightaway to national coffers due to these expensive
front-loaded labor costs. Few will complain about this arrangement, or even
know whom to complain to if they wanted to.
A different way forward is proposed. Developing local talent to administer
and develop these projects on a dedicated, evaluated, and mandated time-
line with the international oil companies. Of course this has been proposed
before, specifically with some developing countries ‘industrial nationalization’
plans of the 1990’s but we add two additional conditions beyond ‘dedicated’:
evaluated (that means skills actually being transferred to locals) and mandated
(that means locals will actually be hired for empowered operational and main-
tenance jobs, not merely token or political jobs) on these projects. If this can
be successfully implemented, the labor cost savings via guaranteed reimburse-
ments to foreign specialists would be astronomical. But there is a deeper rea-
son: that being, the locals would now actually be engaged on a value-added
level in their own strategic industry. Idealistic? No. This is representative of
the Norwegian North Sea oil model. Possible? It will depend on how far the
national governments go to enforce and interpret ‘mandated’. This is a sticky
issue in many developing countries. Empowerment initiatives could backfire
in that they may create people emboldened to take on and challenge the gov-
ernment. In many cases, the same governments that are autocratic, arbitrary
and unresponsive to their people’s needs.14
262  W. HICKEY

State Capitalism
State capitalism,15 similar to fossil-fueled political  mindsets, requires a
dearth of information and non-transparency to support its construct.
SOEs, are simply not competitive, by their nature are status quo, and
­usually  mediocre in performance when contrasted with for-profit com-
panies facing competition. Consider what happens to the share price of
a stock when a government nationalizes (takes over) a company (a bank,
an oil business, or a utility), the share price immediately collapses. Why is
that? In a stable business, the revenue streams are still maintained (such as
a utility providing electricity to households or savings services depositors
in a bank). Simply because the government takes an entity over, does not
mean that any underlying revenues dissipate. Nonetheless, the share price
collapses as investors signal lost faith in the company’s management, effi-
ciency, ability and performance. They simply do not trust a state-owned
management system to be as motivated, efficient, and competitive as a
comparable business in the private sector.16 A partial exception to this is
monopoly enterprise, for example, in oil, banking, utilities, insurance, or
telecommunications where a state-owned operator reaps enormous rev-
enue singularly, but customer expectations and service become distant
secondary concerns.
The very large and insidious corruption scandal that has recently
shaken Brazilian state-owned oil giant Petrobras would seem to confirm
much of investors’ skepticism about how hard change is in SOEs. Even
though Petrobras still is the monopoly player in the Brazilian oil business,
and retail customers pay millions of dollars every day for its product, its
share price has drastically collapsed, and there is now the real possibility
Petrobras may default on its bonds. In a publicly traded company, manage-
ment would have been thrown out and a house cleaning (firing employees
who were underperforming  or unnecessary) would have ensued. But in
state-owned company, the positions and managers are largely protected,
the status quo continues above all else, and it is very difficult to fire or
remove workers. SOEs are  simply a different animal regarding perfor-
mance and efficiency.  Many SOEs exist or are mandated in the energy
and infrastructure sector, mostly on grounds of ‘national interest’ such as
PDSVA, the giant Venezuelan oil SOE. But the reality is that state-owned
companies, with enormous revenue flows due to monopolistic practices
and government favoritism, are all about employment for social stability,
not profits. Nepotistic employment promotes patronage and correspond-
 THE INTERFACE  263

ingly political stability. State-owned companies and the governments that

promote state capitalism are not a moot point. They are a powerful appa-
ratus that employ tens of millions in many developing and former/current
Communist countries. State capitalism dictates a modicum of guaranteed
employment, so changing this situation (and mindset)  will not be easy,
and may well prove impossible.

Education
Today, education has become the Fifth Column for changing age-old
held beliefs in energy finance, production, transmission, and use. We have
already demonstrated in Chapter 5, with HRD mechanisms, that short-­
term training and competency development can close the know-how gap
for many direct job-related tasks and day-to-day management functions.
Yet, that does not answer questions concerning nationwide educational
mandates and overall political direction. The past several years have seen
education in much of the developing world become more of a feudal
stronghold than a way forward for societal development.17 Old methods
die slowly, if at all.
Educators who do not understand change or fast-moving information
technologies can become more inclined to hold onto their statist positions
as opposed to creating any student advancement initiatives. Stakeholders
(educators) then become more important than clients (students), which
is  a classic problem of management/ownership asymmetry. Change is
necessary to bring these old systems (especially ones built on a colonial
past such as in Malaysia,  Indonesia, Angola, or from a Marxist past, such
as the  former USSR states) into the twenty-first century, but political
blockades are omnipresent. Teachers and educational administrations in
large state-run universities and colleges carry political clout with leaders
in  national capitals, students do not. Change becomes necessary but is
demonstrably slow and painful with far too many impediments.
The importance of strategic and current secondary education for youth
development and their long-term opportunities from this development
cannot be overstated. Any national accreditation must be all about aiding
and abetting the strategic development of a nation’s youth in line with its
industrial drivers, or core industry in that society in order to highlight a
country’s real economy and for national development.
Sorely, this is not being done, some developing countries are putting
nationalistic directives on learning obscure languages, religion, or long-­
264  W. HICKEY

held cultural beliefs that do not integrate at all with the demands of mod-
ern industry. Simply put, this may be politically well intentioned, but it is
economically destructive, and will stunt endeavors in creating value-added
capacity. Countries simply cannot afford educational development that is
not in tune with the current investment and economic drivers of the coun-
try, that being the energy and resource industry in most of them.
For example, in the coal industry, the FMC (Full Maintenance Contract),
outsources a plethora of long-term, well-compensated jobs to mining equip-
ment vendors for the maintenance of their equipment. These contracts are
not small numbers, and can be in the hundreds of millions of US dollars.
Most of the value-added and high-end proprietary maintenance techniques
are then held tightly by these vendors, usually Western foreign multination-
als which demand large dollar payments for machinery upgrade and upkeep.
Generally, only lower level vocational skills, such as cleaning, moving,
simple repairs, and replacing parts, are then  transferred to locals, or the
‘crumbs off the table’. The reflexivity is that of a high reliance then on for-
eign equipment and vendors/contractors in national coal mining industries.
This money needs to be channeled more strategically: Away from turnkey
FMCs and to strategic development initiatives in the educational ministries
that are working in tandem with industrial patrons. It could be done, again,
if proper incentives toward strategic education are aligned correctly  in a
national development policy, as we have seen in Chapter 7, Localization,
the  Norwegian model of skills development insists on  the  longitudinal
transferring of industrial skills in the extractive contracts to Norwegians.18
Massification (market demand for higher education by the masses) of
education in the developing world, particularly in Africa, is thriving.19 The
youth of many in Asia and Africa are already speaking out about their
future needs.20 More strategic education is needed, and it is needed now.
One developing country that has done this particularly well is China,
which has insisted (and mandated) know-how and skills transfer initia-
tives in their universities with foreign investments across a vast spectra of
industry, not just energy.21
Yet, a narrow handful of elite schools cannot be the only provider for
empowered tertiary education initiatives for all in any given country.22
Populations and economies are growing exponentially  (the world is on
track to hit 10 billion people by 2035!), which needs enlightened man-
power to maintain and create new ideas. This would also go a long way to
create value-added entrepreneurial activity, which many developing coun-
try government support. Without this ‘spreading the risk’, the economies
stagnate with any downturn in exports of commodity-based resources
 THE INTERFACE  265

which cause economic contractions in bad times. Only strategic ­education

can ‘level out’ the dips and highs caused by economic activity that is
dependent on resource exports over the long term. Consider the energy
levels at all types of economic development (Table 10.1).

