Comment & analysis
A happy birthday?: The Chad/Cameroon oil pipeline one year on
Akong Charles Ndika
2004-09-23, Issue 175
On Friday, October 10 2003, before African head of states and foreign dignitaries in Kome, Chad, President Idriss Deby symbolically turned the tap that opened the flow of 225 000 barrels of oil. The $3.7 billion crown jewel project of the World Bank (WB) is the biggest foreign investment in sub-Sahara Africa. For the next 25 years, approximately 900 million barrels of oil will be pumped from 300 oil wells drilled in Doba, south of Chad, along a 1070km pipeline to Cameroon on the Atlantic coast.
WB financing, which totalled just 4 percent of the cost, was crucial to the project. The oil consortium comprising of Exxon, Petronas, and Chevron considered the participation of WB as a necessary political risk insurance, which enabled them to raise more money on international capital markets. Meanwhile, the WB embraced the project as an unparalleled opportunity for land-locked Chad to lift its 6.5 million population out of acute poverty, and for ocean-bordered Cameroon to generate much needed revenues.
Some months after Chad, the world's fifth poorest country, entered the pantheon of Africa's petro-states, it is worth taking stock of the overall project impacts now that the exploitation phase has started. Has the project broken free from the traditional gap between expectations and dismal realities of oil exploitation? Better still, has the oil been a Weapon of Mass Poverty (WMP) or a Weapon of Mass Development (WMD) to Chad and Cameroon?
The background to any petroleum project is key in determining the development outcomes. In fact, the underlying development problems associated with the extraction of black gold are not inherent in the resource itself. However, there is little disagreement on the ability of oil to ratchet up pre-existing conflict in a society; oil can become the very rationale for starting war. In this light, the socio-political environment in which WB approved the project was a potent recipe for poor development outcomes.
There is an endemic mix of corruption and civil strife in Chad and Cameroon. For instance, Chad, since independence, has been marred by a vicious cycle of conflicts and war. Besides the absence of basic ingredients for the growth of civil society, elections are shamelessly rigged, fraud is rife, and the regimes have shown a predilection to violently repress dissenting voices.
For example, villagers were coerced to give their accord to the project in consultations prior to its approval. Tales in Kome, where villagers were consulted in the presence of government forces and rebels, are all too glaring. The village chief was imprisoned for his unfavourable attitude, and the oil company representative arrived accompanied with military police. Given this background, most people were too intimidated to speak out against the project.
Given that Cameroon has consecutively crowned Transparency International's rating of the most corrupt countries in the world, it was no surprise that a bellicose climate of non- information disclosure concerning the project was the norm.
International civil society organisations in 1997 argued for the project's postponement to ensure the two countries upgrade their governance capacities. Contrarily, WB in June 2000 discounted this burgeoning corruption and civil strife in Cameroon and Chad respectively to approve the project. Shortly after, civil society partners were proved right when the Chadian government, on receiving $25 million from the project consortium as a signature bonus, admitted to have used the money in procuring arms to quell a rebel insurgence in the north of the country.
More recently, soon after the project's official inauguration last October, the government closed down the country's only independent radio station, FM Liberté, which had close ties to the country's human rights organisations. Then residents of the capital city, Ndjamena, witnessed the first public executions in more than a decade after court trails which human rights groups described as a mockery of justice. Hence, a warning signal to critical voices in the country to stay quiet.
It is worth noting that the WB's own Operations and Evaluation Department (OED) review commissioned in 2001 finds the Bank wanting on issues of governance. The review points out that while the WB is aware of the underlying causes for the underperformance of resource-rich countries, it has yet to formulate and implement viable approaches to address them. The recently released report of the WB sponsored Extractive Industry Review, primed the role of governance in shaping development outcomes of oil projects. Unequivocally, it recommended the WB to stop support for petroleum projects in areas of conflict or at high risk of conflict.
