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Chad-Cameroon Pipeline Project

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  • Has the Chad Cameroon Pipeline Project resulted in any benefits for the population?
  • The oil project has resulted in a substantial increase in the revenue flowing to the sectors that can help improve the lives of ordinary Chadians-including schools, health clinics, safe water and roads. As of the end of 2006, over $440 million was transferred to government to be allocated to these development priorities. However, with oil flowing less than four years, it is safe to say that the greatest benefits for the population are not yet realized.

    Inhabitants of the oil producing region around Doba and Bébédja are beginning to see the results of a policy that sends five percent of oil revenues back to the region, as school buildings and equipment, water towers, modern markets, and more are being built and refurbished with oil earnings. As of year-end, some $30 million has been transferred to support citizens living near the production area.

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  • Why did the World Bank resume lending to Chad after a period of suspension?
  • The Bank suspended Chad from new Bank lending because in late 2005, the government unilaterally enacted changes in the oil revenue management system in violation of its loan agreement with the Bank. A new agreement between the government and the Bank, increases the pool of resources going to poverty reduction by covering indirect revenues, such as taxes paid by the oil companies, as well as royalties and dividends arising from the oil project. The Government of Chad has committed 70 percent of its 2007 budget spending to priority domestic and poverty reduction programs, excluding, of course, military and police functions. Meanwhile, Chad is developing a new Poverty Reduction Strategy with the participation of all relevant stakeholders which will form the basis for determining future expenditure priorities.

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  • Have Bank operations been affected by the security problems in Chad?
  • The Bank monitors the security situation closely, and in the last year has had to make arrangements for evacuating staff and their dependents as a precaution. The office is functioning normally now. But security concerns remain a serious problem in Chad, which has been directly affected by the conflict in Darfur, as well as by violence in Northern Central African Republic. Ultimately, a just peace in Darfur is required for the subregion to expect lasting stability.

  • What is the status of the dispute involving the compensation of citizens for the use of their land for drilling oil wells?
  • The International Finance Corporation, through an agreement with Exxon-Mobil, is responsible for enforcing agreed-to social and environment protections in the oil production areas in Chad. A recent independent review found that , although the project has had several positive impacts on the local communities, the operation has taken up more land than originally anticipated. This has adversely affected some households that support themselves through subsistence agriculture. The IFC believes that the livelihoods of people affected by the operations need to be restored by finding alternative land or developing feasible opportunities for employment other than farming. Following discussions with IFC, Esso Chad is drafting a corrective action plan based on the independent review's recommendations.

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  • Do the latest difficulties in realizing all the benefits of the pipeline project mean that the Bank's approach on extractive industries isn't valid?
  • The approach taken in Chad is less a model for all oil-producing countries than a unique solution to a unique challenge. The basic principles underlying the approach taken in Chad-greater transparency and accountability in the use of oil revenues-remain central in the Bank's dialogue with a range of oil-producing countries. Some 20 countries have embraced the Extractive Industries Transparency Initiative, which is a highly constructive trend.

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Updated: March 2007

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