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Petroleum Development and Pipeline Project

Petroleum Development and Pipeline Project. Team 2: Yusuf Akkoca Tom Bloom Karen Delton Shweta Hire Eric Johnson David Mahzonni. Overview of Project Costs and Financing . Project Costs: $ 3.723 billion, split into two parts: $ 1.521 billion - Field System

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Petroleum Development and Pipeline Project

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  1. Petroleum Development and Pipeline Project Team 2: Yusuf Akkoca Tom Bloom Karen Delton Shweta Hire Eric Johnson David Mahzonni

  2. Overview of Project Costs and Financing • Project Costs: $3.723 billion, split into two parts: $1.521 billion - Field System $2.202 billion - Export System • Project Financing: Field System – Corporate Finance Export System – Project Finance

  3. Why do you think the financing of the Field System is using Equity? • Field System is fully owned & financed by the Upstream Consortium (ExxonMobil/Petronas/Chevron) • Minimizes Risk: Chad and Cameroon do not have ownership in the Field System ownership.

  4. Why do you think the financing of the Export System using Debt? • Export System financed with mix of equity and debt to off set political risk. • Host governments contribute their own equity by taking out loans.

  5. Analyze the risks and returns to Chad, Cameroon and the Private Sponsors Environmental Risks • Pipeline would cross 17 rivers • 5 habitat zones w/ rare plant life & endangered species • Forest regions, which are home to 11,000 Bakola people (pygmies) • Pygmies rely on land, vegetation, and wildlife to survive • Atlantic Littoral Forest zone in Cameroon at risk for deforestation & oil spills • Lob Waterfalls flows directly into the ocean, spill could cause irreversible environmental damage • Plans to bury pipeline increase risk for ground water contamination, and make repairs more difficult • Oil pipeline leaks can go undetected at 2,000 gallons per day

  6. Analyze the risks and returns to Chad, Cameroon and the Private Sponsors Social Risks • Risks indigenous populations would be forced to resettle making it difficult to re-establish their livelihoods. • Political Unrest Political Risks • Cameroon will close off access to pipeline • Chad demanding higher prices, Cameroon might not be able to acquire oil.

  7. Analyze the risks and returns to Chad, Cameroon and the Private Sponsors Nationalization • Government could take over the Field System Political Risks • Cameroon will close off access to pipeline • Chad demanding higher prices, Cameroon might not be able to acquire oil.

  8. What is the World Bank/IFC’s role in this deal? • World Bank has experience and knowledge working in these risk filled environments • World Bank has strong mission: “To stimulate economic development and alleviate poverty in its 183 member countries”. • Five year study, with extensive research and communication with all stakeholders • Developed the Revenue Management Plan

  9. What is the World Bank/IFC’s role in this deal? • Developed contingency plans for: environmental impact, indigenous people, & long-term sustainability. • World Bank established capacity- building programs to develop fiscal, legal, regulatory, and managerial infrastructures. • Provide funding of equity ownership for host countries • Provide support for bringing in foreign investment

  10. Is the World Bank likely to be successful? • No, the World Bank’s goal is to reduce poverty • While well intentioned, it will be hard to change a corrupt government • The World Bank will not succeed by supporting this one project

  11. Will the Revenue Management Plan work? No • Lack of details about permissible expenditures • Insufficient oversight • No local support • Chad has the authority to update revenues allocations • Future World Bank loans are contingent on the success of this project

  12. Are there aspects of the plan that you think should be changed? • Better oversight • More details

  13. Would you approve the deal as a World Bank/IFC board member? Yes • It is worth the attempt, it is Chad only shot of success.

  14. Thank you! Team 2: Yusuf Akkoca Tom Bloom Karen Delton Shweta Hire Eric Johnson David Mahzonni

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