International Advisory Group Chad-Cameroon Petroleum Development and Pipeline Project
REPORT OF VISIT TO CHAD AND CAMEROON MAY 17 – JUNE 5, 2004
July 9, 2004 International Advisory Group IAG Secretariat Mamadou Lamine Loum, Chair 5 Place Ville-Marie, Suite 200 Jane I. Guyer Montreal, Quebec Abdou El Mazide Ndiaye CANADA H3B 2G2 Dick de Zeeuw Tel.: +1 514 864 5515 Jacques Gérin, Executive Secretary Fax: +1 514 397 1651 E-mail: [email protected] www.gic-iag.org International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
Table of contents
EXECUTIVE SUMMARY
CHAD...... 1
INTRODUCTION...... 1
1. DOMESTIC SITUATION: VARIOUS CRISES THAT NEED TO BE DEFUSED ...... 2
1.1 Financial Context: A Growing Crisis...... 2
1.2 Economic Context: Ongoing Sector Crises ...... 3 1.2.1 Cotton Crisis ...... 3 1.2.2 Energy Crisis ...... 4
1.3 Political Context: Political and Humanitarian Turmoil ...... 5
2. MANAGING OIL REVENUES: INADEQUATE APPROPRIATION...... 6
2.1 Obstruction of the Mechanism for Transferring and Mobilizing Revenues...... 6
2.2 Mixed Progress on the System for Managing and Using the Revenues...... 7
2.3 Capacity-Building Needs in the Petroleum Era ...... 11
3. EXPANDING THE PETROLEUM SECTOR: FROM MANAGING THE PROJECT TO MANAGING THE SECTOR...... 13
3.1 Project Doba ...... 13 3.1.1 Social and Environmental Monitoring of the Project...... 13 3.1.2 Environmental Issues ...... 14 3.1.3 Socio-Economic Issues ...... 15 3.1.4 Overlapping Issues: Communication and Assessment ...... 16
3.2 New Fields Developed by Esso ...... 17
3.3 Future Exploration and Development: Legal and Regulatory Framework...... 18
3.4 Strengthening and Sustaining the Support Institutions, Structures and Tools...... 20
CONCLUSION ...... 23
International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
CAMEROON...... 25
INTRODUCTION...... 25
4. REGULATORY FRAMEWORK AND REFERENCE INSTRUMENTS: STILL LACKING...... 25
4.1 Sector ...... 26 4.1.1 Implementing Decrees for the Framework Law on the Environment ...... 26 4.1.2 National Oil Spill Response Plan...... 26
4.2 Project ...... 26 4.2.1 Memorandum of Understanding between the MINEF and FEDEC...... 26 4.2.2 Park Management Plans for Campo-Ma’an and Mbam-Djerem ...... 27
5. MEASURES TO PROTECT THE POPULATION: STILL IN PROGRESS ...... 27
5.1 General Issues...... 28 5.1.1 Social Closure...... 28 5.1.2 Health Services for the Populations Adjacent to the Pipeline ...... 28
5.2 Specific Issues ...... 29 5.2.1 The Coastal Area...... 29 5.2.2 Claims by Fishermen ...... 29 5.2.3 Terms of Local Employment for the Project ...... 29
6. ONGOING ACTIVITIES: UNEVEN PROGRESS ...... 30
6.1 Government ...... 30
6.2 COTCO ...... 31
6.3 FEDEC ...... 32
6.4 Non-Governmental Organizations...... 33
6.5 All Parties...... 34
CONCLUSION ...... 34
ACKNOWLEDGEMENTS Appendix 1: Chronology of Meetings Appendix 2: List of Abbreviations and Acronyms
International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
EXECUTIVE SUMMARY
This report presents the observations, analyses, conclusions and recommendations arising from the seventh statutory visit of the International Advisory Group (IAG) for the Chad-Cameroon Petroleum Development and Pipeline Project (“Project” or “Project Doba”), to Chad from May 17 - June 2 and to Cameroon from June 2 - 5, 2004.
The Consortium has practically reached full production mode and is already preparing to expand its activities. The Chadian and Cameroonian governments have improved their Project monitoring abilities, and in the case of Chad, its revenue management skills, but have not yet achieved an adequate level.
In Chad, the mission focused on the management of oil revenues, the transition from the Project Doba construction to production phase, the growth of the oil economy through the development of new oil fields and the social, economic and environmental impact on the population, in the overall context of a country marked by serious financial, economic and political problems.
The country’s financial situation has been deteriorating since the beginning of 2004 despite the accumulation of oil revenues in the sequestered account. Budgetary assistance from international institutions, in particular the International Monetary Fund, has been suspended for several months, implementation of the overall budget was extremely poor and the oil revenues are still not circulating in Chad.1 Consequently, the Government is unable to honor all its financial obligations, whether internal or external.
The economic and social situation continues to suffer the consequences of the crises in the cotton and energy sectors, which are affecting both rural and urban zones, households, businesses and public utilities.
The political context is marked by tensions that manifest themselves, among other ways, in an attempted mutiny by elements of the armed forces in May. The Darfour conflict with its hordes of refugees and the political disagreement sparked by the proposal to eliminate the constitutional limitation to the number of presidential terms are also elements of instability that need to be closely monitored.
Appropriation of the oil revenue management mechanisms is still inadequate despite the progress made: • The mechanism for transferring and mobilizing oil revenues is blocked. The revenues have been accumulating in London since November 2003 because the procedures for repatriating them back to Chad have not been finalized; • Progress made on the system for managing and using the revenues has been erratic and has not yet been put to the test. Improvements are still possible and indeed necessary in terms of preparing the institutions in question, whether it be the central ministries, such as the Ministère de l’Économie et des Finances and the Ministère du Pétrole, the priority
1 On July 6, the IAG learned that an initial transfer of $ 32 million had been made from Citibank to Chad. The Convention between Chad and BEAC is being finalized, and the conventions between Chad and two local commercial banks have been signed.
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ministries, which master the mechanisms for using the revenues to varying degrees, or the monitoring bodies such as the Collège de Contrôle et de Surveillance des Ressources Pétrolières (Oil Resources Control and Monitoring Group) and the Direction Générale des Marchés Publics (Government Procurements Directorate). • The objectives of the two World Bank-funded projects to build Chad’s capacity to manage the petroleum economy, including a program to train Chadian administrators to manage the economy and the petroleum sector, have not been met. This is partly due to the fact that funds have been spent on activities other than training.
Management of a growing oil sector calls for a certain number of measures:
• Esso’s social and environmental monitoring of the Project requires that a skilled and complete EMP team (Environmental Management Plan) with all the necessary authority to monitor construction and production activities be put into place. The training and professionalization of the Government monitoring and oversight teams has still not reached an adequate level. Waste management, dust control and soil reclamation are still not regulated and require prompt measures on the part of Esso and the Government. The dispute caused by the departure of Taylors International, one of Esso’s contractors, needs to be resolved quickly for the benefit of the local businessmen and Esso needs to implement procedures to avoid similar cases in the future.
• Esso is planning to activate five new fields in the Doba region. Construction on two of these fields is scheduled to start before the end of the year. The processes for assessing environmental impact, bringing the project in line with the Doba EMP and holding public consultation need to be made clear to the interested parties and be held to the rigorous standards of the Doba Project.
• The legal and regulatory framework applicable to oil exploration and future development in Chad calls for implementation of the Environmental Law through the still-lacking implementing decrees, and the preparation of a new Petroleum Code to govern expansion of the petroleum sector under safe conditions for the environment and the population and under non-negotiable conditions of transparency.
These points require urgent action by the Government, the World Bank and the Consortium.
The Government of Chad should: improve its ordinary tax revenue collection procedures; use its available resources, including the oil bonus, to strategically repay its debts and renew ties with the international organizations whose financial aid it still needs; hasten to repatriate and use the oil revenues; accelerate the training of officials in charge of environment and petroleum management; complete the legislative and regulatory framework for the sector and decide on the future of the management institutions that will provide long-term oversight of the growing oil sector.
To this end, Chad needs to be able to count on both financial and technical support from its partners to complete the many tasks it has assumed in order to properly manage its oil revenues.
The World Bank must share responsibility with the Government for having allowed funds for the capacity-building projects to be used for often unproductive studies and for construction projects, with serious consequences in terms of Chad’s lack of training and preparedness. The
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Bank must now focus its energy on supporting massive training and appropriate technical support at various stages, based on Chad’s needs. To accomplish this, it will not be sufficient to return to the “normal” mode of organization, as planned. High-caliber staff must be assigned exclusively to the task of making progress with the petroleum-related projects and providing Chad with advice that fits its needs.
The Consortium must come to realize the importance of having its EMP team continue monitoring the construction activities, without constant fluctuations, and contribute to the smooth conduct of production activities.
In Cameroon, where the Project is fully in production mode, the IAG focused on the framework for environmental regulation, social and environmental monitoring, management of ecological compensation and the support program for vulnerable, indigenous peoples.
Like Chad, Cameroon still lags behind in setting up the regulatory framework for the sector and the reference instruments that will guarantee safe and adequate implementation of oil activities, while providing environmental protection. This regulatory deficit is particularly serious given that one of the standing risks of the Project directly concerns the environment.
Implementation of the Framework Law on the Environment, finalization and dissemination of the National Oil Spill Response Plan, finalization of the memorandum of understanding between the Foundation for Environment and Development in Cameroon (FEDEC) and the Ministry of Environment and Forests, preparation of the park management plans for the Campo Ma’an and Mbam-Djerem national parks, designated as ecological compensation under the Project, are all still pending.
Activities designed to protect the population are still underway:
• The social closure process has made great progress. All that remains is for the Consortium to resolve the remnant disputes and the Pipeline Steering and Monitoring Committee (CPSP) to conduct an overall assessment of the process.
• Health services for the populations adjacent to the pipeline have not yet achieved the desired objective. Government measures taken to date do not allow for monitoring of the Project during the operations phase. The World Bank and the CPSP are urged to step up the CAPECE components related to health.
• COTCO has not yet conducted a public awareness campaign on the Area Specific Oil Spill Response Plans with the populations in the Kribi coastal zone because it has been unable to agree on a joint schedule with the CPSP.
