The Chad-Cameroon Petroleum

Backgrounder (1999)

An international consortium consisting of Exxon, Shell and Elf, a French company, is sponsoring the project. The project includes the drilling of 300 wells in the Doba oilfields of southern Chad, the construction of a 1050 km long, 30 m wide buried pipeline through to an offshore marine export terminal facility 15 km off the coast of Cameroon.
Total project costs are estimated at $3.5 billion. The World Bank is being asked to loan $35 million to Chad, $55 million to Cameroon and $100 million directly to the companies. As well, the International Finance Corporation of the World Bank plans to syndicate up to $300 million in loans from commercial banks.
It is likely that the project won’t go forward unless supported by the World Bank. Exxon, leader of the consortium, refers to the World Bank as the foundation of the financing structure for the entire project. In addition, the companies seek support from the World Bank to protect their investments from the risks of expropriation or civil war.
Environmental Impacts:
The 1050 km underground pipeline through Cameroon will pass through ecologically fragile rainforest areas, including an area that is the home of a Pygmy minority of traditional hunters and gatherers. This construction will result in an uncontrollable influx of people in search of work. As the pipeline cannot possibly employ all in need of work, concern has been raised about wildlife poaching of chimpanzees, gorillas and other endangered species in the parks and conservation areas nearby. Along with wildlife poaching, the road construction, deforestation and loss of farmland, will result in a destructive environmental legacy.
The pipeline itself, even with state-of-the art equipment, poses the danger for groundwater contamination and pollution of important regional river systems through leaking of metal-laden oil. Even with the best available technology, over 10,000 litres per day could leak per day without detection.
The proposed offshore loading facility also poses a serious risk of oil spills since it will be a single-hulled vessel. (The US requires its vessels to be double-hulled.)

Social Impacts and Human Rights Abuses:

The World Bank claims that the project will alleviate poverty because revenue from the oil for the Government of Chad and royalties from the Government of Cameroon for the use of the pipeline would be invested in poverty programs. This argument is questionable however, in that both governments have a demonstrated lack of commitment to alleviate poverty.
According to interviews with World Bank staff, royalties from the pipeline will provide general budgetary support to the government and be used to meet Cameroon’s external debt burden. Meanwhile, Cameroon, whose government has regularly failed to account for its massive oil revenues, was recently rated the most corrupt country in the world by the respected watchdog organization Transparency International.
The government in Chad has also a dismal record of managing public finances. At the insistence of foreign donors, the Chad Treasury was under the control of a Swiss firm for years. To its credit, this project includes a technical assistance project to strengthen the country’s management of oil revenues, which will be paid into a Special Development Fund. The Development Fund is to be used by the government for poverty alleviation programs, but for sovereignty reasons the Government of Chad alone decides how to use the funds.
In principle, a development fund can be a critical resource for social development programs in a poor country that has limited access to outside assistance. But in practice, the situation is complicated by the political and socio-economic situation of the country. In a case far simpler than Chad, the Development Fund established under the Lesotho Highlands Water Project, which receives royalties from the export of water from Lesotho to South Africa, has so far failed to benefit the people directly affected by the project and has become an instrument of the politically powerful.
Chad is jut emerging from three decades of civil war and continues to suffer from political violence and armed rebellion. According to international press reports, government forces have resorted to killing and repression of the civilian population. In November, 1997 at least 80 people were killed in the Doba oil field region. Another 100 unarmed civilians were massacred in the same region in March,1998, according to Amnesty International. International observers believe that the renewed conflict and violence in the region are linked to fighting over prospective oil revenues.
Negative impacts on the poor of oil revenue in the hands of corrupt, violent and uncommitted governments are evident in neighbouring countries of Nigeria and Congo. Note that in August 1997, World Bank President James Wolfensohn announced that the Bank would delay or suspend operations in countries where there is endemic corruption or inefficiency.
Lastly, as stated in the Bank’s 1994 Development Report on Infrastructure, World Bank investments in large scale infrastructure are a "blunt instrument" for intervening directly on behalf of the poor. Worse, this type of investment crowds out programs that would directly benefit the social sectors, health, education and environmental protection.
If the World Bank supports this project, it severely reduces the amount that can be lent to Chad and Cameroon for more direct poverty alleviation programs.