The Intangibles

The Carbon Bubble

Over a century of world reliance on oil, gas, and coal have made them
core to the global economy, making polluting industries vulnerable to a
potential financial crash when and if the world shifts to alternative ener-
gies. This bears noting. As discussed in the currency section, so much of
finance and its derivatives are supported by carbon-intensive industries that
national budgets, wealth funds, and stock markets (including pensions and
individual’s investment portfolios) will suffer considerably if fossil fuel use
is suddenly curtailed.23 So many have benefited off of this industry, and for
so long, that any transition period may create losers economically, albeit
winners environmentally. This is the trade-off to deal with climate change
and initial efforts regarding this have not shown promise. Strong leadership
that will cut across national boundaries, will be required. This is a tall order.

The Investing Super-Giants

Ray Dallio, Warren Buffett, George Soros, Tom Steyer, David Tepper.
Some of the giants of investing (in particular, hedge funds) controlling
trillions of US dollars of wealth, with decisions that influence even more
billions of dollars get it, some don’t. It is important to consider their
viewpoints as they are the vanguard of investment trends, and the ‘elite of
the elite’, whose decisions are not only about self-interest but affect the
planet we live on. The world listens to them for financial leadership. For
example, if the giants of investing continue to invest in fossil fuels, it gives
the signal to many that ‘all is well’ with the fossil fuel industry and the
products they produce, despite the glaring facts that planet is warming, ice
sheets in Antarctica melting, and superstorms/drought/wildfires are on
the rise. Most are steeped in a very US-centric view of capitalism: letting
the markets dictate the value of assets, outside conditions be damned.24
Nonetheless, they may also be the ‘trim tab’25 necessary to turn the tide
with attitudes and money committed from large investing pools. In other
words, they can influence the markets. The relationship dynamic between
266  W. HICKEY

Table 10.1  HRD integration conceptual roadmap 3 × 3 at all levels of energy

economics for developing countries (Hickey 2015)
Macro Meso Micro

Upstream Alternative energy Local programs that Training and workforce

policy, transition. support acceptance development for local-­
Energiewiende type for new power content development/
programs generation such as CSR to service and provide
Offshore, shale, and wind, geo, and equipment for exploration
non-conventional nuclear. Addressing and production activities:
oil and gas NIMBY (not in my oil, gas, coal, geo, and
production policies back yard) concerns nuclear industry
with property
owners. Land
acquisitions
Midstream National pipeline Community liaisons Vocational training
and infrastructure and development projects and workforce
upgrades, utility for local content development initiatives to
transmission, and and SME maintain and produce jobs
distribution promotion. Health, in refinery, transmission,
upbraiding policies safety, and pipeline, and shipping
environmental sectors of oil, electric, gas,
programs to create and coal
awareness of energy
production and
operations
Downstream Business-friendly Cluster and hub Educational curricula and
policies that development and initiatives placed in
promote SME support by local universities and colleges to
development and governments to train specialists in chemical
value-added induce incipient engineering,
product domestic pharmaceuticals, and
development. production and operations management
Promotion of value-added for end-stage product
business incubators enhancement of oil, development and
with land, tax gas, coal, and marketing
holidays, and local production of solar
preferences panels, wind
turbines, and local
content
 THE INTERFACE  267

Table 10.2  Tycoons who could positively influence energy policy and develop-
ment via an investment perspective (Source: Hickey)
Person Net individual worth (controls) Investing specialty
company

Warren Buffett $62 billion ($327 billion) Berkshire Energy/infrastructure/

Hathaway finance
Ray Dallio $16 billion ($155 billion) Bridgewater World’s largest hedge fund
Assoc.
George Soros $24 billion (not active) Quantum Fund Currencies and derivatives
Tom Steyer $1.6 billion ($20 billion) (retired) Energy investments
David Tepper $ 10.5 billion ($15 billion) Appaloosa Energy/infrastructure/
finance

money, power, and politics and thus those that can seed real change is
undeniable (Table 10.2).
Warren Buffett26 has invested considerably in the fossil fuel industry
in the past several years. Recently he has divested from Exxon Mobil, not
because he is opposed to the fossil fuel model, but rather Exxon Mobil has
failed to yield better returns with collapsing oil prices. Buffett’s Berkshire
Hathaway corporation also has many other investments either in fossil
fuels or business that supports the fossil fuel industry. His investments
in alternative energy is lacking, to say the least, unless one considers a
company such as GE, which he is also heavily invested in, via their wind
turbines. It is doubtful that Buffett gives much thought to whether or not
the energy investment are fossil fuel or renewable, he is simply interested
in the financial returns.  In spite of this viewpoint, Buffett still commands
a large world following, people listen to him. 
Ray Dalio is an amazing investor. Dalio is the founder of the world’s
biggest hedge fund firm, Bridgewater Associates, which now manages
$155 billion27 and is considered one of the most 100 influential people in
the world today, not for fossil fuels or alternative energies, but for under-
standing business cycles in bull and bear (up and down) markets. Dalio is
most famous for his 2008 publication How the Economic Machine Works;
A Template for Understanding What Is Happening Now. George Soros
and  his theorem on reflexivity  in systems.28 Similar to Senge’s systems
thinking, Soros theory of reflexivity is about positive feedback loops that
can quickly  become negative feedback loops due to mass  psychology in
short order. Soros used this theory for much of his investing and it has paid
off well for him. In essence, societies become more knowledgeable about
the world and methods around them, causing specific predictable behaviors
268  W. HICKEY

and forecasts. Prophesies then become self-fulfilling. The entire reflexivity

theory is much more complicated than this very brief synoptic, however.
The point is, these deep thinkers and movers of capital, may understand
a way forward that few others see. They have already addressed issues of
energy and change. The proof has been in their demonstrated financial
sustainability over time. One may ask why no government officials, like a
Christine LaGuarde, entrepreneurs, such as Elon Musk or central bankers,
Mario Draghi are noted. These types tend to be transitory. Good ideas,
appointments, and so on can be fleeting. But the wealth of the self-made
tends to be around for a long time, has weathered unsustainability, and
is not transitory. The respect in investment circles is large, and sought
for direction. The bottom line is these ‘super-giants’ of investing can be
enlisted with a sense of urgency, they can turn the fossil fuel model on its
ear. These investors must get serious about promoting change in energy
investments, as it will no doubt have a knock-on effect with those that
matter. It is important to convey the seriousness of many of the world’s
issues to some investors as it could very well affect them directly.
We have not considered David or Charles Koch, oil pipeline and infra-
structure magnets, with $85 billion between29 them, in the billionaire titan
list, simply as both are extremely opposed to any sort of intervention or
dealing with climate change. Instead, both have gone out of their way to
fund initiatives and scientists who continue to deny that there is no prob-
lem at all with the fossil fuel model and that global warming is a ‘hoax’.30
Of course their entire midstream industry of privately held pipelines is
based on fossil fuels. Yet, such disbelief, disinformation, and misapplied
philanthropy certainly does nothing to help the climate causes of those in
developing countries, many in places such as the Maldives, Bangladesh,
and Sri Lanka who will be on the front lines of calamity.