Broken livelihoods and promises
Approximately 880 km of the pipeline traverses Cameroon's fragile ecological zones. These include one of Africa's unique coastal rainforests, home to several indigenous peoples. Before the commencement of the construction phase, thousands of affected peoples living in villages and communities along the route of the pipeline were identified for eventual compensations. One hundred and fifty families were singled out for resettlement. Many village lands were expropriated, crops and plants destroyed and water sources polluted. The compensation plan, that included individual and communal compensations, was very limited in scope and inadequate to restore or improve on broken livelihoods.
Despite compensation being paid to replace agricultural land, most of the funds did not go into agricultural production or reinvestment to make provision for the future. The affected communities have been left alone with little or no skills to face the long-term impacts: funds had no impact in terms of generating new livelihoods for villagers; prices have increased due to shortage of labour and agricultural goods on the market; rural-urban exodus has increased and conflicts between locals and migrants attracted by the new found wealth have also increased.
The communal compensation plan, which had as its objective to compensate communities with social development projects, was very limited. Communities, who were supposed to identify projects themselves through consultations, were instead constrained to choose from a restrictive list of options proposed by the consortium.
The project thus raises a crucial issue: that of balancing profits with ecological and social principles in petroleum exploitation. Driven by the ethos of cost minimisation, the consortium was motivated to fast-track its operations, while time-intensive social and environmental components such as capacity building lag on. To what extent therefore can multinational corporations be constrained to synchronise the evolution of their exploitation operations with that of social and environmental safeguards?
Turning oil revenue into long-term benefits for the masses is the most contentious issue in resource-rich countries, particularly in Africa. Ultimately, this depends on the quality of public policy. The WB prides the revenue oversight mechanism in the Chad-Cameroon pipeline as an innovation to the extractive industry.
Under pressure from WB, the Chadian government decreed a petroleum management law in 1998. The law provides for the following division of the $2 billion royalties and dividends that would accrue from the project in the next 25 years: 10 percent set aside in a future generation-fund to prepare Chad for a post-oil future; the remaining 90 percent would pass through an offshore petroleum revenue account; 80 percent of which would go to five priority sectors (health, rural development, education, infrastructure, and environmental and water resources); 5 percent would go to the Doba oil producing region; and the remaining would be used by the Chadian government to tackle pressing operational needs.
To mainstream transparency, accountability, and participation, an oversight committee, comprising representatives from civil society, government, administration, and the judiciary was created to monitors the flows and approve spending from the offshore account.
Undoubtedly, this initiative is laudable. However, there are some flaws, which incapacitate it. For instance, three months after Chad started to taste the oil revenues, the committee lacked basic office facilities. In addition, the 5 percent allocated to the Doba region is inadequate. Worst of all, the allocations contained in the law can be changed by the government unilaterally after five years.
In addition, the law covers only direct revenues generated from royalties while indirect revenues such as taxes and customs duties are precluded. These could account for up to 45 percent of the total oil revenues expected over the lifetime of the project.
Several conclusions about petroleum development in Africa become apparent from the Chad-Cameroon pipeline project.
Firstly, oil corporations cannot be transformed into development agencies even with the best of intentions and monitoring mechanisms. Secondly, global wielders of development outcomes like the WB cannot exercise sufficient clout on the penchant for profits of oil multinationals. Thirdly, WB is incapable of respecting even its own weakening safeguard policies, which are premised on controlling damage rather than avoiding harm.
Fourthly, the embryonic neoliberal governance structures in Africa are incapable of constraining Foreign Direct Investments, which are principally attracted by ground mineral resources, to respect ecological and social principles. The flawed contention of the WB is "one cannot eat omelettes without breaking some eggs'' but the eggs are more often the poor who end up with no livelihood opportunity and become even poorer.
Finally, Public Private Partnerships (PPP), the buzz paradigm of sustainable development, are fundamentally incapable of readdressing the unequal power relations between fattening multinationals, weakening states and the World Bank.
As it turns sixty, it is time therefore to pressure the Bank to retire from financing development and environmental disasters like the pipeline. In sum, just like the Weapons of Mass Destruction in Iraq, the Chad-Cameroon pipeline is an illusive Weapon of Mass Development. It is time to send some United Nations development experts to Chad and Cameroon to uncover Weapons of Mass Poverty.
* Akong Charles Ndika is an energy policy analyst with Global Village Cameroon