By Jim Lobe
WASHINGTON, Sep 14 2002 (IPS)

The World Bank’s executive board has decided the institution can keep supporting an increasingly controversial multi-billion-dollar pipeline project that will pump oil drilled in the Central African country of Chad to Atlantic ports in Cameroon 1,000 kilometres away.

The four-billion-dollar project, which is led by Exxon-Mobil, is supposed to earn some two billion dollars in revenue for Chad, one of the world’s poorest countries, over its 25-year life. Cameroon stands to make about 500 million dollars in transport fees on the project, the largest private-sector infrastructure investment in sub-Saharan Africa.

The board decision Thursday approved management’s response to a report on the project submitted by the Bank’s independent Inspection Panel in July. The panel found serious shortcomings with the project, including the failure to fully assess the pipeline’s environmental impact, particularly in Cameroon, and the possible inadequacy of revenues allocated to local residents of Chad’s southern oil region.

Management’s response to the criticisms was to commit itself to stronger oversight to ensure that its goals of protecting the environment and alleviating poverty in both countries are achieved. The Board said it maintained “strong support” for the project.

“The Inspection Panel is an important instrument contributing to project quality,” said Bank President James Wolfensohn after the board’s meeting Thursday. “The findings of the Panel will lead to improvements in the ongoing implementation of this challenging project, which has enormous potential to bring great benefits to the people of Chad and Cameroon.

But non-governmental organisations (NGOs) that have been critical of the project still have doubts.

“Management’s response to the findings of the inspection is an exercise in damage control that lacks substantive and bold approaches that are needed to solving the problems that are now engulfing the (oil-producing) Doba region in particular as a result of the project,” said Karinna Horta of Environmental Defense.

She said the Panel’s findings confirmed earlier predictions by international and Chadian NGOs that such a huge and costly project risked major environmental, social, and economic disruption.

“The oil-producing region has been very badly affected,” she said, citing a recent report by an independent advisory group that found famine conditions were taking hold in the Doba area due to inflated food prices, and that in-migration and spontaneous settlements were putting an impossible burden on local infrastructure and raising social tensions.

Horta also noted that the education system was breaking down as schoolteachers and older students were hired away by foreign oil companies offering much higher salaries.

The Chad-Cameroon Pipeline Project has been cited by the Bank and the U.S. government, a strong supporter of the venture, as an unprecedented effort to ensure that the wealth generated by the oil is used for the benefit of all Chadians, including those in the oil-producing Doba region.

The challenge is a daunting one. Oil revenues in most African oil-producing states, such as Angola, Nigeria and Gabon, have often been used to enrich small elites at the expense of the general population.

And ethnic minorities from oil-producing regions within countries, such as the Ogoni people of Nigeria, have often found themselves among the poorest and most-exploited groups within such countries.

As a result, the oil itself has become a source of social and ethnic tension and conflict, and foreign oil companies that appear to benefit the most from production have become targets for international and local protests that have increasingly bedevilled Nigeria’s Niger Delta region, for example.

The Bank’s financial participation in the project is negligible – the IFC is providing a mere 140 million dollars – but Exxon-Mobil made the Bank’s participation a pre-condition for putting together the project, which also includes ChevronTexaco and Malaysia’s Petronas.

Because neither Chad nor Cameroon could survive economically without the Bank’s support, its involvement effectively insures the companies against political risk. Similarly, the Bank can make demands on the Chadian government for transparency and accountability that the private companies cannot.

The Bank has set up a mechanism so the companies, rather than pay the central government for oil, will pay into an off-shore account. Withdrawals will have to be approved by an independent committee, also established by the Bank.

More than 80 percent of the government’s share of the oil revenues placed in that account must be spent on health, education, rural, development, infrastructure and water. In addition, five percent of that share will be allocated to the Doba region and managed locally, according to the same agreement.

But NGO critics and the Inspection Panel have worried that the social, environmental, institutional and revenue-allocation elements of the project are lagging far behind construction of the pipeline, which will begin full operation as early as the end of 2003.

The Panel, for example, expressed concerns that the revenue management system will not be in place by the time construction is completed, an observation that management admitted will “remain a challenge”. The Panel also said it did not understand the criteria behind the five-percent allocation to the Doba region. Management said it could not interfere in “a highly complex, internal political process”.

As for the Panel’s concern that the cumulative environmental impact of the project has not been assessed, Bank management promised to develop a “regional development plan” by next April.

“With the lack of preparedness in terms of capacity, institution-building, and planning that has taken place, and the continuing rise of social, environmental and health problems in the oil region, one may wonder if the region’s poor people will ever see any improvements in their living conditions,” said Horta.

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