Overcoming PSCs, Reworks, and Turnkeys:

Developing Internal Capacity for Realpolitik
We recap here that the type of energy mechanisms commonly in devel-
oping countries that handicap human development initiatives and pro-
mote the North–South phenomena. The biggest, PSCs were covered in
the Localization chapter—Chapter 7. They are an old construct of shared
investment that essentially guarantees the profits of foreign-invested
entities in developing countries, no matter how ‘positively’ it is spun by
their financial ministries. They are still actively being courted by finance
 THE INTERFACE  269

ministries and national oil companies in Russia, Iraq, Indonesia, and

Angola. PSCs do not exist in developed countries such as Canada or the
U.K. Companies in developed countries simply must form their own con-
sortia and get their own private loans and financial backing for fossil fuel
development. Reworks in mining are farmouts or contracted sections of
work mostly to foreign contractors with superior technology and methods
for efficiency. They also carry considerably higher labor costs for these spe-
cialties. Turnkeys are complete foreign-invested ‘kits’ for anything from
power plants, to refineries, to toll roads to processing factories. A foreign
entity delivers a completed project to the client, who only has to go into
the entity and ‘turn the key’ to start and operate. All technology and
know-how is held by the foreign entity, sometimes into perpetuity, to run
and maintain the operation on a fee schedule. In all three cases, very little
know-how or operations expertise is transferred to local populations.
A potential case for building refineries in Sri Lanka based on realpoli-
tik, domestic economic need, and employment issues outside of utilizing
turnkeys is presented for utility. Both Singapore and Korea have developed
national refinery businesses that serve their own populations and export
finished downstream products. In both these cases, Singapore and Korea
have internalized much know-how with a minimal dependence on for-
eign employees. However, Korea is a developed country, according to the
OECD31 as is Singapore, according to the IMF and the WB, whereas Sri
Lanka is developing.

Case Study: Sri Lanka and the Potential for a Downstream Energy
Development Hub
Sri Lanka is a former British colonial island nation and a developing
country in the Indian Ocean. It has recently elected a new leader after
several years of a destructive civil war between Sinhalese and Tamils.
They badly need to develop localized industry and Chinese investment
has been pouring in, unfortunately this investment is mostly turnkey
investment in power plants and infrastructure, with limited localization
effectiveness. Sri Lanka has no commodity-based natural resources out-
side of fishing, tea, and a very finite gem industry in its highlands. 
Michael Porter’s concept of ‘cluster competitiveness’ suggests
development of strategic industry based on the diamond model of

(continued)
270  W. HICKEY

(continued)
human resources, government, policy, infrastructure, and economic
incentives for a given industry. In this case, it is Sri Lanka’s strategic
geographic position with its deepwater ports, highly educated engi-
neers, and growing world demand for refining capacity that would
place it in the win column for developing downstream refinery
business. The concept is to align effective workforce development
practices toward this, for both domestic consumption and export
of higher-value finished products. A proper benchmark would be
comparable refinery development in Singapore and Korea. Like Sri
Lanka, neither country has commodity-based resources. They must
use their know-how to succeed, and both their government’s poli-
cies have been favorable toward this. Singapore is the largest refiner
in Asia, and Korea has a burgeoning export model of polyvinyl
extrusions (plastics) from oil. These businesses can only be enacted
with knowledgeable employees. Sri Lanka is in an opportune time
in its history to do this, as it can only build up. Its location next to
India and with growing demand from other Bay of Bengal countries
makes this initiative a win/win for all. This growing demand pres-
ents a possible competitive advantage for Sri Lanka due to its strate-
gic location, knowledgeable employees, and low-cost labor. 
Here are the potential benefits of developing a cluster competitive-
ness approach to refining in Sri Lanka, in short, many knowledge
competencies could be built that would create a national advantage:

• Increase the overall refining capacity for all types of petroleum

products in Sri Lanka that could address undercapacity of
much of the Bay of Bengal region.
• Development of expertise in refining of low-grade crude and
high sulfurous oil could become a competitive advantage in Sri
Lanka.
• Increase remittances to Sri Lanka via skilled refinery work-
ers sent abroad/Ceypetco secundment once the industry has
endogenous (internal) growth potential.
• Supply lower-cost refined products to nearby countries
(Bangladesh, Singapore)
• Standardize and specialize in select refining for jet fuel, lubri-
cants, Naptha, benzene, 95 Oct., and so on.
 THE INTERFACE  271

• Development of employee expertise in other downstream capa-

bilities (blending, storing, transportation, etc.) that can further
be used to Sri Lanka’s competitive advantage.
• Develop financial and trading expertise against the crack spread
(pricing volatility) between crude and refined products.
• Develop expertise in non-core areas of refining such as CSR,
environment, pipelines, storage, and shipping.

It is assumed then  that increased domestic refining ability could

also meet Sri Lanka’s downstream energy needs, there are also two
subordinate national competitiveness goals: Further development of
local Sri Lankan’s for working in downstream oil, and positioning Sri
Lanka as a key Asian oil refining center for various qualities of crude
(a competitive advantage would be refining for API < 18 crude). 
It is believed that a proper alignment and strategic approach in regard
to the above issues can transform Sri Lanka’s state-owned national oil
company Ceypetco from a mere energy-trading house and downstream
distributor of others products, to an economic powerhouse national
refining company worth billions of dollars with current demand trends
for capacity, expertise, and products. Similar to Singapore and South
Korea. Of course this is not to say it will happen. The large amounts
of Chinese investment have created a type of ‘Dutch Disease’ situation
with hot money inflows and increasing inflation.  Chinese investment,
for geo-political reasons,32 is distorting the economy of Sri Lanka and
driving up costs. Lack of employment opportunities still have contrib-
uted to Sri Lanka’s persistent brain drain of the well educated going
abroad. Finally, Sri Lanka is mired in bureaucratic  red tape. It is has
an overabundance of regulations, so any real change initiatives must
face the political reality of a post-colonial country still emerging from
civil war. Nonetheless the possibilities are real, and market demand and
geographical positioning is a tremendous advantage.

‘Facebook’ Future
The fossil fuel model in developing countries depends on implicit gov-
ernment financial guarantees for investment outlays. This all sounds very
reasonable... in another era. In the twenty-first century, any resource-rich
developing state should not be in the business of guaranteeing reimburse-
272  W. HICKEY

ments on fossil projects or any other type of soft producer fuel subsidies for
energy. This is a core reason in that PSC’s are no longer relevant in today’s
knowledge age. Consider that the social networking site Facebook, received
a $100 billion market valuation when it went public based on the value of
an incipient idea only  (that is very little tangible hardware was noted) in
2012.33 There was no predicated business model or any realized profits at
first. Facebook never received guarantees from any government entity to
produce anything. Their profits were never ‘assured’, it was a pure venture
capital (VC) arrangement. $100 billion is a lot of money, it’s more money
than the GDP of many developing countries, and many combined at that!
So how did Facebook ever garner this extreme market capitalization? It
was based on a ‘perceived future value’ of the project in the eyes of inves-
tors of a publicly traded company. To be clear, Facebook originally  was
only an idea and algorithm that people were investing in at the time.
Not tangible capital equipment, realized cash flows on future commod-
ity resources, or bidding on territorial leases for deep-sea blocks offshore.
This is an important distinction: in energy cases, collateral is offered for
the investment, whereby Facebook (and many other players in the infor-
mation age: Google, Uber, Twitter, Baidu, etc.) was ethereal. They are only
offering ideas, in the ‘clouds’ and yet they can raise billions of dollars.34
As there was no measurable physical collateral (property, equipment, rolling
stock), perhaps all of Facebook’s tangible assets at the time could have filled
two rooms with computers and servers. The point being is that if the markets
are willing to assign astronomical, untested monetary values on entities with no
assets and no profits, how much more value should the markets assign to enti-
ties with collateralized assets, on needed finite, non-­renewable energy products
that move the planet with a commodity price, as mentioned above?
That is the way it should be in investments with a transparent and level
playing field. Nonetheless PSCs tend to tilt the investment decisions toward
the worse, not the better, regarding transparency and cash outlays. In other
words, with government backstops  in hand investors will then do things
they normally shouldn’t. Whether it be excessive risk-taking, or, untendered
bidding, or asymmetric information (information that insiders act on with-
out informing investors), or awarding eight-year contracts to questionable
vendors, good decisions are not manifest. By their nature then PSCs work
against competitiveness in any project, similar to state-­owned companies,
where jobs are guaranteed for life, with little threat of repercussion for
incompetence  or poor performance. Neither can stand forever when more
competent and motivated people are able to man the ship.
 THE INTERFACE  273

