Watching Government: Chad’s promise

April 29, 2002
The Chad-Cameroon pipeline project won’t end the corruptive nature oil can have on a developing nation. But policy-makers from the world’s most developed nations are betting it’s a good step in the right direction.

The Chad-Cameroon pipeline project won’t end the corruptive nature oil can have on a developing nation. But policy-makers from the world’s most developed nations are betting it’s a good step in the right direction.

The US House Subcommittee on Africa on Apr. 18 held an educational briefing for its members on the $3.7 billion project that will ship oil from landlocked Chad to an ocean port in Cameroon. The pipe- line represents the largest infrastructure project of its kind in Africa, with a consortium of subsidiaries from ExxonMobil Corp, ChevronTexaco Corp., and Malaysia’s Petronas making investments (OGJ, Feb. 4, 2002, p. 26). The upstream portion, which includes oil production facilities and wells, will be completely owned by the companies. But the two host countries will have minority ownership in a pipeline that will be financed with a minimum of $186 million in loans from the World Bank and the European Investment Bank.

World Bank role

To get that approval, both countries allowed the World Bank to take an aggressive role in tracking oil revenue from the pipeline in order to deter corruption. But policy-makers must remain vigilant to ensure that the spirit of the agreement is being met, witnesses told committee members.

For example, regulations largely crafted by the bank that are supposed to ensure that oil revenues are used for humanitarian projects are still too toothless to be effective, warned Peter Rosenblum of Harvard Law School. "They do not provide actual power to compel production of necessary information or to stop nonconforming expenditures," Rosenblum said. He argued that there is a pressing need for a US commitment to confront "the growing delay in implementing those aspects of the projects intended to build civil society capacity and ensure proper oversight."

Revenues key

The project is expected to generate $3 billion in revenue for Chad and some $500 million for Cameroon over its 25-30 year production period.

The revenues, pegged to future oil prices, will represent about half of the national budget of Chad, one of the five poorest countries in the world. Project revenues will represent 3% of the Cameroon budget, US officials predict.

"The Chad project is a bold new model for collaboration among private investors, the World Bank Group, and the government of Chad. But these are not the only key players. Indeed, success will require keeping the project in the spotlight of public attention as well as under constant scrutiny and monitoring by outside groups: NGOs [nongovernmental organizations], human rights and environmental organizations, and the media. Scrutiny is the key to transparency," Donald Norland, retired US ambassador to Chad, told the subcommittee.

"Transparency is, in turn, indispensable in guaranteeing that oil resources go-as prescribed by Chadian law and relevant agreements-to projects that reduce poverty while preserving the environment and advancing human rights. In short, to make sure that revenues go to benefit the people of Chad and not to private bank accounts," he said.