• COTCO’s plan to lay an artificial reef to replace a rock destroyed during construction of the pipeline, which has been the subject of claims by the Kribi fishermen, has still not been studied by the relevant government departments and has not been implemented.
Uneven progress has been made on the ongoing activities of the various parties involved in the Project:
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• The Government began an assessment of the activities under the CAPECE program, which begs to be broadened to include all dimensions of the pipeline Project, ideally with input from all the parties involved.
• There is a lot of catching up to do in terms of implementing the various components of the CAPECE.
• The transfer of temporary infrastructures is lagging behind at the cost of their deterioration. The Government needs to decide on a date and the final transfer procedures.
• The security perimeter around the floating storage terminal off the coast of Kribi has not yet been installed.
• Finally, implementation of the compensation measures for the case of level III non- compliance with the EMP on archeological issues has led to an unresolved dispute between COTCO and the Ministry of Culture.
COTCO and the CPSP are urged to show a willingness to consult together and to act promptly to resolve these various problems. The CPSP in particular should produce a timetable of the next steps for each case.
• FEDEC’s activities are progressing at a satisfactory pace. However, the Foundation needs to remain vigilant concerning the rather poor results of the financial audit of one of the executing agency’s accounts – WSC (Wildlife Conservation Society). FEDEC is currently rethinking its long-term objectives. It needs to increase the visibility of its current programs so as to attract potential donors.
• The Cameroonian non-governmental organizations monitoring the Project are currently assessing the effects of the construction phase and are also concerned with Cameroon’s management of the oil revenues. They have asked the Government to provide information needed for their work and to publish data on the volume and value of oil transportation. The NGOs have also stated their willingness to initiate a permanent framework for dialogue on the Project.
The IAG suggested numerous corrective measures last December, which are still relevant for Cameroon. The Government, via the CPSP, and COTCO need to act promptly in order to ensure that the conditions have been met for safe use of the oil infrastructure and the improvement of the population’s well-being.
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EXECUTIVE SUMMARY PR93125.018-ENG.doc iv International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
1. The International Advisory Group (IAG) for the Chad-Cameroon Petroleum Development and Pipeline Project (the Project or Doba Project) conducted its seventh statutory visit to Chad and Cameroon from May 17 to June 5, 2004.
2. This report presents the observations, analysis, conclusions and recommendations arising from the mission and reflects the situation as of June 5, 2004.
3. The IAG paid close attention to all the subjects raised by its interlocutors during the visit. However, at the risk of omitting some of the topics discussed, this report focuses on the principal challenges faced by Chad and Cameroon, as well as by their partners, to make the Doba Project a development project, contributing to the poverty reduction and to the well-being of the populations of the host countries.
CHAD
INTRODUCTION
4. The IAG was in Chad from May 17 to June 2, 2004 working in N’Djamena and in Komé, Bébédjia and Moundou in the oil region. In the south of Chad, the Group visited two villages near the oil production infrastructures (Dildo and Maïkeri) and the waste treatment facilities at Komé 5. The IAG met with national and local government officials, the Prime Minister and other members of the Government and with representatives of the World Bank (WB), the International Monetary Fund (IMF) and civil society. The mission ended with a review session with the primary partners to clarify and complete certain pieces of information gathered during the mission, and finally, a debriefing session with all the parties.
5. The mission itinerary and chronology of the meetings can be found in Appendix 1.
6. The sixth statutory visit in December 2003 provided the Group with the opportunity to assess how well the Project’s social and environmental impact is being managed, to take stock of the issues related to national, regional and local development and to determine the extent of preparation of the parties to manage the oil revenues in 2004 and over the long term. At that time, the IAG noted that despite the efforts Chad had made, the country was still a long way from having the capacities required to guide its economy into the petroleum era and to turn Project Doba into a true development project. Project monitoring by government teams and the Consortium also needed to be improved.
7. Six months later, the IAG recommendations from mission 6 have only been partially followed by its designated partners – the World Bank and the Government of Chad – as well as its de facto partner, the Consortium. There are still shortcomings in terms of prompt action and some of the issues have become more complicated, reflecting the economic and financial difficulties that Chad is facing.
8. The Chad-Cameroon Petroleum Development and Pipeline Project (“the Project”, or “Project Doba”) has been in the oil production stage since July 2003. Construction activities will continue at the Doba oilfields until August-September 2004 and will begin subsequently at the satellite
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fields. The Consortium staff is transitioning between the construction and the operations teams. Sales of Chadian crude oil on the international market began in October 2003, and funds are being deposited into Chad’s Citibank account in London, which was set up for the country’s oil revenues.
9. This visit occurred in a context marked by political turbulence and a difficult economic and financial situation while Chad’s oil revenues have been accumulating in London since November 2003 because the institutional arrangements required to repatriate the funds back to the Bank of Central African States (BEAC) have not yet been finalized. The transition from the construction to the operational phase of Project Doba has also been characterized by high staff turnover in the monitoring teams at Esso, the World Bank, the Coordination Nationale (National Coordination, or CN) and the Collège de Contrôle et de Surveillance des Ressources Pétrolières (Oil Resources Control and Monitoring Group, or CCSRP).
10. For all these reasons, this mission focused on Chad’s management of the oil revenues, an assessment of how well all the various parties have transitioned from the Doba Project construction phase to the production phase, the growth of the oil economy through the development of new oil fields and the impact on the local population thus placing the Project in the overall context of the country.
1. DOMESTIC SITUATION: VARIOUS CRISES THAT NEED TO BE DEFUSED
11. During its visit to Chad, the IAG encountered a difficult domestic situation. Although the inflow of oil revenues at the end of 2003 seemed to bode well for the country’s financial situation in 2004, the opposite was in fact true in the first few months of the year. The economic and financial situation in Chad is going through a disturbing period, which is preventing the population’s expectations from being satisfactorily met and adding to the ongoing crisis in the agricultural and energy sectors. The institutional context is also characterized by political turmoil of every nature.
1.1 Financial Context: A Growing Crisis2
12. Due to a combination of factors, the financial situation in Chad has been deteriorating since the beginning of 2004, putting the country on the verge of a crisis even though the initial oil sales at the end of 2003 seemed to indicate the contrary, with a strong projected growth rate.
13. Despite the progress Chad has made in terms of macroeconomic stabilization and structural reforms, the International Monetary Fund (IMF) decided not to conclude its sixth and final review of the triennial program supported by the Poverty Reduction and Growth Facility (PRGF) before the program expired in January 2004 because several performance criteria had not been met. Since then, the IMF has suspended aid to Chad, which has led the European Union and other partners to do likewise.
2 On July 6, the IAG learned that an initial transfer of $ 32 million had been made from Citibank to Chad. The Convention between Chad and BEAC is being finalized, and the conventions between Chad and two local commercial banks have been signed.
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14. Implementation of the non-petroleum related budget was weak during the first quarter of 2004, with only 11% of forecast revenues received, and with expenditures other than payroll well below estimates.
15. Domestic debt has also been accumulating since the beginning of the year, as seen in the Government’s late payments to CotonTchad and the Société Tchadienne d’Eau et d’Électricité (Chad Water and Electric Company, or STEE). Despite all efforts the arrears in foreign debt are building up again, placing the country at risk of having its foreign aid suspended – a situation that must be rectified if it is to recover harmonious relations with its partners.
16. In addition, the oil revenues have not yet been repatriated from London to the BEAC because the necessary arrangements and procedures have not been finalized, which means that Chad has been deprived thus far of the oil revenues included in its 2004 budget. The path has not been cleared at the BEAC for managing the oil revenues in accordance with Chad’s desire to turn this Project into a transparent tool to fight poverty and promote development.
17. Consequently, implementation of Chad’s overall budget has been weak since the beginning of the year and its petroleum budget has been non-existent. At the time of the IAG visit, the Ministère de l’Économie et des Finances was working on drafting a functional cash flow plan that would help the government agencies secure payments for the most pressing debts. Similarly, a government revenue recovery campaign was under way, but the results of this campaign were not known. In any case, the substantial decrease in revenue levels leads to the serious risk of non-additionality of oil revenues, which in turn jeopardizes the smooth functioning of the Government. This threat must be warded off quickly3.
VII.1 The IAG recommends that:
18. - the Government quickly identify the causes of the current revenue counter performance and take the long-term measures needed to eliminate these causes;
19. - Chad and its partners, especially the IMF, meet in order to realistically identify the conditions that need to be met in order to quickly revive the foreign aid program in Chad; in particular through access to the PRGF and the benefit of the HIPC (Highly Indebted Poor Countries) initiative.
1.2 Economic Context: Ongoing Sector Crises
20. Although outlines of solutions are starting to appear, as compared to December 2003, two sectors that are key to the survival of rural and urban households and to the competitiveness of companies are still suffering.
1.2.1 Cotton Crisis
21. The cotton industry in Chad continues to face a recurring crisis that is more acute than in other African countries. Given the weight of this industry in the domestic economy, the crisis is being
3 Esso’s payment of the second part of the bonus on June 11, following the decreed ratification of the Convention between Chad and the Consortium on May 10, 2004, helped facilitate this transition, allowing Chad to use these funds to pay off some of its priority debts. However, the fundamental situation is still worrisome for the reasons cited above.
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felt at every level – from the farmers to the Government to the world of finance, insurance, transportation and business. Substantial profits were lost by many of the middlemen who were struck full force by the poor performance of the last harvest – the worst in 20 years according to some.
22. Recently, the Government launched a campaign to revive cotton as part of its efforts to fight poverty. In particular, this campaign will provide government subsidies during the next cotton farming season of up to 40 CFA francs per kilogram of cotton, for a total purchase price of 190 CFA francs per producer. A program to repair rural roads is also being studied, as well as improved extension services to farmers.
23. Improving the finances of CotonTchad is a pre-requisite for the company’s pursuit of its business activities. A timetable has been established outlining the schedule for payment of State debts to the company starting in January 2005.
24. The privatization of CotonTchad, an inevitable process that is already underway, continues to be the subject of discussion between the Government, CotonTchad and the World Bank with regard to the plans for selling off the cotton seed factories.