So one might ask, what then exactly is the purpose of the PSC in the
information age we are in today, where good projects and ideas can attract
money on their own (without state guarantees) via VC (venture capital) or
eager investors (who are willing to take risks, albeit big ones)? Simply the
government guarantees are a remnant of an immediate post-colonial era,
and must be stopped. They are totally unnecessary in today’s information
era. It cannot be financial business as usual. Project guarantees also prevent
development of entrepreneurism (of which many governments today say
they strongly support in their educational institutions), localization (where
there is no need to create or develop local vendors if the same insiders are
consistently recycled), and CSR (if the same outcomes are already decided,
who cares?). Change is necessary, and not an optional pathway, restructur-
ing cannot occur if guarantees for old behaviors are in place.
We have got to get past the point of PSC’s being insurance for politi-
cal risks, as opposed to being reimbursements for actual cash outlays on
money-making projects that were made with good due diligence.

Insular Politics
The last barrier then to application of the interface is in overcoming politics
rooted in systems that are insular and stubbornly refuse to recognize (because
the system itself is self-contained and self-reinforcing) the emerging big pic-
ture of our world’s mega-trends: Overpopulation, climate change, youth
unemployment, human capital, and mobility. If governments continue to
ignore these vast and fast-moving paradigms in order to protect localized
elites and their interests, they only continue to perpetuate and calcify an old
system that has failed to change and cannot change on its own accord. In
the Information Age, such a mindset will be going directly against the civil
society trends it portends to represent. It requires political will and inter-
vention to change. Perhaps even scrapping the entire current system to deal
with leviathan public-goods problems.35 To be blunt, if not pithy, Britannica
no longer rules the Seven Seas: the sun sets. Americans cannot ‘have it all’,
without impinging on others’ very survival  and subsistence. China is not
the center of the world, despite its name saying it is.36 Change is not easy,
but is necessary for the planet and humanities very survival. The tools are
there, but the political will is now required to utilize the tools and develop
mindsets necessary to accept reality.
As strange as it may sound to some, using highly intelligent incarcer-
ated prisoners may be a possible first step in creating ideas to deal with
274  W. HICKEY

climate change and systems rethink of the entire fossil fuel model when
processes and politics stymie change initiatives. Consider the following
when dealing with prisoners:
In many cases it took the entire resources of the state to bring one
individual to justice. This is a powerful statement. While the criminals
were eventually apprehended on the street, many had an ‘absolute’ advan-
tage one-on-one against any singular  police officer. They could only be
brought in under a collective ‘comparative’ advantage by an entire police
effort. Trying to break the gridlock of the current system will require
outside ideas that are not part of the ongoing problem, systems and pro-
cesses that created them in the first place.
These criminals, especially those with a long-term incarceration, will have
no hidden short-term political agenda. They have no political constituency
to please, or a well-endowed benefactor. They are prisoners. Most have
nothing, and nothing to lose, thus they are a fully impartial, apolitical entity.
Consider that the incarcerated in a prison (a forced arrangement, not a
voluntary one) spend all their waking hours trying to figure out how to ‘break
the rules’, circumvent the rules, or bend the rules for their advantage. Their
mindsets become sharp for nuances and any weakness in the system. These are
the types of minds that are undistracted by many things, unlike those we have
in the daily civilian grind that take our attention away. If they can determine
softness or inconsistency in a system, then it may be possible to use this critical
incidencing for a ‘reframing’ of more relevant big picture issues.37
Of course, any use of criminals must be handled with the highest
security safeguards  and control standards available. This is not to sug-
gest unrealistic idealism. Prisoners are masters at the art of deception and
manipulation. That is why any such proposed initiative must be tied into a
direct and immediate rewards system for them. This would serve to allevi-
ate ‘other’ nonconformist behaviors and gaming the system for some non-­
technical outcome.38 To break out of the world’s endemic cycle of fossil
fuel use and pending climate change though requires unorthodox  and
radical methods. This would definitely be one.

The Future of HRD and Energy, Three Possible

Scenarios
As we envision the future of energy, three ways forward seem to appear
that will all have severe consequences on humanity, no matter which door
is chosen without radical intervention. HRD reformation can play a clear
role in two of the scenarios, one for better, one for worse. Each scenario
 THE INTERFACE  275

has considerable consequences for the planet: economically and environ-

mentally. There is no getting around this or avoiding outcomes by sugar-
coating the direness of the situation.

1. The world radically ramps up its use of fossil fuels to try to offset dis-
inflation (falling prices) due to overcapacity and angry unemployed
constituencies facing impoverishment or low economic growth. The
world gets further entwined with fossil fuels for economic survival.
There are simply too many mouths to feed. This is done via more
producer fuel subsidies, more fracking, more tar sands, and further
deepwater development. Developing countries with resources prom-
ise the moon to companies who can extract their resources, no skills
transfer or human development is required, only financial investment.
Airports are expanded, ports enlarged,  highways lengthened, and
cheap oil still underpins developing countries’ export economies. It’s
all they know, due to structural deficiencies and political promises,
they simply cannot wean themselves off their capital investment mod-
els. Carbon emissions worldwide soar, as does more acidification of
the oceans, melting of the  arctic, Greenland, and Antarctic sea ice.
Ancient glaciers on mountaintops disappear. Species go extinct.
Floods, storms, and wildfires increase around the globe exponentially,
as well as sea level rises, but governments are hamstrung in their
responses, falling back on the sovereignty argument that it is either
not their problem or will have deep negative effect on their economies
if they pull the plug on fossil fuels. Putting a price on carbon was a
nice idea for awhile, but like a world carbon tax, it can never be effec-
tively realized as long as a nation’s elites benefit from fossil fuel con-
cepts couched in seventeenth-century Westphalian sovereignty
exclusivity and neo-colonial practices.
2. The world muddles along in its current energy format of an ‘all of the
above’ energy portfolio mix. There is a surreal and uneasy compro-
mise between alternatives and fossil fuels that co-exists, one realizing
the way of the future, the other economic verisimilitude. Ships and
planes are still powered by oil but large Energiewiende39 type projects
for wind, hydro, and geothermal energy by select wealthy countries
(i.e. Germany and Korea) are actively utilized. Fuel subsidies still exist
for certain developing countries (i.e. Iran, Venezuela, and Nigeria).
Fossil fuel-burning cars with hungrier engines, clog more and more
roads in developing countries, yet, sales of electric cars in Western
markets are also  on the rise. The use of photovoltaic solar panels
276  W. HICKEY

increases, but most big utility companies in developing India and

China burn coal for energy certainty. Developed countries also stub-
bornly cling to coal-fired power plants to keep investors satisfied with
returns and use their political clout to avoid any net metering on a
large scale due to low purchase power agreement pricings.40 Large-
scale hydro and nuclear projects are shelved due to huge cash outlays
strapped governments cannot pay or vociferous rejection from prop-
erty owners about NIMBY issues. No binding carbon targets in inter-
national plenipotentiary meetings are ever realized. It’s all talk. Some
countries have maintained a carbon market ‘cap and trade’ CO2
reduction scheme, but a binding agreement cannot be reached with
holdout countries, who continue to pollute with increasing use.
Carbon emissions push past 500 ppm and the world global mean
temperatures climb past 2° C, with world governments handwringing
the entire time and  citing ‘economic survival’ as a reason  not to
change a thing. This situation is status quo with the years 2015, 2025,
2035, and onward. Energy production then becomes a giant ‘zero-
sum’ game of clear financial winners and environmental losers.41
3. An alternative energy renaissance blooms that curtails the planet’s
carbon intensity. Replacement costs are high to wean itself off this
situation, but well worth it for future generations. A price on carbon
is set, carbon emission ‘cap and trade’ schemes are enforced domes-
tically and by cooperative governments under international conven-
tion. A spirit of burden-sharing emerges, where countries with
resources work to lower and eliminate ‘beggar thy neighbor’ poli-
cies of currency wars, fuel subsidies, and heavily polluting indus-
try  with weaker neighbors. The carbon bubble is slowly deflated
where pensions, wealth funds, and large investment portfolios are
incentivized economically to invest in alternative/renewable energy.

