World Bank-IMF Annual Meetings October 11, 2013 Korinna Horta, Ph.D.

1. The Chad-Cameroon Oil & Pipeline Project: 10th Anniversary of first Oil Exports from Chad: Are there lessons for the World Bank’s “smart” risks strategy? World Bank-IMF Annual Meetings October 11, 2013 Korinna Horta, Ph.D.

2. Exxon Mobil-led Consortium : Development of Doba Oil fields & construction of 650 mile long pipeline Initial estimated cost: U $ 3.7 billion - Current estimated cost US $ 6.5 billion Initial cost estimate in 2000: US $ 3.5 Billion Cost estimate in 2008: US $ 6.5 Billion

3. The Chad/Cameroon Oil and Pipeline • Development of 7 oil fields (initially only 3 were planned) in southern Chad • Construction of a 1,040 km pipeline from Doba through Cameroon to the Atlantic • Building of a marine pipeline at Kribi to a floating storage offloading (FSO) vessel

4. World Bank Group as Catalyst Exxon Mobil-led Consortium (Exxon 40%, Petronas 35%, Chevron 25%): World Bank participation is a pre-condition for the investment. World Bank: Consortium unwilling to proceed without the Bank Group’s participation “…given the significance that they attach to the mitigation of political risks…”(WB PAD 2000:22)

5. World Bank: A Model Public-Private Partnership “…an unprecedented framework to transform oil wealth into benefits for the poor” (World Bank press release June 6, 2000) “The project provides a unique opportunity for IFC and the Bank to play a significant complementary role in reducing poverty in one of Africa’s poorest regions.” (Project Appraisal Document, April 20, 2000, page 12) “Chad has successfully put in place democratic political institutions.” (Project Appraisal Document, April 20, 2000, page 121)

6. October 10, 2003 Official Inauguration of the Chad-Cameroon Oil & Pipeline ProjectChad’s President Idriss Déby: “…guaranteeing the social well-being of our people, in short, enabling at last the socio-economical takeoff of Chad while offering the chance of a decent life to future generations.”

7. Bonanza for the Déby Regime • Between October 2003 and 2012, Chad exported 436,4 million barrels of oil; • The Chadian government received US$ 9,343 billion in revenues (royalties, income taxes, fees, duties). (Source: Geointelligence Network, last up-date March 14, 2013)

8. World Bank Press Release Washington, September 9, 2008 “Regrettably, it became evident that the arrangements that had underpinned the Bank’s involvement in the Chad/Cameroon pipeline project were not working.  The Bank therefore concluded that it could not continue to support this project under these circumstances.”   IBRD/IDA only pulled out after Chad fully repaid its loans. IFC remained in the project until 2012.

9. World Bank’s Independent Evaluation Group – 2009 “The logic was textbook perfect – except for the revealed weakness of every link in the chain.” (IEG report,p.38)

10. Some of IEG’s Findings • Fundamental objective of reducing poverty has not been met. • Furthermore “…the oil revenue windfall was associated with resurgence of civil conflict and a worsening of governance.” p.35 • Deterioration of non-oil economy after the project became operational.

11. NEW OILAnother Broken Promise A key promise of the project, enshrined in the Bank’s loan and project agreements, was that all additional oil passing through the pipeline would have to adhere to World Bank environmental and social standards. The China National Petroleum Corporation and Griffith Energy International (Canada) are in negotiations with the Government of Chad.

12. World Bank “Modernization Plan” Put an end to: • risk aversion • Rigid and time-consuming compliance processes “To deliver corporate goals, the Bank will need to be more willing to take risks and manage them smartly” (Risks and Accountability Change Team, Preliminary Recommendations, May 15, 2013)