oil revenues ring-fenced as exports start

Landlocked Chad, one of the poorest countries in Africa, this week becomes an oil exporter as crude starts flowing down a 1,070 km pipeline to a floating export terminal off the coast of Cameroon. Production from oilfields in the Doba basin in southern Chad is expected to build up from an initial 50,000 barrels per day to a peak of 225,000 barrels per day and last for 25 to 30 years. ExxonMobil, the project operator, estimates that the oil boom will pour more than $2.5 billion in revenues and royalties into government coffers. The oil consortium, which comprises the US oil companies ExxonMobil and Chevron, Petronas of Malaysia and the World Bank, began pumping oil into the pipeline on Monday. According to Michel Gallet, the general manager of the pipeline operating company COTCO, the first tanker loaded with Chadian crude is expected to set sail from the Kribi export terminal, 11 km off the coast of Cameroun, in three months time. However, this largely desert country of around eight million people, plagued by civil war for much of its 43 years as an independent state, is unlikely to become rich and affluent overnight. Chad currently depends on subsistence agriculture, ranching and the export of cotton to generate a gross domestic product of just US $267 per capita. The World Bank estimates that 80 percent of the population lives below the poverty line. President Idriss Deby, who has ruled this former French colony for the past 13 years, is regarded by diplomats as heading one of the most corrupt governments in Africa. And despite the official toleration of opposition parties and the periodic holding of elections, his administration has a poor record for allowing genuine democracy and press freedom. However, the World Bank and three of the world's biggest oil companies have invested US $3.7 billion in developing Chad's huge oil reserves after devising a legal framework that - in theory at least - guarantees that the country's oil revenues will be used for poverty reduction projects rather than arms purchases or the enrichment of individuals in the ruling elite. If this happens, it will be a small miracle. Diplomats and the International Monetary Fund question where up to a billion dollars of Angola's oil revenues go every year. And the population of Equatorial Guinea is still waiting to share the benefits of rising oil production that keeps President Teodoro Obiang and his government colleagues in luxury. However, in December 1998, the World Bank, which has invested $200 million in the Chad petroleum development project, and its oil company partners, persuaded Chad's parliament to pass a revenue management law that earmarks 95 percent of the government's future earnings from oil for projects that promote economic and social development. According to this law, 80 percent of all royalties and dividends from the oil project will be earmarked for spending on education, health, social services, rural development, infrastructure and water management. A further 10 percent will be set aside in a trust fund for future genegations and five percent will be allocated to development projects in the Doba oil producing region, to ensure that the oil bonanza provides some direct benefit to the local population. Complaints that too little oil money flows back to benefit local communities have sparked violent conflicts in the Niger delta region of Nigeria and Angola's oil rich enclave of Cabinda. All disbursements from Chad's Special Oil Revenue Account will be monitored by a special oversight committee comprising representatives of the government, parliament, the supreme court and civil society. This will have to authorise all expenditures from the oil fund. Annual audits of the government's petroleum revenues and how they are spent will be published. The World Bank is therefore hoping that Chad, despite having one of Africa's least promising governments, will prove a model of transparency and public accountability when it comes to spending future oil revenues. "I am confident the structures are in place to ensure that petroleum resources will result in visible poverty reduction of the coming years and improve living standards in the country," said Gregor Binkert, the World Bank's country manager in the capital N'Djamena. Callisto Madavo, the World Bank's vice-president for Africa, is also bullish. "This provides a unique opportunity to raise living standards in one of the world's poorest countries," he said.