Companies begin to actively work with robust technology-transfer ini-

tiatives to access cheaper labor in the developing world to utilize and
maintain their alternative energies via governmental trade and policy pref-
erences. Corruption is marginalized as a hidden fossil fuel redux takes hold
and more transparent investment practices for wind, solar, and geother-
mal. Indeed, governments begin to look past landed alternative energy
and invest heavily in thorium-based NP, space exploration for new tech-
niques, cold fusion, and zero-point energy techniques that are costly, but
new and innovative, providing an even higher caloric return than the most
refined of any fossil fuel. A world spirit of burden-sharing and cooperation
 THE INTERFACE  277

emerges. There are no hiding places for derelict countries, rent-seeking

activity (soft corruption), or heavily polluting industry, it’s about survival.

All three of the above scenarios are plausible, the first, of increased fossil fuel
usage being the most dire and pessimistic, but also very possible under a
finance-ruled world aggressively driven by a profit motive and domestic con-
cerns that outweigh all else for political stability. HRD is utilized here but in a
very pessimistic sense: the winner takes all society. The second scenario shows
a confused world muddling along, some rich countries implement green tech-
nology, developing countries cling to burning carbon. The last scenario is the
most idealistic. HRD is utilized here in a burden-sharing format,42 countries
work together to eliminate an existential threat to the planet, and to protect
future generations from both environmental catastrophe and extreme impov-
erishment. Cooperation between nation-states rues the day, sovereignty car-
ries some weight but is secondary to humanities very survival.

Which exact path the world will follow is unknown, what is known is
that one of these directions will definitely be traversed.43 It is most prob-
able that today’s scenario, doing little, or the current situation with fossil
fuels  as predicated in scenario two, is the best predictor for the future. What
is happening today will be ongoing tomorrow. The status quo becomes and
is the default baseline position. Certain wealthy countries recognize the
threats and will act, with emission schemes and carbon taxes, but it is costly.
Developing countries will also react, not to the threat of climate change, but
for their own economic (and political) interests. Fuel subsidies will continue,
renewables will be shunned beyond token projects as too expensive.44 Not
much will change. The world will stumble along, climate change will slowly
grow worse, but the brunt of its effects will be on the developing countries
(problems that are out of sight, out of mind to most Western media), who
can least afford to aid their large populations, not on developed populations
who can ‘move to higher ground’ and set the tone for the information age.
Companies and governments will be reluctant to share technology or devel-
opment with competing players. HRD will stagnate, some places will excel
with human development, others will play catch up, some will backtrack,
but all will be dictated to by the investment dollar and beholden to the gods
of finance: pensions, stock returns, and national wealth funds. It becomes a
zero-sum world of winners and losers on the balance sheet.
The above three scenarios all also demonstrate future courses of political
action. Even choosing ‘none of the above’ is still making a choice. None
of these scenarios may be as far-fetched as they seem if one stands back to
ponder the landscape. Keeping the status quo of things requires minimal
278  W. HICKEY

input and political positioning. It is a riskless position, and thus appealing

to political leaders and those that derive wealth from the all-consuming
fossil fuel-intensive economy, with a realization that something should be
done—someday ... by someone.
Both, the increased usage of fossil fuels or the increased use of alterna-
tives carries costs and risks. Increasing fossil fuel usage is cheap, but is envi-
ronmentally and humanity wise destructive. Protecting the environment is
extremely costly upfront, but pays large non-financial dividends over time.
Of course this direction will be very unappealing to those invested in only
the current fossil-fueled system.

The Information Age Integration

Information sharing then across all fields and disciplines then becomes the
‘a priori’ key on our very finite world. Gaining acceptance of the chang-
ing information age in its totality is a crucial ‘first step’. But it’s not only

Fig. 10.1  Fossil fuel investment decision  paradigms: Neo-Colonial versus

Information Age (Source: Hickey 2016)
 THE INTERFACE  279

about getting the information, but also in interpreting it.45 This can only
be done via empowered and relevant education, which must be mandated
and set in policy initiatives by governments under our current framework
of embedded and leveraged use of  fossil fuels. Education must now sit
as an equal in today’s energy mix, which is still overwhelmingly carbon
based. This book proposes a way forward based on a new paradigm of
resource investment, development, and usage: The institutionalization of
strategic education in the energy mix for societal empowerment and stew-
ardship in natural resources. Policy has to set educational objectives into
the mix of Information Age energy investment methods. The below figure
sums up the entire body of work herein.

Notes
1. North, D. (1990) Institutions, Institutional Change, and Economic
Performance. New York: Cambridge University Press.
2. Coleman, J.S. (1990) Foundations of Social Theory. Cambridge, MA:
Belknap.
3. ‘Violence specialists’ are a Douglas North construct, meaning police and
military to ensure safety and order, not necessarily the total society, but
those in particular in society with the most vested interests.
4. Ibid., p. 6.
5. Senge, P. (2006) The Fifth Discipline: The Art and Practice of the Learning
Organization 3rd. Ed. NY: Doubleday.
6. Deming, W. E. (1986) Out of the Crisis. Cambridge, MA: MIT Technology
Press.
7. Simmons, M. (2000) Revisiting The Limits to Growth: Could The Club of
Rome Have Been Correct, After All? An Energy White Paper. URL: http://
greatchange.org/ov-simmons,club_of_rome_revisted.html
8. The Occupy movement started on Wall St. after the financial crash of 2009,
protesting essentially, privatization of profits and socialization of losses.
9. Yamada, T. (2010) Restructuring the California State University: A Call to
Action. The NEA Higher Education Journal, Fall: 91–106.
10. Bozkurt, A., Akgun-Ozbek, E., Onrat-Yilmazer, S., Erdogdu, E., Ucar,
H., Guler, E., Sezgin, S., Karadeniz, A., Sen, N., Goksel-­Canbek, N.,
Dincer, G. D., Ari, S.,& Aydin, C. H. (2015). Trends in Distance Education
Research: A Content Analysis of Journals 2009–2013. International
Review of Research in Open and Distributed Learning, 16(1), 330–363.
11. Tempo English. (Dec. 16, 2015) Total, Inpex Agree to Share 30 Percent
Stake of Mahakam Block. Economy and Business Section.
12. URL: http://www.offshore-technology.com/projects/tupi-oilfield/
280  W. HICKEY