25. The cotton industry is one of the keys to Chad’s development and an important element in facilitating cohabitation between industry and agriculture in the oil region. State investment in this area contributes directly to the fight against poverty for an appreciable number of Chadians and also ensures that costs are covered through guaranteed tax revenue.
VII.2 The IAG recommends that:
26. - the Government continue to support the cotton industry revival program, in particular by setting aside funds in its 2005 budget to pay back its debt (current and arrears) to CotonTchad and to subsidize producers for the purchase of cotton. In addition to the measures already contemplated, the Government should look into other possibilities for boosting declining production, especially improving seed quality through agronomic research and increasing farmer access to technology through subsidies or tax breaks for fertilizers, pesticides and farming equipment;
27. - the Government, backed by the WB, proceed with caution on the CotonTchad privatization process, with the goal being to promote long-term development of the industry through the integration, and not the dislocation, of this sector. To this end, lessons can be learned from other experiences in expanding cotton industries in West or Central Africa;
28. - that the Government and the World Bank pay special attention to the farmers’ associations that were trained several years ago, but have not received much guidance since, in order to build their technical and economic capacities.
1.2.2 Energy Crisis
29. The energy crisis is the other facet of the economic slump affecting Chad. The urban zones, starting with N’Djamena, are particularly hard-hit, where the crisis is hindering development.
30. While there is little visible progress for consumers, the Government, with the support of various donors, is methodically taking charge of the energy situation. New generators were purchased to supply the capital city, while the existing infrastructures are being progressively rehabilitated.
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However, the deficit in supply versus demand from current customers is still considerable, not to mention potential demand.
31. The use of Doba oil to run the future Farcha power plant is an option that is being considered more and more seriously in order to reduce the cost of electricity over the long term. However, this option should not rule out the Sidigui project. Once emergency measures have been launched, an overall approach needs to be adopted.
VII.3 The IAG recommends that:
32. The Government, with support from the World Bank and its other partners, persist in its determination to rehabilitate and develop the essential services of water and electricity, and that short and medium-term actions be accompanied by an overall study of demand and consideration of all the possibilities for lasting solutions, including the long-contemplated development of Sidigui.
1.3 Political Context: Political and Humanitarian Turmoil
33. In addition to the financial and economic difficulties, the institutional situation is also marked by tension.
34. The conflict in the Darfour region in the Sudan is being played out on Chad’s doorstep with significant impact, including the presence of several thousand Sudanese refugees in Chad for the past several months. Chad is heading up the mediation process between the Sudanese rebels and the Khartoum government, who still have not reached an agreement to settle the conflict once and for all. The human, financial, security and political costs are evident in Chad.
35. When the IAG arrived in Chad, an attempted mutiny by Chadian soldiers had just failed. The motives of the insurgents are still not clear. Some link them to the Darfour conflict, others to opposition to the proposal by the ruling party to eliminate the constitutional limitation to the number of presidential terms. The official theory cites hostile reactions to the financial adjustment measures taken within the armed forces.
36. On May 26, 2004, a parliamentary debate led to the proposal of a constitutional amendment by the Mouvement Patriotique du Salut, the party of the President of the Republic. If approved in an upcoming referendum, this amendment will allow the Head of State in office to run for a third term starting in 2006.
37. On these various issues, political and social consensus on the rules of the institutional game is what is affected.
VII.4 The IAG recommends that:
38. The Government carefully prepare the constitutional amendment referendum in a transparent manner so as to appease, rather than exacerbate the tensions.
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2. MANAGING OIL REVENUES: INADEQUATE APPROPRIATION
39. Although the IAG mission was expected to evaluate how well the Chadian government is actually managing the oil revenues and whether the procedures established to follow up on law no. 001/PR/99 on the management of oil revenues have been applied, the Group had to note that not all the instruments required to repatriate the revenues to Chad from the sequestered account at Citibank in London have been finalized.
40. The IAG reviewed the areas where repatriation of the revenues to the BEAC is being blocked. It also pursued its assessment of the Chadian government’s preparedness for managing and spending these revenues and noted disparate progress. Finally, the Group identified Chad’s yet unmet capacity-building needs in this area.
2.1 Obstruction of the Mechanism for Transferring and Mobilizing Revenues
41. The oil revenues in Chad from the production of crude at the Miandoum, Bolobo and Komé fields under Project Doba can be broken down into several components.
42. Pursuant to the provisions of law no. 001/PR/99, direct revenues, royalties and dividends are to be deposited in an off-shore sequestered account that Chad opened at an international financial institution – Citibank in London. Indirect revenues, taxes and customs duties are transited through this account and then deposited directly into the current accounts of the Chadian treasury at the BEAC.
43. Repaying loans from donors (International Bank for Reconstruction and Development and the European Investment Bank) and supplying the “Fund for Future Generations” at the BEAC receive priority when money is drawn from the Citibank account. Chad must then repatriate the rest of the money to the BEAC to a direct revenue repatriation account.
44. The funds that pass through the repatriation account are earmarked for the oil-producing region, the Treasury’s current account and the priority sectors designated under law no. 001/PR/99. The Fund for Future Generations will be managed by an international financial institution.
45. There have been considerable delays in implementing the formalities required to transfer the oil funds to the BEAC accounts. At the time of the IAG visit, the oil revenues were still being held up in London.
46. The funds are being obstructed on two levels:
47. - Four agreements between the Government and the BEAC are being drafted in order to set the terms for repatriating the funds and for managing the repatriation account, the stabilization account, the Fund for Future Generations and the account assigned to the oil- producing region. The technical mechanism required to repatriate the funds to the BEAC is new in several respects, which complicates the preparation of these agreements.
48. - Chad decided to appoint a second commercial bank in the country to receive these funds; however, this measure modifies the agreements between Chad and the WB. This provision appears to be pertinent and important, but Chad’s partners are waiting for the Chadian proposal to be formalized before following up on it.
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49. Concerning the Fund for Future Generations (FFG), Chad has not yet set up a committee or defined an investment strategy. Before the strategy is applied, it must be approved by the CCSRP. In the meantime, while Chad is identifying an international institution to manage the FFG, temporary measures for funding the account at the BEAC should be taken.
50. Concerning the account earmarked for the oil-producing region, the Government is considering temporary measures for using the revenues, while waiting for the local, decentralized authorities to be elected. These measures still need to be spelled out and approved by the parties involved.
VII.5 The IAG recommends that:
51. - the Government give priority to finalizing the agreements between the State and the BEAC and to initiating the procedures for appointing a second, in-country commercial bank to receive the oil revenues;
52. - given the complexity of the legal and accounting procedures for receiving oil revenues that still need to be finalized, the need for outside and high-level technical assistance at various stages appears to be urgent. Chad and its partners, especially the IMF, should work together to put this technical assistance in place as quickly as possible so as to provide support for the Ministère de l’Économie et des Finances;
53. - the Government continue its search for a temporary formula that will enable the oil zone population to access its 5% share of the oil revenues;
54. - information be given to the population about the specific terms governing budget implementation and about how the national and local oil revenues are being mobilized, in order to explain this unexpected impasse.
2.2 Mixed Progress on the System for Managing and Using the Revenues
55. In the context of preparing Chad to manage and use the oil revenues, the institutions involved have already taken a certain number of steps. However, improvements are still possible and still needed.
56. The Ministère du Pétrole: The subject of calculating the revenues that the ExxonMobil- Chevron-Petronas Oil Consortium (headed by Exxon) pays to Chad following each sale of crude oil is still under discussion with the Ministère du Pétrole. The parties have not yet reached an agreement on the terms for calculating the “billable” crude or the price of transportation. The Government and the Consortium each have their own interpretation of the Agreement between them with respect to location of the meter that will serve as the reference for calculating oil revenues. At the time of the IAG visit, the parties were planning to continue their technical discussions on the meter location, the calculation of quantities produced and the cost of transporting the crude oil. Their goal was to reach a consensus by June 30, 2004. If they are unable to do so, they will resort to arbitration as stipulated in the Agreement. In the meantime, Esso Exploration and Production Chad, Inc. (EEPCI) is paying royalties to Chad, pursuant to its understanding of the Agreement. The final amount will be sorted out when the parties reach an agreement on the method of calculation.
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57. The Ministère de l’Économie et des Finances has set up a computerized system to manage government expenditures. However, a connection is still lacking with the spending agencies upstream and with the budget and treasury offices downstream.
58. Esso recently submitted its updated economic model for calculating oil revenues to the Government and is currently training Chadian agents to understand and use this complex model. The model still needs to be fully understood and certified before the Ministère de l’Économie et des Finances adopts it.
59. At the same time, Chad is preparing its own model, which will serve as a point of reference and comparison. This model must also be adopted by Ministry experts. The parameterization of this model may be discussed with other partners, to avoid costly and irresolvable disputes.
VII.6 The IAG recommends that:
60. - the recognized importance of the working tools needed to mange the oil revenues be acted upon by providing key training to staff at the Ministère de l’Économie et des Finances, starting with agents from the Direction du Budget and the Trésor and the top officials from the priority Ministries;
61. - the Government promote stability among the personnel trained to use Esso’s economic model so as to capitalize on these training sessions for the benefit of the largest possible number of administrators.
62. The Priority Ministries designated under law no. 001/PR/99 are those that cover public health and social affairs, education, infrastructures, rural development (agriculture and livestock production), the environment and water resources. The IAG visited all the relevant ministries during this mission, except for the Ministère des Affaires Sociales. The Group was thus able to assess how prepared these ministries are to use the oil revenues on several levels:
63. - Framework for medium and long-term action: This framework is intended to express the visions of the various ministries and thus, the pertinence of the ways they are contemplating spending the oil funds, using the National Poverty Reduction Strategy (NPRS) as a guide. The ministries of Travaux Publics, Éducation Nationale, Santé Publique and of Aménagement du Territoire, de l’Urbanisme et de l’Habitat all have a medium and long-term framework for action. The ministries of Agriculture et de l’Élevage and of Enseignement Supérieur, Formation Professionnelle et Recherche are finalizing the process. The Ministère de l’Environnement et de l’Eau has not yet prepared a framework.
