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Longer, analytical article.  Chad-Cameroon pipeline: A model for African resource development?

Summary & Comment: With oil about to flow through the Chad-Cameroon pipeline, it’s a time to reflect on the successes and failures of the project as well as a time to ponder and analyze its future benefits and harms. The article analyzes the tripartite agreement between stakeholders in the face of AIDS, activists’ rebuttals and other roadblocks. dkc

Author: Diane Chesla Date Written: 1 July 2003
Primary Category: Resource Extraction Document Origin: various
Secondary Category: Western Region Source URL: http://various-see bottom of page
Key Words: Chad, economic justice, AIDS, pipeline, oil, ExxonMobil, World Bank, transparency


Printable Version

Chad-Cameroon pipeline: A model for African resource development?

Recent publications have highlighted the negative social and economic effects that have accompanied resource extraction in sub-Saharan Africa. Christian Aid’s Fuelling Poverty and Catholic Relief’s Bottom of the Barrel reports are two such examples. Both are critical of the transnational companies involved in resource development as well as international lending institutions, such as the World Bank, and local African governments who engage in corrupt revenue practices.

Is Chad’s revenue management agreement worked out between the World Bank, the Chadian government and ExxonMobil, the lead developer of the landlocked country’s oil resources, any different? Perhaps.

The three principal stakeholders; the World Bank led by bank President James Wolfensohn, Chad led by President Idriss Deby and ExxonMobil, represented by point man Andre Madec, round out the high-stake consortium. Although negotiations have been ongoing throughout the life of the project, the particulars of the French-written agreement were hashed out over a three-week period at an Exxon training centre near Paris, France.

The agreement works because each player stands to lose tremendously should the other renege. The oil project appears to be Chad’s only chance at escaping poverty by securing World Bank (hence, international) support for development and debt relief. The subsequent positive outcome on society could then be the means by which Deby could secure his position of power in the coup-ridden country. For ExxonMobil, the project means increased revenues and for their political supporter, the U.S., an important new oil source beyond the troubled Middle East as well as another foothold in Africa.

On the flip side, the involvement of the World Bank helps to shoulder a great deal of the extraordinary political risk involved in the company’s overseas investment. The bank itself stands to gain economically from financing the project. Better still, should the terms of the revenue management agreement stick (Chad had to surrender its oil sovereignty and ExxonMobil had to submit its plans to bank officials for scrutiny), the bank might just be successful in its goals of alleviating poverty in an African country – potentially softening the harsh criticism often expressed by the bank’s adversaries.

For Chad’s part in the deal, the country receives 12% in royalty payments. The figure is on the low side compared to other similar agreements but is appropriate considering the political risk and increased production costs involved. To ensure the money is not squandered, it is to be held in escrow in banks in the UK and later transferred to two Chadian banks where a committee of religious, political and community leaders will decide on its development-specific uses. To ensure that future generations benefit from the non-renewable resource, 10% of revenues will be put into an investment fund for future usage.

For the most part, the deal appears promising. It is not, however, without its problems.

As oil is near-ready to flow through the pipeline, Chad’s capital city, N’Djamena, has no working traffic lights and is subject to power blackouts, a challenge for any city let alone one engaged in a new, large-scale venture. For the committee monitoring oil-related development projects, funds are scarce. Activists in both Chad and Cameroon claim that benefits to the two countries are too small. The Chadian government’s level of commitment is untested. One-sixth, or $4 million of the fees paid by ChevronTexaco and Petronas for their share of the oil concession was used for military purchases. However, this is an arguable point as, technically, this fee did not represent the oil ‘proceeds’, which was what the government had legally agreed to spend on development. In any case, the problem was immediately corrected by Mr. Wolfensohn who threatened to remove Chad from the bank’s international debt relief program should further funds be used for military purchases.

Also, the influx of money into Chad’s economy is slow to effect change because local infrastructure is not yet capable of handling the hundreds of thousands of dollars a day in oil revenue. As a result, dollars for micro-finance projects are slow to come by and requisition forms for computers and vehicles are caught up in red tape. This is a conundrum in itself as more than a quarter of civil service workers do not know how to use computers – and power is intermittent even if the first problem were resolved.

In spite of these roadblocks, the project has achieved some positive results. Three hundred miles of roads and bridges have been improved in Chad, $500 million has been spent in procurement of local goods and services and pipeline construction has triggered a 10% increase in gross domestic product.

Compensation, which is often a flashpoint for conflict between community and transnational firms, is an issue that has been addressed from the onset of the project. For example, in addition to a field-based social and environmental responsibility assessment by World Bank employees, decisions such as rerouting the pipeline to avoid unsettling a local indigenous community and reimbursing locals for damaged mango trees have been undertaken.

Initiatives as those listed above have not placated all affected peoples. Ngarledji Yorongar, the leading opposition figure in Chad, states that people now live in mud huts and this is not expected to change in the next twenty years in spite of the influx of oil revenues. Additionally, communities are upset that only 5% of revenues are destined for the oil-producing region in the country. The World Bank’s inspection panel has even corroborated several of the claims made against the project. One of these claims is that the environmental impact assessment is improper and non-cumulative.

This same panel has also found the bank’s anti-AIDS education and prevention program in Chad to be ‘modest’ and ‘insufficient’. AIDS is perhaps, the greatest social problem generated by the pipeline project whose detrimental and fatal effects can not be reversed.

The possibility of paid employment has been the cause for hundreds of African men to relocate to shantytowns in close proximity to pipeline projects. Prostitution and alcoholism soon followed. Health experts now assert that the spread of AIDS follows the 670-mile pipeline route. They have also expressed concern over the lack of preventative measures being taken to address the problem. The World Bank is not in agreement with these experts, sighting a 2002 study by the government of Chad. The study measured over four thousand women and found that the HIV rate has not increased over previous years (the same years the pipeline was being built).

Although ExxonMobil feels it is the responsibility of the government to handle both the costs and responsibility of the disease, the company is supportive of various efforts aimed at AIDS education and awareness. These include voluntary HIV testing for project employees, sponsoring female focus groups centred on developing economic projects instead of prostitution, subsidizing the purchase of condoms and contributing to a local AIDS-awareness theatre group.

The real concern is now that the pipeline is completed, the AIDS-infected workers will return to their respective homes taking the disease with them. In a country with a rudimentary health care system, the situation is deemed vulnerable.

I return to the question of the success of the World Bank sponsored petroleum development and pipeline project. Perhaps it is still too early to render a judgement. What seems like a full-proof system is in place but the real test will be over the next several years as oil and revenues flow and development has the chance to flourish in an impoverished country.

Sources:

In war on poverty, Chad’s pipeline plays an unusual role

http://www.petroleumworld.com/story1633.htm

Bank inspectors find fault with Chad

http://www.brettonwoodsproject.org/topic/enironment/e3004chadcam.html

AIDS Could Follow African Pipeline

http://www.latimes.com/classified/jobs/news/la-na- pipeline18jun18001434,0,3411372.story?coll=la-class-employ-jobnews

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