13. Sakhalin PSA, (1994), Agreement on the Development of the Piltun-­

Astokhskoe and Lunskoe Oil and Gas Fields on the Basis of Production
Sharing, The Russian Federation and Sakhalin Energy Investment Co. Ltd.
14. See Sachs, J. (2008) Common Wealth, Penguin Books, and Kacowicz,
A.  M. (2007) Globalization, Poverty, and the North–South Divide.
International Studies Review 9(4): 565–580.
15. The Economist ran a multi-section spread on state capitalism, its strong and
weak points, and its mechanism of the state-owned enterprise. Special
Report: State Capitalism, The Economist 1/21/2012. (7 sections). URL:
http://www.economist.com/node/21542931
16. Much of this deals with economic nationalization, or government take-
over. In all cases, when government has taken over or nationalized an
industry, even with revenues sustained unfettered, share prices collapse.
Consider AIG, http://www.wsj.com/articles/SB122156561931242905
RBS Bank, http://www.telegraph.co.uk/finance/newsbysector/bank-
sandfinance/8176145/RBS-­timeline-­where-it-all-went-wrong.html Rolls
Roycehttp://www.theguardian.com/business/2015/dec/14/rolls-royce-shares-
fall-over-nationalisation-contingency-plan
17. Altbach, P. and McGill-Peterson, P. (eds.) (2007) Higher Education in the
New Century. Washington, D.C,: Sense Publications.
18. Hatakenaka, S., Westnes, P., Gjelsvik, M., Lester, R. (2006) From Black
Gold to Human Gold. MIT Working Paper Series, MIT-IPC-06-004.
19. Partnership for Higher Education in Africa. (2007). The Bandwidth
Consortium: Opening the Power of the Internet to African Universities.
Retrieved from http://www.foundation-partnership.org/pubs/press/
bandwidth.php
20. Working Group on Higher Education (WGHE). (2004). Higher Education
Innovations in Sub-Saharan Africa, with Specific Reference to Universities.
Association of African Universities. Accra.
21. The Economist (2005). Survey: Higher Education, A world of opportunity,
8 Sept. Retrieved in 2007 from http://www.economist.com/displaystory.
cfm and Wikipedia (2005). Higher education in China.
22. Mohamedbhai, G. (2003). Globalization and its Implications for

Universities in Developing Countries. In Breton, G. and Lambert, M. (eds).
Universities and Globalization: Private Linkages, Public Trust. UNESCO/
Universite Laval/Economica. Paris.
23. http://news.yahoo.com/shift-fossil-fuels-risks-popping-carbon-bubble-
world-203433539.html
24. The movie Schindler’s List see’s a German entrepreneur, Oskar Schindler,
convincing disbelieving Jewish industrialists in early Nazi Germany, that
the world as they know would soon be over, and to give him money to
create a company to ‘hire them’, a move that would prove to save their
lives under his tutelage.
 THE INTERFACE  281

25. A trim tab is a second, very tiny rudder affixed to the larger, main rudder
of a ship that creates a counterforce, making it easier for the pilot to turn
the gigantic rudder.
26. http://www.forbes.com/profile/warren-buffett/
27. http://www.forbes.com/profile/ray-dalio/
28. Soros, G. (2009) Soros: General Theory of Reflexivity, Financial Times,
10/26/2009, Global Economy section.
29. http://www.forbes.com/profile/david-koch/ and see Greenpeace, http://
www.greenpeace.org/usa/global-warming/climate-­deniers/koch-indus-
tries/ where the Koch’s have poured nearly $80 million into denying climate
change science, and that climate change is a hoax.
30. The Koch’s have been notorious for this, in hostile denial of scientific find-
ings by IPCC, NASA, NOAA.
31. OECD URL: http://www.oecd.org/about/membersandpartners/list-
oecd-member-countries.htm
32. China seeks a military presence in the Indian Ocean. Sri Lanka could pro-
vide a strategic port of call.
33. Warren, O. (2012), Facebook IPO: A Touchstone Cultural Moment for

America? URL: http://www.kcrw.com/news-culture/shows/to-the-
point/facebook-ipo-a-touchstone-cultural-moment-for-america
34. We literally mean ‘Cloud Computing’, or storing masses of data via third-
party storage on the internet.
35. Peter Senge has suggested this on book tours for his work, The Fifth
Discipline. ibid.
36. These are all historically ethnocentric positions that these countries have
taken and can be a political barrier to a changing mindsets. Britain in eigh-
teenth century had vast colonialism, the  USA in the 1980s under the
Reagan Revolution and China historically has taken the position it is the
center of the world, it name, Zhongguo, means ‘Middle Kingdom’.
37. Crozier, M. (1982). Strategies for Change, Cambridge, MA: MIT Press.
38. Crozier, (1982) ibid. Crozier understood completely man’s propensity, in
fact, mandate to beat the system.
39. Germany’s energy transformation, Energiewende. The Economist. Jul. 28,
2012 URL: http://www.economist.com/node/21559667
40. http://news.yahoo.com/electricity-firm-ceos-urge-clear-policies-low-car-
bon-042759926--finance.html
41. Thurow, L. (1996) The Future of Capitalism. Wm. Morrow and Co.: New York.
42. Moeller, J. (2010) Savvy and Foresight Will Be the Winning Commodities in
This Era of Scarcity. Yale Center for the Study of Globalization in The
Jakarta Post, 8/12/2010.
43. Bloomberg presented a “Future of Energy” summit with Nathan Bullock,
which discussed many hypotheticals, URL http://about.bnef.com/sum-
mit/agenda/
282  W. HICKEY

44. Indonesian renewable power, while mandated in law, is still a very tiny part
of its overall fossil-fueled energy portfolio. This is also the same for many
other developing countries: Malaysia, Brazil, Russia, SA.
45. Interpretation of big data and the ‘Internet of things’; is key in Rifkin, J.
(2011) The Third Industrial Revolution: How Lateral Power Is Transforming
Energy, the Economy, and the World, Palgrave Macmillan url: ­http://www.
thethirdindustrialrevolution.com
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 Index1

A Asia, 1, 5, 6, 25, 39, 40, 41, 58, 60,

Afghanistan, 16, 199 63, 120, 125, 133, 142, 144,
AIIB. See Asian Infrastructure 163, 167, 169, 172, 175, 178,
Investment Bank (AIIB) 200, 222, 224, 225, 230
alternative energy, 21, 38, 48, 87, 94, Asian Infrastructure Investment Bank
95, 111, 176, 241 (AIIB), 6, 225–9, 236
Amazon Basin, 102 Association of Southeast Asian Nations
American Petroleum Institute (API), (ASEAN), 4, 111, 222
171, 236 Australia, 6, 15, 46, 106, 111, 169,
andragogy, 14 184, 207
Andrew Ang SWF Benchmarks, 80
Angola, 3, 77, 83, 94, 124, 125,
164, 178, 180, 188, 191, 210, B
220, 229 Bali, 1, 133
Antartica, 15, 102, 266 Bangladesh, 222, 225, 226
anthracite, 36 Becker, Gary, 15, 116, 118
API. See American Petroleum Institute beggar nations, 237, 255
(API) beggar nations, 237, 255
Arctic, 15, 44 BHP, 174
Arctic sea, 44 biomass, 2, 5, 7, 25, 49, 63, 65, 101,
Argentina, 111 203, 221
ASEAN. See Association of Southeast The Black Swan, 8
Asian Nations (ASEAN) Blue Ocean, 25, 144, 226

 Note: Page numbers with “n” denote notes.