64. - Quality of oil resource allocation: The expenditure plans of several of the priority ministries have been reduced on account of the Ministère des Travaux Publics et des Transports. The proposals that the various ministries submitted to the CCSRP were generally in keeping with the objectives of the fight against poverty, with the exception of the proposal from the Ministère de l’Élevage, whose planned expenditures were heavily focused on equipment while there is a great need to invest in improving knowledge of the condition of the livestock. By the end of its visit, the IAG had not yet obtained details of the oil resources expenditure plans from the Ministère de l’Agriculture or the Ministère de l’Environnement et de l’Eau.
65. - Controlling expenditures: The execution of government spending could only be monitored at their initial stages since the oil revenues were not available at the time of the visit. The Ministère des Travaux Publics et des Transports is the most advanced in the process with
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two contracts awarded and approved by the Direction Générale des Marchés Publics (Government Procurements Directorate, or DGMP) and the CCSRP. Now, the ministry is waiting for the arrival of the oil revenues in order to seek a funding commitment from the Ministère de l’Économie et des Finances. The other Ministries are familiarizing themselves with the CCSRP procedures. The move to put Administrative and Financial Directors (DAF) in place at the priority ministries was a welcome initiative; however, the lack of human resources to back these DAF was pointed out to the Group.
66. - Absorption potential: This reflects the needs of the sectors that are eligible to receive the oil funds. In general, the needs of the education sector are considerable, with more than 60% of classrooms requiring improvements in order to be brought up to standard, plus the additional classrooms needed to meet the millennium goals. The need is also great in the health, agriculture and livestock sectors in comparison with transportation infrastructures.
67. - Absorption capacity: The ability to spend the money was an important criterion in the distribution of the oil income in the 2004 budget, with the lion’s share going to the Public Works sector. However, it now appears that the ministries of health, education, agriculture and urbanism also have a presumed absorption capacity and are in a position to use a substantial amount of money.
68. - Special case: The Ministère chargé de l’Enseignement Supérieur, de la Recherche Scientifique et de la Formation Professionnelle is the most dependent on the oil revenues due to the creation of new schools for advanced technical programs and for general academic instruction. In addition, with regard to public institutions that have legal status and financial autonomy, there is a legitimate interest in having the CCSRP ease the approval process for their applications for subsidies and grants, which would instead be verified after the fact.
69. Due to the mounting insecurity in the country, the Ministère de la Justice, a crucial ministry that has not been classified as a priority, should receive a portion of the 15% of direct oil resources that is not allocated to priority ministries.
70. The Estates-General on Justice, which was convened after being thoroughly prepped to suggest permanent solutions, provided recommendations and resolutions that will be implemented by a Follow-up Committee established by decree in December 2003 and up and running since January 2004. This committee has already drafted a plan of action along with a timetable and a budget as a follow up to the Estates-General recommendations. This remarkable progress, however, is hindered by a lack of funds to implement the actions proposed by the committee. Generally speaking, the entire Ministère de la Justice is lacking financial, material and human resources, especially since the Ministry’s 2004 budget, which was smaller than the 2003 budget, has been poorly implemented to date.
71. The fresh outbreak of insecurity caused by roadside bandits, especially in the South, does not seem to have been assuaged at all since 2003.
72. The Ministères de l’Agriculture et de l’Élevage are central to development issues. Investments in each of the priority sectors will contribute to the development of Chad. The IAG again stresses the vital importance of the agricultural and livestock sectors, where investments can quickly translate into an improved well-being for the majority of the population. Investing in research, training and mentoring services, facilitating access to fertilizers and seeds, opening up the rural areas to the outside world in order to facilitate transportation, minimizing areas of
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conflict between farmers and breeders, taking an inventory of livestock in order to better support the sector – all of these actions would lead to rapid improvement of the population’s fate.
VII.7 The IAG recommends that:
73. - the priority Ministries in question finalize the drafting of a medium and long-term framework for action;
74. - the priority Ministries implement the necessary measures to familiarize all their departments with the CCSRP procedures so as to make progress in preparing projects to be financed with the oil revenues, with the goal of being ready to submit requests for funding commitments to the Ministère des Finances as soon as the oil funds are available;
75. - the Ministère de la Fonction Publique recruit and train executing agents to provide technical assistance to the priority ministries in the area of government procurement. The Government should first negotiate special quotas with the IMF in order to facilitate this recruitment;
76. - the Government try to remedy the causes of insecurity, especially in the South, and provide funds in the 2005 budget for the committee following up on the recommendations and resolutions of the Estates-General on Justice so as to ensure continuity of the process until the action plan is implemented;
77. - the importance of developing agriculture and livestock production as an economic base and a source of well-being for the majority of the population be explicitly recognized in the allocation of the oil revenues;
78. - the Government ensure that the allocation of the oil revenues to the priority sectors corresponds as closely as possible to the objectives of the National Poverty Reduction Strategy and to a coherent assessment of the needs and absorption capacities.
79. After taking longer than expected to finalize its Procedures Manual, the Collège de Contrôle et de Surveillance des Ressources Pétrolières (Oil Resources Control and Monitoring Group, or CCSRP) recently introduced the Manual through a seminar held for the various government agencies involved. The feedback from this seminar still needs to be integrated into a final version that will be distributed. Distribution of the manual is especially important as the priority ministries must thoroughly understand the procedures to follow in using oil revenues and must comply with a standardized procedure.
80. Transfer expenditures, which some of the priority ministries such as the Ministère de l’Éducation Nationale or the Ministère de l’Enseignement Supérieur, will want to include in their use of the oil revenues, as seen above, will require careful planning in order to identify an approach that adapts the CCSRP’s level of monitoring, since the procedures for such expenditures are not all compatible yet.
81. The CCSRP members will be reappointed on a regular basis (every three years). The representatives of civil society are stable for the time being, but some instability was noted among the State representatives from the Treasury and the BEAC.
82. The CCSRP has a number of staff to carry out the various tasks under its responsibility. However, the distribution of staff, especially the small number of agents in charge of
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procurement, fuels concern that the oversight group will have difficulty processing files promptly within the prescribed 5-day time limit when the priority ministries begin submitting funding requests in massive numbers.
83. Over the past few months, the CCSRP has focused on monitoring the use of the remainder of the oil bonus and has produced a report in this respect. This monitoring effort led the CCSRP to make several observations (projects executed without a disbursement agreement, tendency to carve up procurement contracts, lack of project follow-up by the ministries), which largely echo the observations made by the Inspection Générale des Finances in 2003 during its mission to monitor implementation of the 2002 budget.
VII.8 The IAG recommends that:
84. - the CCSRP take steps to finalize its Procedures Manual as quickly as possible and to ensure wide distribution to the relevant government agencies;
85. - the CCSRP examine the need to hire additional staff members in the procurement division so as to be able to handle the anticipated influx of files from the priority Ministries;
86. - the CCSRP prepare an information campaign to advertise its activities throughout the country so as to facilitate its work with its partners and its work in the field;
87. - the Government learn from the valuable lessons in the CCSRP report on the remainder of the bonus and establish a plan of corrective actions to avoid making the same mistakes with the oil revenues.
88. Direction Générale des Marchés Publics (Government Procurements Directorate, or DGMP): the drafting of the 15 implementing decrees for the new Procurement Code approved in December 2003 is in the final stages. Once the implementing decrees are signed, the new Code will be applied by setting up adapted structures at the ministerial level and in the regions, identifying and training sufficient human resources and mobilizing the necessary material resources.
89. The new Procurement Code is thus expected to be fully implemented by 2005, provided that considerable efforts are made in terms of following up on the procedures to execute the implementing decrees.
VII.9 The IAG recommends that:
90. - the Government add the cost of training and other expenditures required to implement the new Procurement Code, which was missing in the initial 2004 budget, to the 2004 interim budget;
91. - a plan for putting into place the structures and human resources required for the new Procurement Code to function properly be drawn up and implemented so that nothing will prevent the code from taking effect in 2005.
2.3 Capacity-Building Needs in the Petroleum Era
92. Along with Project Doba, Chad has implemented two capacity-building projects, with World Bank backing, in order to strengthen its capacity to manage both the petroleum sector and its
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economy in the petroleum era. The two projects are the Petroleum Sector Management Capacity-Building Project (PSMCBP) and the Management of the Petroleum Economy Project (GEEP)
93. A formal review in April 2004 of the portfolio of World Bank funded projects in Chad made it possible to assess the level and quality of execution of the GEEP and the PSMCBP and to identify any difficulties encountered and any objectives not yet met.
94. The objective of the GEEP is to help build Chad’s capacity to implement a strategy for managing the oil revenues that will enable the country to use these resources efficiently and consequently, to pursue its goal of reducing poverty. The results obtained in connection with the GEEP are important steps towards managing the economy in the petroleum era. These results include the establishment of the CCSRP and the Chambre des comptes, the implementation of an integrated circuit for government spending, installing the DAF in the priority sectors and finalizing the new Procurement Code. The project review showed that this progress must be consolidated and pursued.
95. However, the review also revealed that the provisions designed to facilitate efficient management of all revenues, including the oil revenues, are still not in place, which the IAG also confirmed during its mission. Thus the implementation of the integrated circuit for government spending has been delayed and the training program for agents working with government finances is not up and running. In addition, the Chadian government has still not adopted a plan of action to correct the problems noted during the institutional and organizational audit of the nine priority ministries.
96. The PSMCBP also produced significant results, but two of the project’s components suffered from considerable delays: the training of managerial staff from the Comité Technique National de Suivi et de Contrôle (National Technical Committee for Monitoring and Control, or CTNSC) and the Ministère du Pétrole, and the building of social infrastructures in the oil-producing region. Currently the available funds from the IDA (International Development Association) loan for the PSMCBP are not sufficient to cover all the activities planned under this project. The expenditure planning was deficient from the start: some of the project aspects were underestimated (in particular the cost of technical experts and legal advisors), there were problems with administrative management and accounting at the CTNSC and ineligible expenses were found during the mid-term review. In terms of the quality of program execution, studies conducted by some of the consultants were more expensive than anticipated and moreover, were not entirely satisfactory. This is particularly true for the Regional Development Plan and Regional Environmental Assessment and for the Environmental Information Management System.
97. Overall, the two capacity-building projects strayed from some of the initial, essential objectives, including the training of Chadian administrators and technicians to manage the petroleum sector and economy.
