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