1

© The Editor(s) (if applicable) and The Author(s) 2017 299

W. Hickey, Energy and Human Resource Development in Developing
Countries, DOI 10.1057/978-1-137-57082-6
300   INDEX

Brautigam, Deborah, 230–3 167, 169, 172, 180–2, 184, 187,

Brazil, 5, 36, 44, 63, 77, 124, 177, 190, 197, 219–40
199, 221, 242, 261, 262 Chinese Central Committee (CCC),
Bulgaria, 222 20, 170
burden-sharing, 6, 8, 27 clean coal, 47, 128
Burma, 220, 228, 233 client driven model, 28, 243–5, 248
climate change, 2, 5, 7, 15, 21, 25,
27–9, 39, 40, 54, 63, 91, 96,
C 101–14, 154, 156, 157, 232
Cambodia, 226 Club of Rome, 33n55, 257, 279n7
Canada, 42, 58, 158, 186, 194 ‘cluster competitiveness’, 8, 22, 79,
Canary Wharf, 29, 86, 139, 209 251n34, 269, 270
CAPEX. See Capital Investment and cluster development, 186, 190, 254
Expenditures (CAPEX) cluster economics, 25
Capital Asset Pricing Models CNG. See compressed natural gas
(CAPM), 77 (CNG)
Capital Investment and Expenditures coal-to-liquids (CTL), 49
(CAPEX), 89 CO2 emissions, 10, 14, 46, 47, 97,
CAPM. See Capital Asset Pricing 108, 219
Models (CAPM) Columbia University, 80
carbon based fuels, 2, 38, 63 compressed natural gas (CNG), 25
carbon-based renewables, 65 Congo, 44, 75, 122, 145, 197, 233,
carbon credit market, 109 236, 258
Carbon Development Mechanisms Consolidated Contracts Provider
(CDM), 21, 22, 109, 111 (CCP), 20, 48, 200, 227, 228
carbon emissions, 42, 94, 103 Copenhagen, 2
reducing, 5, 13, 41, 47, 55, 94, Coporate Social Responsibility (CSR),
110, 112 20, 22, 27, 126, 176, 195, 199,
Carpenter, Alan, 169 233, 245, 265, 270, 272
Caspian Sea, 102, 195 CO2 reduction, 41
CCC. See Chinese Central Committee Covey, Stephen, 125, 133
(CCC) CPM. See crude palm oil (CPM)
CCP. See Consolidated Contracts crude oil, 36, 209
Provider (CCP) crude palm oil (CPM), 10, 25, 49, 50,
CDM. See Carbon Development 175
Mechanisms (CDM) CSR. See Coporate Social
Central Asia, 1 Responsibility (CSR)
Chavez, Hugo, 156 currency wars, 15
Chernobyl, 60
Chile, 9, 80
China, 10, 16, 17, 28, 36, 39, 41, 44, D
46, 47, 50, 51, 54, 57, 58, 63, DACUM. See developing a curriculum
65, 73, 75, 77, 107, 109, 111, (DACUM)
112, 120, 125, 133, 142–4, 146, Dalio, Ray, 85
 INDEX   301

Delphi method, 122, 123 Fiji, 10

Denmark, 53 Fischer-Trope process, 49
derivatives, 7, 14, 17, 28, 50, 73, 84, Formal Maintenance Contracts
85, 90, 92, 94, 96, 102, 104, 205 (FMC), 196
developing a curriculum (DACUM), fossil fuel addiction, 39, 40, 41
123, 125 fossil fuel model, 28, 36, 38, 92, 101,
diamond model, 22 111
Dimon, Jamie, 88 fracking, 44, 45, 48, 49, 73
divestment, 91–4 Friedman, Milton, 7, 40, 82, 91,
Dubai, 168 232, 253
Friedman, Thomas, 6

E
Earth Institute, 8 G
Eastern Siberia, 102 gainsharing, 7, 24, 234
East-South problem, 237 Gantt charts, 20
economic nationalism, 156, 184 Garvey, Marcus, 156, 162n62
Ecuador, 64, 73, 102, 158, 198, 210, gas-to-liquids (GTL), 49
223, 230, 234, 236 GDP. See gross domestic product
Egypt, 4, 6, 182, 225 (GDP)
EITI. See Extractive Industries gemeinschaft, 210
Transparency Initiative (EITI) Generally Accepted Practices and
emissions trading system (ETS), 108, 109 Principles (GAPP), 80
enhancement, 10 Genuine Progress Indicator (GPI), 24
Eni Zohr, 44 Germany, 16, 46, 47, 49, 57, 106,
ETS. See emissions trading system 141, 143, 207, 227, 237, 275
(ETS) gesellschaft, 158, 162n63, 210
EU. See European Union (EU) GHG. See "green-house gas"
Eureka moment, 21 emissions (GHG)
European Union (EU), 38, 41, 58, globalization, 143, 144
109, 110, 188, 219, 222 global warming, 5, 8, 10, 15, 16, 27,
Extractive Industries Transparency 35, 39, 41, 46, 82, 97, 102, 105,
Initiative (EITI), 231, 245, 112, 154, 260, 268
246, 248 GPI. See Genuine Progress Indicator
Exxon (GPI)
Exxon-Mobil, 24, 94, 101, 171, gradualism, 228
174, 182 "green-house gas" emissions (GHG), 42
Greenland, 15
gross domestic product (GDP), 7, 16,
F 24, 39, 40, 74, 87, 147, 175,
Fels, Joachim, 85 209, 222, 224, 242, 271
Fifth Column, 263 GTL. See gas-to-liquids
302   INDEX

H 222, 225, 229, 230, 235, 236,

Halliburton, 20 242, 263, 268
Hampden-Turner, Charles, 172 Information Age, xiv, 9, 17, 28, 76–8,
Harvard Business School, 8 82, 96, 108, 135, 140, 142, 145,
Hofstede, Geert, 172, 190, 191 151, 157, 165, 177, 199, 205,
Homi Bhabha National Institute, 57 207, 209–11, 233, 236, 238,
hubs, 189–90, 254 247, 254, 257–9, 260, 272, 273,
Human resource development (HRD), 277, 278–9
1–35, 38, 52, 54, 56–9, 61–3, 65, International Energy Agency (IEA), 44,
76, 77, 81, 85, 89, 101, 102, 46, 49, 55, 103, 149, 158, 220
106–7, 113, 115, 117, 118, 120, Iran, 9, 42, 73, 75, 111, 158, 275
126, 128, 129, 130, 133, 134, 135, Iraq, 16, 93, 107, 151, 152, 192, 202,
145, 146, 166, 176, 196, 204–6, 242, 268
208–10, 220, 221, 224, 226,
229–38, 241–4, 246, 248, 253,
256, 257, 258, 262, 274–7, 415 J
macro level, 11, 208, 210, 257 Japan, 17, 57, 58, 60, 63, 86, 111, 120,
meso level, 11, 207, 210 121, 144, 165, 169, 172, 186, 227
micro level, 11, 207, 210, 257 Fukushima, 57, 60–1
hydrocarbons, 36, 152, 192 joint-system design (JSD), 58
hydroelectric, 50
hydrogen based power, 55
hydropower, 4, 38, 42, 50, 51, 54, 61, K
63, 65, 71, 111, 117, 198, 221 KAERI, 58
Kandy, 3
Kazakhstan, vi, vii, 3, 36, 46, 75, 77,
I 128, 133, 148, 158, 168, 172,
IEA. See International Energy Agency 181, 192, 193, 195, 205, 210,
(IEA) 242
India, ix, 1, 3, 5, 6, 10, 16, 36, 39, Kenya, 107, 190
40, 44, 46, 47, 50, 57, 58, 63, KEPCO, 58
64, 106, 107, 109, 111, 112, kerosene, 36, 73, 89, 91
155, 156, 158, 167, 169, 177, Key West, 11
188, 190, 198, 199, 219, 221, Kirkpatrick, Donald, 126, 129
222, 225, 275 Korea, 4, 17, 25, 39, 40, 51, 57, 58,
Individualistic-Structuralist, 144 64, 65, 75, 77, 83, 109, 144,
Indonesia, 3, 4, 5, 36, 39, 41, 47, 48, 169, 172, 182, 186–8, 191, 233,
53, 57, 60, 64, 65, 71, 75, 79, 269, 271, 275
102, 124, 133, 144, 145, 147, Busan, 39
151, 152, 155, 158, 167, 180–4, Kuwait, 83, 104, 168, 182, 230
186, 187, 192, 199, 203, 221, Kyoto, 2, 156
 INDEX   303