98. The World Bank and Chad do recognize, nonetheless, that the objectives of the two projects are still pertinent, especially in the area of training. However, since the funds for these projects have been exhausted, additional funding will be required, currently a subject of discussion between Chad and the World Bank.
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99. During the mid-term review of the PSMCBP, the World Bank team considered the possibility of an additional $10 million in funds. Now, the WB is waiting to hear Chad’s position on the amount of additional funding proposed and the distribution of these funds.
100. A follow-up project to the GEEP appears to be necessary starting from the end of the year and is currently under consideration. This project would be designed to support the training sessions, to continue reforming the civil service and pursuing structural reforms, and to strengthen certain agencies such as customs. Preparation for this new project requires that certain prerequisites be met, including resolution of the management problems linked to the implementation of the GEEP.
101. Whatever follow-up is given to the GEEP and the PSMCBP will require high-level, close monitoring in the field by the World Bank.
VII.10 The IAG recommends that:
102. - the World Bank and the Government quickly agree on the terms of additional funding for the PSMCBP in order to continue the project activities. Absolute priority must be given to training managers at the CTNSC and the Ministère du Pétrole;
103. - the GEEP follow-up project be launched in such a way as to avoid any break in funding for the activities that are already underway, with priority given to training the Ministère des Finances and the spending ministries;
104. - the World Bank and the CTNSC learn from past experiences in the area of awarding contracts for studies and that both parties take the necessary measures to avoid repeating past mistakes.
3. EXPANDING THE PETROLEUM SECTOR: FROM MANAGING THE PROJECT TO MANAGING THE SECTOR
3.1 Project Doba
105. Project Doba involves the development of three oil fields: Bolobo, Komé and Miandoum, all located in the Doba basin. Production began at Miandoum in July 2003, followed by Komé in the first quarter of 2004. Construction work at Bolobo should be concluded in September 2004. Esso predicts that the targeted normal production flow of 250,000 barrels of crude per day will be reached during the second quarter of 2004.
106. The IAG followed up on environmental and social issues in the oil zone that were raised during its previous missions and dealt with new concerns that were brought to its attention.
3.1.1 Social and Environmental Monitoring of the Project
107. Esso’s environmental and social monitoring team (EMP team – Environmental Management Plan) is currently undergoing a complete transition between the construction team and the production team. This transition has created somewhat of a void, especially since some positions have not been permanently filled, such as the on-site biophysical EMP Coordinator (during the IAG visit, an interim coordinator was appointed). The EMP team has not yet been
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integrated with the production team and the requirements and the benefits of the EMP and the monitoring team have not been adequately explained to the production managers.
108. The CTNSC On-Site Supervision Team reports an improvement in relations with Esso: access to information is better and monthly meetings with written minutes are being formally held. However, the CTNSC described a lack of communication between the Project’s health facilities and the public health facilities. The CTNSC On-Site Supervision Team also reports that its monitoring activities slowed down in the first quarter of 2004, which it attributes to the departure of some of its staff and to the lingering questions surrounding the additional funding from the World Bank for the rest of the PSMCBP activities.
VII.11 The IAG recommends that:
109. - Esso add a skilled and complete EMP team with all the necessary authority to its production team and that the EMP team train the production managers with respect to their responsibilities in this area. In particular, biophysical follow-up capacities need to be strengthened and the socio-economic team, which serves as the liaison with the villagers throughout the project, needs to be given a prominent role and adequate resources;
110. - the CTNSC continue the training and professionalization of its monitoring team so that the team is able to perform its tasks with rigor and complete independence.
3.1.2 Environmental Issues
111. Waste management: Waste management procedures and structures are still being implemented. Currently, Esso is re-injecting waste oil into the pipeline in accordance with the EMP standards and pursuant to the agreement with the CTNSC. However, there has been some delay in getting the Komé 5 hazardous waste incinerator up and running. During the IAG visit, the system was being tested.
112. Dust control: EEPCI has continued to implement its Dust Control Plan in the Doba Oil Field Development Area (OFDA) since December 2003. However, Esso and the CTNSC still disagree over how many kilometers of road should be paved (Double Bitumen Surface Treatment). The two parties started discussions on the issue and, at the time of the IAG visit, they had initiated a series of joint, on-site inspections to identify which sections of the road are eligible for asphalting according to the pre-defined criteria.
113. Soil reclamation: The oil company launched its soil reclamation program at the OFDA borrow pits with some delay in April 2004. Some of the drilling platforms have been partially restored, as have some of the laterite sampling sites. However, the oil company is waiting for the construction work to be completed before restoring the borrow pit area to the local populations. Thus because of the delays in implementing the program, the land will not be restored to the people before the rain season.
114. Water management: To date, the results of the water management program that Esso set up in the OFDA have shown that the oil activities have not had any negative impact on the quantity or quality of the drinking water in the zone. This extremely comprehensive monitoring program deserves to be pursued and publicized in French. The results of the analyses conducted by the Institut Pasteur have not yet been published, which would be in Esso’s interest, and should be pursued by the CTNSC.
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VII.12 The IAG recommends that:
115. Esso resolve the pending environmental issues:
116. - getting the hazardous waste incinerator up and running at Komé 5;
117. - managing hazardous and non-hazardous waste treatment in a fully transparent manner vis-à-vis the CTNSC and providing copies of all the waste disposal manifests as stipulated in the EMP;
118. - obtaining an agreement with the CTNSC, with support from Public Works experts, that is based on criteria acceptable to both parties, and the establishment of definitive, corrective measures to control dust – a sensitive issue that has been the subject of claims for several years;
119. - pushing forward procedures required to implement the soil reclamation program, with greater awareness of the rural calendar so as to gradually restore the land to the local populations according to their priority needs.
3.1.3 Socio-Economic Issues
120. Compensation: Individual compensation has been completed, but the IAG learned of a few residual, missed cases that Esso has promised to settle. During its next visit, the Group will ensure that adequate follow-up has been given to these cases.
121. Implementation of community compensation programs by the German cooperation agency, GTZ, in collaboration with non-governmental organizations in Chad, continues to occur under good conditions. All the recipient villages have now selected an infrastructure project. Construction of these projects should be complete by September 2004. The IAG was able to inspect the quality of some of the infrastructures that have been built, including the classroom buildings. Classrooms were the number one project selected by the recipient populations, with water supply infrastructures second.
122. GTZ and its partners are still supervising the management committees for the infrastructures built.
123. Social closure: Esso plans to begin social closure activities in the OFDA once construction at the Bolobo field is complete in September 2004. The process to be put into place will be discussed with the CTNSC.
124. The Chadian Non-Governmental Organizations (NGOs) monitoring Project Doba have said on several occasions that they have not been given information about the timeframe for social closure. Some of these organizations would like to be involved in the process.
125. Taylors International dispute: In March 2004, the IAG learned of the fallout caused when one of Esso’s sub-contractors, Taylors International, suddenly pulled out of Chad without paying several of its Chadian suppliers and creditors. The IAG approached Esso to encourage a quick settlement for the benefit of local entrepreneurs. Without attempting to assign legal liability, the IAG wants to see Esso quickly find a fair and definitive solution. However, this incident highlights the need for improvements to the clauses in the contracts between Esso and its
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contractors and sub-contractors, so that the local Chadian entrepreneurs are protected and such incidents do not occur again.
126. Emergency measures: Given the lack of funding to complete all of the PSMCBP activities, Chad decided, with World Bank agreement, to exclude several of the emergency measures from the IDA loan for this project.
127. In addition to the emergency measures already in place, only activities related to improving the Doba health district and building the Komé Atan community center will now be funded under the IDA loan. Chad has handed over responsibility for implementing the emergency measures excluded from the IDA loan to the relevant ministries. In particular, the “clean city” investments will need to be successfully implemented and their long-term management ensured.
VII.13 The IAG recommends that:
128. - GTZ make an inventory of the technical and human capacities in the zone where the community compensation infrastructures are being constructed and provide this information to the Government to develop a database of people who can be used again for future development projects;
129. - Esso announce its planned time frame for launching the social closure process and, similar to the approach tried in Cameroon, involve Chadian NGOs in the process;
130. - further to the disputes created by Taylors International, the Consortium review the nature of its contracts with contractors and sub-contractors so as to take additional precautions to avoid these types of situations that weaken the local economy;
131. - further to the decision to give the sector-based ministries responsibility for following up on some of the land use projects planned as part of the “emergency measures,” the CTNSC should exert the necessary pressure so that at a minimum, the projects that have been promised and announced to the population will be completed, especially those dealing with improvements to health care in the towns, and that these projects be included in the 2005 budgets for these ministries.
3.1.4 Overlapping Issues: Communication and Assessment
132. Communication: Although communication between Esso and the CTNSC is continually improving according to both parties, relations between Esso and the local authorities have not made any significant progress.
133. The studies on the quality of water and drilling mud need to be published and should be published in French to be of any use to the authorities and civil society in the region.
134. Esso should give more publicity to the support that it is providing for higher education (scholarship programs) and think about developing permanent relations with institutions of higher education in Chad, especially those that are supplying candidates for its technical and professional jobs.
135. Our interlocutors noted the absence of information days or traveling information sessions since the project began last October. The need for ongoing public outreach in the region is still great and should be met.
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136. Finally, the NGOs that are interested in maintaining dialogue and in developing a more formal framework for national dialogue should speak out: their response to past proposals is still awaited.
137. Assessment: The Coordination Nationale launched a study to assess the construction phase of the Project. This major initiative should provide an opportunity to analyze strengths and weaknesses on the technical, economic, environmental and social levels including opportunities seized and missed, effects that were corrected and those that remain, technical and human capacities now available thanks to the Project, training needs and the ability to negotiate with the Government, civil society and entrepreneurs. This type of assessment could also serve as a tool for planning, forecasting and communicating. Its credibility and utility will be determined by the quality of the analysis and the level of participation by all interested parties, including the Consortium, authorities and civil society, from the villages to the Government.4
VII.14 The IAG recommends that:
138. - Esso develop continuous communication with the authorities and the villagers in the zone as part of the responsibility inherent in its presence in the region;
139. - Esso also develop a medium and long-term program for supporting research and institutes of higher education, especially those from which it recruits students;
140. - the CTNSC reactivate a factual and objective outreach program for the people in the region, which would also serve as a means to hear grievances and other information from these populations;
141. - the NGOs continue to promote a structured and permanent framework for dialogue on the Project and actively contribute to it;
142. - further to its timely initiative to undertake an assessment of the construction phase, the Coordination Nationale ensure that the assessment is rigorously analyzed and that all the interested parties participate, two conditions for the credibility and utility of this otherwise promising work.
