afrol News, 15 July - Chad joined the ranks of the world's oil producers Monday, with the first flow of oil from wells in the south of the country. The US$ 3.7 billion project is a year ahead of schedule, according to Esso Explorations and Production Chad, Inc., the consortium drilling for oil in the Doba basin.

The first oil from the wells is expected to reach international markets via loading facilities off the coast of Cameroon around the end of 2003, according to a release by the World Bank today. The Bank has been central in the funding of the Chad-Cameroon pipeline, which was necessary to make a Chadian oil production viable.

- The project could result in nearly US$ 2 billion in revenues for Chad and US$ 500 million for Cameroon over the 25-year production period, the World Bank says. By 2004, the pipeline would increase government revenues by 45-50 percent per year in Chad, where per capita income is US$ 200 and illiteracy is over 50 percent.

The World Bank has been involved in the project in a number of ways. It has supported the development of a sound revenue management program, triggered the application of the Bank's environmental and social policies, and ensured broad public consultations - in the two countries and around the world, according to the Bank itself.

The project's private sponsors - led by ExxonMobil, the operator, Petronas, and Chevron - are financing about US$ 3 billion, or 81 percent, of the total costs. The Bank is providing US$ 92.9 million in loans, amounting to about 3 percent of project costs to finance the governments' minority holdings in the joint-venture pipeline companies.

World Bank development credits totalling nearly US$ 47 million are providing financing for three parallel support projects to build capacity in Chad and Cameroon that would help to assure successful implementation of the pipeline project.

- I am confident the structures are in place to ensure that petroleum resources will result in visible poverty reduction over the coming years and improve living standards in the country, Gregor Binkert of the Bank said.

- Chadian officials are keenly aware of the need to take advantage of this rare opportunity to make a difference in the lives of their citizens and are committed to avoid the problems that have beset other countries in converting oil revenues into lasting benefits for the population, he added.

A revenue-management law passed by Chad's Parliament in December 1998 commits the government to using its oil revenues for poverty reduction. The law sets out several targets for those revenues. 10 percent of royalties and dividends would be held in trust for future generations. A further 5 percent was to be earmarked for regional development in the oil producing area. Finally, 80 percent would be devoted to education, health and social services, rural development, infrastructure and water management.

The law also created an oversight committee that includes representatives of civil society, Parliament, the Supreme Court, and the government. The committee must authorise expenditures from the Special Oil Revenue Account. Annual audits of petroleum accounts are to be published, and the World Bank and the government are to carry out regular expenditure reviews. Several reports from Chad however indicate that high government officials already have violated the intentions of these agreements.

The World Bank however holds it "has been working to strengthen the capacity of the oversight committee and of the public administration to improve delivery of social, economic and infrastructure services and to monitor the environmental impact of the project."

Additional benefits from the project include infrastructure improvements in Chad and to a lesser extent in Cameroon, employment generation, a spur in private investment, and further oil exploration and development in both countries, the Bank says.

The funding agencies had also launched an initiative to support the growth and development of small businesses in Chad and are investing in several projects, including a micro-credit bank. The Bank says it believes "the pipeline project will continue to provide an opportunity for private sector development in both Chad and Cameroon."

Peter Woicke of the Bank holds the project had "raised the bar" for large, cross-border initiatives, "thanks to the foresight in the design process and the continued vigilance on the part of all parties involved."

Chad has a population of nearly 8 million, with 80 percent living below the poverty line. Most of the country is desert or semi-arid land, with a harsh physical environment and a very narrow economic base. The official inauguration of the pipeline project is scheduled for 30 September.

By staff writer

© afrol News

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