Energy in Africa


Chad under the spotlight
Dianna Games
Published: 01-APR-01

A storm of protest around the proposed Chad-Cameroon oil pipeline has led to a number of key safeguards being built in. Dianna Games looks at the debate

Chadian President Idriss Deby spent $4.5 million of his first oil receipts on weapons to support the country's long running civil war.

Shortly before this, he had assured the World Bank and other interested par- ties that the vast revenues due to flow into the country's coffers would be used for development and poverty alleviation in this desperately poor country.

It took the bank more than seven months to find out where the money had disappeared to. When Deby finally admitted that it had been used for weapons, he claimed the World Bank knew about this. The Bank vociferously denied the claim. In any case, said Deby, there could be no development without security.

The incident went a long way towards damaging the strong case built up by the World Bank as its rationale for going into the project in the first place.

It also played right into the hands of human rights groups, environmental and development organisations which had objected loudly and persistently to the Bank's sanctioning of the project.

Their arguments were premised on just this eventuality - that the president of a country ravaged by civil war and corruption was more likely to divert the oil windfall into his own pocket, or spend it on weapons, than to improve the lot of his people.

Robert Calderisi, World Bank director for Chad, said the disappointing news showed the need for greater transparency.

"We cannot defend new projects in Chad if they violate agreements with us. People are going to be very, very sceptical and reluctant to help Chad if they misuse the money."

Although the project is going ahead, with the Bank's active participation, the lobby groups have provided an important watchdog role which has led to the establishment of a number of independent monitoring bodies.

The latest of these was announced recently in Washington - the six-member International Advisory Group (IAG).

The lAG's specific responsibilities are to identify potential problems as they arise, such as the misallocation or misuse of public revenues, adequacy of civil society participation in project implementation, and monitor issues of governance, environmental management and social impacts.

The group is to be headed by the former Prime Minister of Senegal, Mamadou Lamine Loum. Other members are Jacques Gerin (former Canadian Deputy Minister of the Environment); Prof Jane Guyer (Director of the Program of African Studies at Northwestern University in the US); Hilde Frafjord Johnson (former Norwegian Minister of Development and Human Rights); Abdou El Mazide Ndi- aye (President of the Forum of African Voluntary Development Organizations based in Senegal); and Dr Dick de Zeeuw (a Dutch agricultural specialist).

The work of the IAG is expected to continue for up to ten years. It will visit Chad and Cameroon at least twice a year and report periodically to the World Bank Group.

Other supervisory and monitoring groups include the Environmental and Social Experts Panel to oversee the implementation of environmental management plans and an External Compliance Monitoring Group which will monitor the plans on behalf of lenders.

A consortium of Exxon-Mobil (the operator, with 40 percent of equity), Chevron (25 percent), and Malaysian company Petronas (35 percent) is to sink 300 oil wells in the landlocked country. A 1,000 km pipeline will run underground from the Doba oil fields to Kribi on the Atlantic coast of Cameroon.

The pipeline will bring $80-$ 100 mil- lion a year into Chad, one of the world's poorest countries, representing almost half its budget. Cameroon will get $20 million a year in transit fees.

Depending on world oil prices, the project could result in nearly $2 billion in revenues for Chad altogether and $500 million for Cameroon over the 25- year production period, according to a World Bank estimate.

This project is extremely important for Chad, it says. "At the moment, the country is so poor that it cannot afford the minimum public services necessary for a decent life.

"In four years' time, the pipeline could increase government revenues by 45-50 percent per year and allow it to use those resources for important investments in health, education, environment, infrastructure and rural development, necessary to reduce poverty."

The World Bank, which has been criticised over the years for its involvement in projects with African governments that have failed to return benefits to their people, imposed strict accounting standards. It insisted on guarantees from the government of Chad that its oil profits would be spend on health, education and infrastructure.

Deby, a general who seized power in a coup in 1990, has accepted the establishment of two boards, one set up by Chad and one a World Bank-supervised international body, to audit the spending of oil revenue.

He has agreed to put into law a commitment to spend 80 percent of the revenue on health, education, infra- structure and rural development programmes. He also agreed that 10 percent of the receipts would be put into a trust account abroad for the country's use in the future.

When the first revenues came in, a $25 million bonus paid by Chevron and Petronas, Deby made a public promise of full disclosure of how it would be spend. According to reports, the money began disappearing just as a rebellion in the north heated up. Inquiries into the issue proved fruitless and it was only 7 months later, in December last year, that Deby admitted spending $4.5 million of it on weapons.

The rest of the money has been frozen until the Oil Revenues Control and Monitoring Board begins functioning.

Deby's apparent inability to keep to his promises and patent lack of account- ability have not been a good start for the beleaguered World Bank Group. However, its involvement is already too far gone for it to pull out of the project without scuppering it altogether.

Although it is financing only 3 per- cent of the $3.7 billion project, its participation was crucial in persuading a consortium of three oil companies to invest in it. The bank will provide $193 million in loans and arrange another $300 million of commercial finance.

The remainder of the funding will be raised through a $400 million bond offering, $600 million from export credit agencies and commercial banks, $112 million equity from Chad and Cameroon to be funded in part by the European Investment Bank, and $500 million from the private sponsors.

The Bank's involvement helps to pro- vide a measure of security against investment risk in this volatile country.

Chad, a French colony until 1960, has a poor human rights record and has been scarred by 40 years of civil war and repressive dictatorships. It relies heavily on aid, has low literacy levels, and generally lacks development. Cameroon has been listed by Amnesty International as one of the most corrupt countries in the world.

The poor reputation of both countries led human rights and development organisations to protest against any involvement in the project by the Bank, saying that the oil revenues would not reach the people. The strong anti lobby led two of the original members of the consortium to pull out - Royal Dutch Shell, which has enough problems with its reputation in Nigeria, and French company ELF.

The primary concerns are:

  • The huge environmental risks which include damage to forests and wildlife along the 1,000km route, high risk of oil spills related to the civil war and dislocation of communities;
  • Human rights violations. Oil exploration activity may attract rebel activities in the south and repression will escalate. Already NGOs have reported more human rights violations since the World Bank approved the project in June last year; and
  • Lack of accountability of the two governments and of the oil companies. A recent study by IUCN shows that in the case of a major disaster the oil companies will not be liable for any damage.
Two environmental impact studies have been done over the past few years. The first one, in 1997, was considered to be inadequate. A second one done in 1999 was also found to have inadequacies.

Also in response to the strong anti- pipeline lobby, the companies involved have set up the Indigenous Peoples Plan to deal with compensation of affected communities, these being the Bakola forest people and Bantu farmers who inhabit the pipeline corridor. Funds have been provided for a 28-year period to support health, education and development projects for these people.

The World Bank says a wide range of steps have been taken to minimise the social and environmental risks of pipeline construction and operation. "However, important risks remain and close supervision by the two governments and the World Bank will be necessary to ensure project success," it says.

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