3.2 New Fields Developed by Esso
143. Esso is preparing to commission five new oil fields (Moundouli, Nya, Mbikou, Baikoro and Beguere), called satellite fields, in the Doba zone. For Moundouli and Nya, the drilling and pipeline liaison work is expected to begin in September 2004. Although these fields are not part of Project Doba, the loan agreement between the World Bank and Chad stipulates that these fields must be developed in accordance with environmental and social standards that comply with the principles of the Doba Project Environmental Management Plan in order for oil from these fields to be transported through the Komé-Kribi pipeline.
4 The recent Internet publication and regular updates of the oil revenues paid to Chad and the allocation of this money is a significant sign of transparency that should be encouraged.
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144. The oil revenues from these new fields are not subject to law no. 001/PR/99 on the management of oil revenues, which only applies to the three fields at Bolobo, Komé and Miandoum.
145. Esso announced that it would publish the studies that formed the basis of the Environmental Impact Assessment and the Environmental Management Plan for the Moundouli and Nya fields sometime in June 2004. The process for public consultation and approval of these studies by the Government and the World Bank has not yet been laid out, nor has it been made public by the authorities, which raises concern among the NGOs and the population as to the oil company’s willingness to comply with the necessary requirements.
146. These two new fields will be the first oil developments outside Project Doba and will likely be followed by numerous others in the years to come. Development of these fields brings new challenges, especially in Moundouli: wider pipeline right-of-way, greater population density than in Doba and proximity to the Logone river. The Government now needs to demonstrate its will and its ability to regulate and monitor these projects. An active CTNSC presence and the development of capacities to monitor and distinguish between the various sources of oil that are subject to different revenue allocation systems are two of the minimum obligations the Government must meet.
VII.15 The IAG recommends that:
147. - the Government immediately announce what time frame it is proposing for the assessment and approval of the Moundouli and Nya development projects and that this schedule include enough time to allow groups and interested persons to come forward;
148. - the Government take all necessary measures to master the accounting process for the products of the various oil fields at all times and to ensure an effective CTNSC presence with diligent monitoring of the oil activities;
149. - the World Bank explain how it intends to enforce the clause in the Doba Project loan agreement requiring that all oil transported through the Komé-Kribi pipeline be produced in accordance with the “principles of the EMP for the Doba Project.”
3.3 Future Exploration and Development: Legal and Regulatory Framework
150. On May 10, 2004, the Consortium signed a new agreement with the Government stipulating the rights and obligations of both parties for the years to come and opening the door to new exploration by Esso and its partners, ChevronTexaco and Petronas.
151. Since 2002, the Canadian company, EnCana, has been conducting exploration work under its research permit, or H permit. Some of these initiatives may possibly affect areas that are highly sensitive on the environmental and cultural levels, such as the area around Lake Chad. This exploration work is being conducted without any supervision other than the agreement with the Ministère du Pétrole, without any applicable environmental or social regulations and with only a sporadic presence by the CTNSC, which acknowledges that it has jurisdiction but lacks the resources to exert supervision. In order to retain the possibility of exporting its oil through the Komé-Kribi pipeline, EnCana has decided to comply with the principles of the Doba Project EMP. In reality, the company is the only judge of its compliance.
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152. The expansion of Esso and EnCana’s activities as a result of the launching of the pipeline reveals the potential for accelerated exploration in several basins in Chad over a period of several years. This could either be advantageous or harmful for Chad and its people depending on whether or not there is legal and regulatory oversight and whether its application is rigorous and effective.
153. For the time being, however, the framework and the oversight mechanisms for the few regulations that do exist are all but absent. The CTNSC does not have the human and material resources required to exercise its jurisdiction, which normally covers the entire country. Its ability to exercise authority is still ambiguous due to a lack of agreement with the Ministère du Pétrole, the main point of contact for the oil companies. A revision of the 1962 Petroleum Code is currently underway. The preliminary draft was deemed to be “non-incentive” by government advisors. The environmental law has not been followed by the implementing orders required to execute it, for lack of appropriate expertise within the Ministère de l’Environnement et de l’Eau to draft them. In addition, the National Oil Spill Intervention Plan (PNIDAH) has still not been finalized and approved. The absence of an effective government presence also deprives the affected populations of any recourse.
VII.16 Under these circumstances, the IAG recommends that:
154. for the time being, the Government:
155. - submit its draft agreement with the Consortium to the National Assembly without delay so as bring the legal framework up to date, make the document public and collect the share of the bonus to which it will then be entitled;5
156. - enact an inter-ministerial decree between the Ministère du Pétrole and the Ministère de l’Environnement confirming the latter’s jurisdiction over all exploration work outside the scope of Project Doba, and in particular, that of EnCana;
157. - quickly conclude the steps required to give the National Oil Spill Intervention Plan (PNIDAH) force of law.
158. more long-ranging procedures be taken starting now:
159. - the drafting and promulgation of a Petroleum Code that adheres to modern international standards and provides an effective and standardized framework for oil activities in Chad;
160. - the drafting and promulgation of the implementing decrees for Law no. 14, the Environmental Law;
161. - the standardization of Environmental Impact Studies and Environmental Management Plans, at both the exploration and the development stages, so that the procedures, rules and requirements can be publicized in advance.
5 Since the National Assembly was in recess, the Government ratified the Research Agreement through an executive order on May 10 and received the second part of the signing bonus on June 11. The Government now needs to make the agreement public and use the bonus in a strategic manner in order to renew ties with the international institutions.
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3.4 Strengthening and Sustaining the Support Institutions, Structures and Tools
162. The prospect of expanded growth of oil activities over time and over a larger geographic area calls for strengthening and sustaining the support and development institutions and structures, and adopting a forward-looking approach to future needs.
Government Agencies: CN, CTNSC, Local Authorities, Regional Delegations
163. The Government has already begun to think about the future of the Coordination Nationale and the CTNSC, two bodies created specifically for Project Doba and whose future will be determined in the context of ongoing oil activity. Some countries have opted to have a separate agency that governs oil activities. Others have given this responsibility to the Ministère du Pétrole. The various different models should be studied in order to find the one that works best for Chad.
164. The CTNSC already has a role to play beyond Project Doba. If it is to continue its work, however, it will need to have the necessary human and material resources, as well as a clear, and clearly stated authority.
165. The role of local authorities will be modified by the possible elections of local communities and the establishment of the system of communities, departments and regions. As for the Regional Delegations, which seem to be perpetually left by the wayside, the Government should clarify the purpose for which they were created and either give them the resources to carry out these functions, or re-evaluate the need for these currently inoperative structures.
The RDP: An Integrated Development Tool
166. The second draft report that the consultant on the Regional Development Plan (RDP) submitted to the CTNSC is far from having unanimous support. Alternatives have been proposed in order to successfully complete the work.
167. With the prospect of continued oil development over several years, the RDP takes on added importance as a proactive instrument that attempts to define a spatial and sector-based vision of the region, its population and its economy.
168. The IAG believes that the work done thus far should not be rejected entirely, but that the remainder of the work needs to be focused on the region and that the people of the region should lead and drive the process and provide information. The development of the Plan has suffered many delays. However, rather than rush through the process, the goal should be to create a working tool that will allow the people of the region to best define their future – something which has not been done to date.
169. Thus the RDP could become a guide, an instrument for consultation, to identify the priorities and to guide the programs and activities of government and other actors.
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The FACIL
170. The activities of the Fonds d’Action Concertées d’Initiatives Locales (Local Initiatives Development Fund, or FACIL) are proceeding at a good pace and in a satisfactory manner, despite the delays in repaying loans by two financial intermediaries.
171. In terms of cash flow, the Second Generation Special Account that the World Bank and the Government agreed upon during the mid-term review of the PSMCBP is still not in place. The FACIL first needs to have an accounting system with World Bank approved software. In addition, the World Bank requested that the administrative and financial manual for the fund be modified. The Fund has begun these procedures.
172. The FACIL must now take the lead in thinking about expanding the program to the national level, as was the idea when the pilot project was first established.
Economic Operators and Market Garden Farmers
173. During the meeting the IAG held with economic operators and the Moundou Chamber of Commerce, protest was raised over the lack of economic impact in the region from the Petroleum Project and the chronic lack of information concerning contracts to be awarded in the context of the Project. Esso has nevertheless promised to publish information in advance about its needs in terms of goods and services and to establish points of contact for the economic operators with each of its main contractors.
174. In addition, one initiative by COEL, the Logone Organization of Economic Operators, deserves to be highlighted and supported. This initiative aims to develop a means of receiving pertinent information and the ability to respond to this information. The initiative should be supported by all the parties, especially the Consortium.
175. Similarly, market gardening initiatives under the Projet d’Encadrement des Producteurs de Fruits et Légumes (Fruit and Vegetable Producers Supervision Project, or PEPFL), initiatives by ORT (Organisation for Rehabilitation and Training – International) in the context of compensation by Esso, and Africare initiatives in the context of International Finance Corporation (IFC) projects, have already been tried and tested. The producers in Moundou, who up to this point were supplying the Project with fruits and vegetables, are now facing a drop in demand due to the slowdown in construction activities, which resulted in the demobilization of a large number of workers. Consequently, the garden farmers are trying to adjust their production and to develop new markets. Since both Esso and the IFC have seriously invested in these initiatives, they would like to contribute to making these projects as sustainable as possible, in particular by ensuring the continuity of technical assistance and supervision.
The NGOs
176. The capacity-building programs are also intended for civil society, especially the NGOs involved in thinking about the future of the oil region. These NGOs are contributing more actively to the discussions and the development projects. Continuation of the RDP hinges on the ties they have with the population and their communication skills. The new petroleum activities will continue to require their vigilance and their participation. It is important that these NGOs have access to the various training and consultation mechanisms.