L National Oceanic and Atmospheric

lead board engineer (LBE), 130–2 Administration (NOAA), 5
Libya, 6, 9, 16, 71, 158, 165, 182, nation state, 108, 140, 142, 182
199, 202 Nauru, 10
lifting costs, 23, 44, 45, 92, 195 net metering, 51, 94–7, 275
Liquified natural gas (LNG), 25, 48, New Zealand, 207
49, 148, 149 Nigeria, 5, 17, 36, 63, 64, 75, 79, 83,
Liquified propane gas (LPG), 25 93, 102, 146, 147, 149, 151–3,
localization, 1–34, 58, 76, 115, 134, 155, 158, 165, 172, 177, 178,
135, 153, 163–217, 236, 245, 180, 181, 188, 191, 192, 194,
246, 248, 253, 264, 268, 269, 272 210, 221, 229, 241, 260, 275
NIMBY, 61, 266, 276
non-carbon based renewables,
M 50–2, 92
Mager, Robert, 117, 118 non-renewable, 42, 139
Malaya, 17, 39, 167–8, 177 North American Free Trade
Malaysia Agreement (NAFTA), 17
Malaysians, 5, 10, 39, 57, 64, 77, Norway, 27, 63, 75, 76, 79, 80, 83,
133, 143–5, 148, 158, 177, 93, 124, 146, 151–3, 155, 157,
180, 182, 191 165, 177–9, 188, 189, 194, 207,
Maldives, 10 212, 246, 248
Massification, 264 Norwegian model, 188, 213, 264
McGregor, Douglas, 120 nuclear power, 4, 13, 56–60, 108
McKibben, Bill, 15, 104 nuclear power plants (NPPs), 57–63
Mexico, 42, 64, 71, 144, 158
Middle East, 16, 74, 75, 79, 83, 142,
145, 168, 178, 195, 225 O
Mineral and Coal Law, 183, 187 Objectivist-Subjectivist, 145
M.I.T. Sloane, 8 OBOR (One-Belt, One-Road), 225–6
Moeller, Joergen, 22, 82 OECD, 40, 78, 147, 148, 150
Mongolia, 41, 83, 125, 181 Oil and gas industry (OPITO),
Moyo, Dambisa, 220, 231–3 205, 206
Myanmar, 54, 75, 77, 122, 197, Oman, 5, 64, 230
200, 225 One Belt One Road (OBOR), 225
OPEC. See Organization of Petroleum
Exporting Countries (OPEC)
N open-access, 7, 255
Namibia, 149, 169 Organization of Petroleum Exporting
National Aeronautics and Space Countries (OPEC), 15, 17, 45,
Administration (NASA), 5, 104, 105 72, 74, 76, 147, 182, 223
304   INDEX

P Rothwell, William, 15, 22, 117, 120,

Pakistan, 5, 20 128, 206
Papua New Guinea, 102, 226 Russia, 42, 44, 57, 58, 63, 73,
pari passu, 146, 155 93, 104, 106, 111, 133,
Paris, 2, 156 143, 158, 165, 178, 192,
Paul, Bill, 49 194, 202, 210, 268
Peredeniya University, 3
Peru, 222
Lima, 2 S
petrodollars, 73, 74 Sachs, Jeffrey, 8, 15, 22
Philippines, 143 Saharan, 1, 6, 182, 219, 226, 232
Phillips, Jack, 126 Saudi Arabia, 10, 36, 42, 71–3, 75,
Pinochet, 9 82, 83, 93, 158, 165, 168, 182,
Pipe, P., 28n6 191, 192, 230, 255
pollution, 10, 35, 37, 39, 42, 46, 47, Schein, Edgar, 61, 126, 170
87, 96, 108, 109, 113, 140, 148, Schlumberger, 20
153, 154, 219, 255 seigniorage, 74
Porter, Michael, 15, 22, 146, 188, Senge, Peter, 7, 8, 15, 22, 256, 267
189, 269 Shell, 5, 71, 84, 92, 101, 171,
power baseload, 4, 59 174, 213
PPM levels, 104 shell companies, 82
producer subsidies, 149 Singapore, 17, 25, 39, 75, 77, 80,
Production Sharing Agreements 121, 125, 144, 165, 167, 182,
(PSA), 23, 191–3, 205, 210, 188, 233, 269–71
212, 246 social capital, 11, 13, 18, 25,
Production Sharing Contracts (PSC), 27, 34n71, 78, 98n25,
19, 124, 129, 148, 172, 243, 116, 154, 157, 162n53,
244, 261, 272 165, 180, 249, 254
SOE Oil Companies (NOC), 233
solar photovoltaic project, 203
R Somalia, 107
renewable energy, 38, 39, 49, 51–3, Soros, George, 85, 266, 267
55, 56, 111, 276 South Africa, 46, 47, 49, 145, 158,
renewables, 42, 54, 64, 221, 241, 169, 190
254, 276 South America, 1, 40, 63, 191, 219,
reservoir management (RMG), 230
124, 131 South Australia, 15
retraining fee, 211 South China Sea, 102, 142, 143
reworks, 191, 195–6 South Florida, 11
Ribao, Zhongguo Remin, 238 South Korea, 25, 39, 57, 58, 64, 109,
Rio Tinto, 174 233, 271
Romania, 222 South Sudan, 234
 INDEX   305

Sovereign Wealth Fund (SWF), 14, Tokyo Electric Power Co. (TEPCO),
28, 74–84, 95, 212, 227, 260 57, 60, 61
Sovereign Wealth Funds, 73–5, 95, training needs assessment (TNA), 117,
209, 211, 212 119, 128
Spain, 51, 95 Trans-Pacific Partnership (TPP), 17,
Sri Lanka, v, ix, 3, 39, 40, 41, 65, 145, 142, 228
148, 180, 181, 197, 200, 220, Tromenpaars, Fons, 172
222, 225, 226, 229, 230, 235–6, Truman, Edwin, 77, 78, 80
268–71 Tunisia, 6
standard oil, 24, 71 Turkmenistan, 44, 168, 236, 242
Statoil, 76, 178 turnkey projects, 23, 196–8, 229
STEM, 170
stranded assets, 92, 95
Studzinski, John, 87 U
Sub-Saharan Africa, 226 UK, 27, 63, 76, 95, 124, 143, 165,
succession planning, 2, 118, 119, 125, 178, 179, 194, 205, 227
164, 206, 224 Ukraine, 60
Sudan, 38, 57, 59, 65, 198, 220, 223, United States, 3, 24, 47, 110–13, 147
229, 234, 236, 242, 255 US CIA, 5
Suharto, 9 US State of Alaska, 27, 151, 152
sustainability, 7, 9, 21, 22, 25, 27,
187, 195, 198, 267
SWF. See Sovereign Wealth Fund V
(SWF) Vietnam, 5, 143, 206, 207, 230, 236
Switzerland, 76, 82, 86, 193
SWOT analysis, 123
Syria, 6, 16 W
Wall Street, 29, 86, 96
Weighted Average Cost of Capital
T (WACC), 77–8
Taiwan, 19, 25, 121 Western Java, 39
Taleb, Nassim, 8 Westphalia, 108, 112, 141–3, 145,
Tanzania, 4, 38, 64, 197, 198 150, 155, 157, 191, 199, 275
tarsands, 41, 45, 49, 92, 194, 244 World Bank, 1, 46, 81, 97, 149,
Technical and Further Education 150, 156, 177, 190, 196,
(TAFE), 172, 236 205, 213, 223, 226–8, 230,
Technology Institute of Bandung, 3 233, 236, 255, 269
Thailand, 1, 133, 180, 182, 190, 191
thermal coal, 5, 59, 94
third country national (TCN), 20 Y
Three Mile Island, 60 Yemen, 16, 164, 165
tokenism, 210 Yergin, Daniel, 15, 42