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The ECMG
177. The External Compliance Monitoring Group (ECMG) is, by definition, not a local institution. However, the ECMG has played a significant role in monitoring the Project to date. Its mandate is tied to the loan terms set by the Project backers. The possibility of extending its mandate to the new fields and providing assistance to Chadian institutions such as the CTNSC has been raised, but needs to be further clarified.
Training
178. It is clear that ongoing training is a necessity for all aspects of the regional development activities. It is important to ensure support for and continuity of the programs currently available. In this respect, Esso’s initiative to establish a sub-regional center in Komé to train its employees from Chad and the African sub-region is notable.
Medium and Long-Term Cohabitation
179. The most serious challenge facing this large, multi-national company is that of being a “good neighbor” – the challenge of medium and long-term cohabitation with the people of a region whose contrasts will be extremely striking for a long time to come.
180. In addition to the measures that are often recommended for good-neighborliness with local and regional authorities, this challenge also requires a more long-term vision of the region and the spatial impact of oil development on the villages, roads and fields. How will the region evolve along with the oil activities? What are the short and medium-term security implications of this contrast between wealth and poverty? The RDP should be the prime avenue for this type of discussion, but it also requires the participation of all the players – the Consortium, the authorities, civil society and the population.
181. At the national level, Esso has already provided support for higher education (training and technical equipment donations) and is working to establish a scholarship program. However, the institutions of higher education would like to develop permanent relations, including assistance for research and occupational training.
Based on the foregoing, the IAG recommends that:
182. VII.17 discussion about the future of the two coordinating institutions, the CN and the CTNSC, continue in order to identify Chad-specific solutions that will ensure a strong institutional framework for an industry that will play an increasingly greater role in the economy and the social fabric of Chad;
183. VII.18 the authorities, civil society and the people “repatriate” and take ownership of the efforts to design the RDP as quickly as possible and ensure development of the RDP in the regional context;
184. VII.19 the Government ensure the growth and sustainability of the development institutions such as FACIL and the continuity of training programs, as well as the initiatives of the fruit and vegetable producers and the economic operators who contribute to development in the region. In this respect, the ministries in charge of agriculture and commerce should be actively involved in monitoring these initiatives;
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185. VII.20 the Consortium, along with the national and local authorities, actively work to establish neighborly relations and to develop a forward-looking view of the future of this region; that the Consortium also develop a medium and long-term program to support research and institutions of higher education, especially those from which it recruits students.
CONCLUSION
186. This mission provided an opportunity to take stock of the difficulties that Chad is currently experiencing on several levels – financial, economical and political, and which are preventing the first petroleum era budget from being executed under optimal conditions. There are several urgent measures that the Government and its partners need to take with respect to managing the oil economy.
187. The country now needs to look ahead and ensure that the policies and practices governing the oil companies which will play an increasingly active role in the country are homogeneous. Oversight measures for this sector are essential to protecting the environment and the population.
188. It is clear that there are still gaps caused by the two-tiered progress of this project: the government agencies have not yet taken ownership of the oil revenue management model, the priority ministries are only partially ready to manage the revenues that they will soon receive, the CCSRP, as a new institution, is not yet up and running and must prove that it has the necessary additional human resources to quickly process the large volume of expected cases, and the decrees for making the policies of the DGMP operational have not yet been promulgated.
189. Chad must,
190. - improve its ability to collect ordinary tax revenues and ensure ongoing improvement of its collection procedures;
191. - improve the conditions for executing its general budget by using the second half of the bonus it received after ratifying the new research agreement signed with the Consortium to pay off its debts and to thereby renew dialogue with the international and bilateral organizations whose aid it still needs;
192. - establish the necessary conditions to repatriate and use its oil revenues by finalizing the agreements with the BEAC and the commercial banks, by remedying the lack of financial and managerial training for its institutions and by seeking, if need be, immediate, high-level outside support during this period in order to resolve the related technical problems;
193. - accelerate environmental and petroleum-related training, finalize the legislative and regulatory framework for the sector and decide on the future of the management institutions so as to provide supervision and good, long-term management of a growing petroleum sector.
194. To this end, the open and benevolent support of its partners is essential, given the difficulties that, for the most part, come along with the numerous tasks Chad has undertaken to manage its revenues in a transparent fashion.
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195. The World Bank, which is committed to helping develop and build Chad’s management capacities, was very late in launching the two capacity-building projects, whereas the oil project proceeded much more quickly than expected.
196. The WB must share responsibility with the Government for having allowed much of the training funds to be used for often unproductive studies and construction projects, with serious consequences in terms of Chad’s lack of training and preparedness.
197. The WB must now focus all its energy on supporting massive training and appropriate technical assistance at various stages and do everything possible to help Chad succeed in this venture.
198. To accomplish this, it will not be sufficient to return to the “normal” mode of organization, as planned. High-caliber staff must be assigned exclusively to the task of making progress with the training projects and providing Chad with advice that fits its needs.
199. The Consortium must take into account the role that its EMP team played in the success of the construction phase and place as much emphasis on this team in the production phase. The void created during the transition phase must not be prolonged. Production managers must be quickly trained to treat the EMP specialists as colleagues whose role is essential and positive.
200. The Consortium must also ensure compliance with the principles of the EMP and publicize its actions for all exploration and development activities in a transparent manner.
201. Failing this, the benefits gained during the construction phase – such as they are and fragile though they may be – will rapidly dissipate.
202. As it enters the petroleum era, Chad is experiencing three great paradoxes that absolutely must be eliminated:
203. - Whereas there is general consensus on the priorities assigned to the fight against poverty (NPRS) and to good governance, Chad is witnessing a period of political controversy that is undermining the consensus that has been built over the last decade;
204. - Whereas the economy has just hit a growth peak due to the oil activities, public finances are in a slump that must be rapidly overcome;
205. - Finally, whereas the exports of crude oil reach their planned threshold of 225,000 barrels per day, Chad is still importing oil at high prices and is experiencing an energy crisis in the capital.
206. The ability to meet these formidable challenges in the medium term will undoubtedly be a performance test for the country.
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CAMEROON
INTRODUCTION
207. The Chad-Cameroon Petroleum Development and Pipeline Project in Cameroon is now entirely in the production stage. The pipeline, pumping and pressure reduction stations, floating storage and offloading facility (FSO) off the coast of Kribi and related facilities are fully operating. As of the end of May 2004, more than 30 ships had already docked at the FSO to be loaded with Chadian crude for export to the international market.
208. The transition from the construction to the production phase was accompanied by a change of teams at COTCO (Cameroon Oil Transportation Company) and its contractors and sub- contractors. This was the case for COTCO’s EMP team (Environmental Management Plan), which was reorganized in order to continue environmental and social monitoring of the Project based on the new activities and characteristics of the operational phase.
209. It was in this context, and shortly before the June 12, 2004 inauguration ceremonies for the Kribi terminal organized by the Cameroonian government, that the International Advisory Group conducted its seventh statutory visit to Cameroon from June 2-5, 2004.
210. The Group stayed in Yaoundé, where it met with members of the Government and representatives of the central administration, the World Bank, the Foundation for Environment and Development in Cameroon (FEDEC), non-governmental organizations and COTCO. The Group also visited two villages in the Yaoundé region, Ngoya I and Mvomndoumba, accompanied by representatives of NGOs and COTCO, in order to evaluate the social closure process. Due to unforeseen schedule changes for the Group and its interlocutors, the Group was unable to hold a debriefing session with all parties at the end of the visit.
211. The mission itinerary and chronology of the meetings can be found in Appendix 1.
212. During this visit, the IAG focused on the framework for environmental regulation, social and environmental monitoring of the Project, management of the Project’s ecological compensation programs through the Campo-Ma’an and Mbam Djerem national parks and on the assistance program for vulnerable, indigenous populations.
213. The IAG noted that its interlocutors have not always given the necessary attention to the recommendations from its previous statutory mission to Cameroon in December 2003 and urges them to be vigilant in this respect.
214. This report presents the observations, analyses, conclusions and recommendations of the mission.
4. REGULATORY FRAMEWORK AND REFERENCE INSTRUMENTS: STILL LACKING
215. As the Project entered the operations phase, one of the most serious risks was that of environmental damage to land and sea.
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216. Now, almost a year after the pipeline was activated, there are still endemic delays in establishing a regulatory framework for the sector and reference instruments for the Project that will provide environmental protections. These legal and technical voids increase the risk of impact on the environment and hence on the population, not only for the pipeline Project but for other major projects to come, such as the Lom-Pangar dam project, should the Government go ahead.
4.1 Sector
4.1.1 Implementing Decrees for the Framework Law on the Environment
217. The implementing decrees for the 1996 Framework Law on the Environment should be drafted as part of the Cameroon Petroleum Environment Capacity Enhancement Program (CAPECE) established in 2000. Draft environmental regulations in the petroleum sector were prepared by a consultant and given to the Pipeline Steering and Monitoring Committee (CPSP), which was reviewing them during the IAG visit. Several more steps still need to be taken before they will be ready and can make the law operational.
4.1.2 National Oil Spill Response Plan
218. The National Oil Spill Response Plan (PNLDAH), which was drafted as part of the CAPECE, could not be finalized before COTCO’s area specific plans were finished. It had been hoped that the PNLDAH could be adopted before the end of 2003.
219. After the CPSP’s comments were integrated into the draft PNLDAH, the plan was presented to government agencies and bodies dealing with the petroleum sector and to certain international institutions and NGOs during the month of April.
220. The CPSP expects to receive the final plan by the end of June. Then, in order for the plan to take effect, the CPSP will need to organize the next steps, which are to have the plan adopted by the National Assembly in the appropriate legal form and to disseminate the plan to the population. However, this legal form is yet to be identified and the CPSP does not have a time frame for planning this step. Thus, nearly a year after First Oil, Cameroon is still without a National Oil Spill Response Plan.
VII.21 The IAG recommends that:
221. - the Cameroonian government enact these two regulatory instruments by the end of the year;
222. - and that the CPSP prepare a timetable for planning the next steps for implementing the PNLDAH in time for it to be presented to the National Assembly when the October-December 2004 session resumes.
4.2 Project
4.2.1 Memorandum of Understanding between the MINEF and FEDEC
223. The Ministry of Environment and Forests (MINEF) and FEDEC have been working for several months on a memorandum of understanding that will specify the framework for intervention by the Foundation and the Executing Agencies (EA) recruited by FEDEC to manage the Campo-
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Ma’an and Mbam-Djerem national parks, which have been designated as ecological compensation under the pipeline project.
224. FEDEC submitted a draft memorandum of understanding (MOU) to the MINEF during the second half of 2003 but the MOU has not had any follow-up since, despite being well received within the Ministry.
225. The MINEF attributes this delay to technical problems as various Ministry departments were involved in preparing the Forest Environment Sector-Based Program (PSFE). This program represents a major reform and will provide a framework for all future projects in protected areas and national parks and forests over the next decade.
VII.22 The IAG recommends that:
226. The MINEF finalize the draft memorandum of understanding with FEDEC as soon as possible. If necessary, the memorandum could be amended in accordance with the PSFE.
4.2.2 Park Management Plans for Campo-Ma’an and Mbam-Djerem
227. Preparation and finalization of the park management plans for the Campo-Ma’an and Mbam Djerem national parks are among the priorities set by the technical follow-up committees representing the MINEF, the EAs and FEDEC for World Wildlife Fund (WWF) for Campo-Ma’an and Wildlife Conservation Society (WCS) for Mbam-Djerem.
228. The drafting of these park management plans, which are crucial to the integrated management of the two parks, has not made much progress since December 2003, despite the importance of this project. The new time frame that MINEF announced for Campo-Ma’an calls for the plan to be finalized before the end of 2004. For Mbam-Djerem, the drafting of the park management plan and the related public consultation process will not even begin until January 2005. Under these conditions, the plan is not expected to be finalized before the end of 2005.
229. This newly-announced calendar for instruments that should have already been adopted shows a clear lack of diligence that must be rectified.
VII.23 The IAG recommends that:
230. The MINEF ensure that the park management plans for Campo-Ma’an and Mbam-Djerem are drafted and finalized within the newly-announced time frame, and before if possible.
5. MEASURES TO PROTECT THE POPULATION: STILL IN PROGRESS
231. COTCO and the government are continuing to implement measures to correct or mitigate the negative impact of the pipeline project on the populations adjacent to the facilities.
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5.1 General Issues
5.1.1 Social Closure
232. The second phase of social closure, designed to verify that COTCO is fulfilling its promises to the communities adjacent to the pipeline, was launched in November 2003 and concluded at the end of May 2004.
233. COTCO’s socio-economic teams held meetings in the 291 affected villages to take stock of the situation and to sign joint statements with the village chiefs declaring that the compensation process is complete. A local NGO, RENSET, participated in all the meetings as an observer and co-signed the statements.
234. By May 28, 2004, 43 villages had refused to sign COTCO’s statement, in most cases because the regional compensation was not complete. A few villages raised other issues, such as inadequate repairs to the bridges used by the Project and the premature termination of agreements to provide supplies for workers.
235. COTCO is preparing a report explaining how each complaint was processed, which all the villages will receive. The company will then revisit the villages that did not sign or expressed reservations in order to address the situation.
VII.24 The IAG recommends that:
236. COTCO continue to monitor the process closely to ensure a satisfactory conclusion and resolve the cases that are still in dispute. Thereafter, the CPSP should conduct an overall assessment of the process.
5.1.2 Health Services for the Populations Adjacent to the Pipeline
237. COTCO still runs an anti-HIV/AIDS and anti-malaria program for its employees and maintains ongoing communication with the points of contact at the Ministry of Health.
238. The IAG was assured that the Government’s health studies and campaigns under the CAPECE program, some of which were started late, are making progress. However, the process remains slow given what is at stake.
239. The results of a national sero-epidemiological study should be published by the end of 2004 and the preliminary results should be available in August. The sero-epidemiological and behavioral study on at-risk populations, including truck drivers and prostitutes, was launched at the beginning of April and the results should be ready by July 2004. The task given to local NGOs of increasing awareness about sexually-transmitted diseases (STD) and AIDS along the pipeline route had not yet begun as of the IAG visit. Finally, the CPSP, representing the Ministry of Health, was still in the process of seeking non-objection from the World Bank for the project to design a health map for the pipeline corridor zone.
240. Thus, measures taken by the government to date still do not allow for monitoring of the Project’s impact on the health of the population during the operations phase, something which was not done at the construction phase either.
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VII.25 The IAG recommends that:
241. The CPSP and the World Bank take the necessary steps to make progress on the various CAPECE components relating to health and compile an epidemiological file on the populations exposed during the construction phase as soon as possible.
5.2 Specific Issues
5.2.1 The Coastal Area
242. In December 2003, the coastal populations and the fishermen in the Kribi zone seemed to be poorly informed about COTCO’s Area Specific Oil Spill Response Plan (ASOSRP) covering their zone. A new public awareness campaign was thus recommended.
243. At the time of the IAG visit, the launch of this campaign, which had been postponed several times due to the CPSP’s lack of availability, was scheduled to begin soon.
VII.26 The IAG recommends that:
244. COTCO quickly conduct an ASOSRP public awareness campaign targeting the coastal populations in Kribi, in collaboration with the CPSP if possible.
5.2.2 Claims by Fishermen
245. The fishermen in the Kribi zone complained that the destruction of an underground rock had caused the loss of fishing resources harbored there. At the time, the oil company had promised to replace the destroyed rock with artificial reefs.
246. Very little progress has been made on this issue since December 2003 and COTCO has not given the CPSP any files to be submitted to the appropriate government agencies.
VII.27 The IAG recommends that:
247. COTCO prepare a complete technical file on the laying of the proposed artificial reef to replace the rock destroyed off the coast of Kribi and submit this file to the CPSP without delay so that the Ministries in charge of fishing and the environment can study and evaluate it. The Government is also urged to provide a prompt reaction to this file so as to reduce the implementation time of a project that has already been delayed, thereby continuing to fuel the discontent of part of the population.
5.2.3 Terms of Local Employment for the Project
248. The land around the pipeline right-of-way is being cleared by workers recruited from the adjacent villages. The terms of employment by COTCO’s contractors are described in COTCO’s Right of Way Plan and are in line with the socio-economic and environmental standards in the Environmental Management Plan.
249. During the first quarter of 2004, COTCO’s Community Relations Officers (CRO), who replaced the Local Community Contacts from the construction phase, held meetings with the company’s contractors and community representatives to explain the hiring procedures. This attempt to clarify the terms of employment is a welcome initiative, but vigilance is still required. In one
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village, the hiring decisions were not well understood and in another, a contractor was late in paying the workers. Thus, the system is not yet running smoothly.
VII.28 The IAG recommends that:
250. COTCO and its contractors apply consistent and transparent terms of employment in accordance with the EMP and explain these terms to the local population to ensure that the workers are treated fairly and to alleviate misunderstandings and grievances on the part of applicants who are not hired.
6. ONGOING ACTIVITIES: UNEVEN PROGRESS
6.1 Government
251. Monitoring: Government teams continue to monitor the environmental and socio-economic impact of the Project under the aegis of the CPSP. The Government recruited a private company to conduct an independent inspection of the crude oil loads from the Terminal off the coast of Kribi. The IAG was not able to verify the selection criteria or the particular role that this company is playing with respect to COTCO agents.
252. Assessment: The IAG proposed that the Government conduct an overall socio-economic and environmental assessment of the construction phase, which could then serve as a planning, forecasting and communication tool.
253. Some progress was made in this respect with the workshop on the benefits of the CAPECE project that the CPSP organized last April with help from the World Bank for all of the government agencies involved in monitoring the Project. The goal of this workshop was to “take stock of the best practices and capacities acquired in the area of environmental and social management during the pipeline construction phase, in order to capitalize on the production phase experience and to apply the benefits to other projects or activities in Cameroon,” (CPSP). Now the other partners need to get involved: the Consortium, civil society, economic operators, labor unions and communities.
254. CAPECE: Despite the fact that the World Bank agreed to relax the procedures for awarding contracts during the mid-term capacity-building project review in August 2003, the process has not been accelerated. For example, non-objection has just been obtained from the World Bank for the socio-economic assessment study and the study to assess the overall impact of the communication plan. Non-objection is still pending for the follow-up plan on coastal and marine environment protection even though, as the IAG pointed out in its last report, this component is crucial given the risks related to the presence of the FSO.
255. Even after the various studies planned by the CPSP are launched, the road to action and impact will still be long.
256. Long-term monitoring of Project: The PSMC has determined it could not discuss directly with the World Bank the long-term monitoring of the Project and the future of the institutions responsible for management of the oil sector. The Bank should raise the issue of long-term institutional oversight with the appropriate political authorities, particularly since the topic is one
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of those planned under the CAPECE studies “Study of the Long Term Vision of Environmental and Social Management in the Oil Sector”.
VII.29 The IAG recommends that:
257. - The CPSP continue with the benefits assessment initiated by the CAPECE and broaden the scope to include an assessment of the entire Project in all its dimensions. Care should be taken to adopt a multidisciplinary approach that involves all the various players from civil society to Government.
258. - CPSP and WB accelerate the remaining CAPECE studies, as the study phase is only the first step of a long process leading to eventual action;
259. - The Government share with the World Bank its long-term vision for monitoring the oil sector so that the necessary studies can be initiated under CAPECE.
6.2 COTCO
260. Demarcating the right-of-way land: The pipeline system’s permanent right-of-way has been demarcated. Now that demarcation is complete, COTCO will need to give the CPSP the coordinates of all the land restored to the State so that the Ministry of Urban Planning can begin to issue decrees modifying the company’s rights to the right-of-way land. The government has set up a one-stop shop to deal with all the land sites in question.
261. Transfer of infrastructures: Transfer to the Government of some temporary infrastructures has still not taken place. The CPSP is preparing memorandums of understanding with COTCO for each type of infrastructure, but these legal instruments cannot be approved until the land on which they stand has been restored to the government.
262. In the meantime, the question of who is responsible for the upkeep of these infrastructures is not clear. COTCO is still the legal owner of the infrastructures, but the company is only holding onto them at the request of some of the local authorities who would like to use them for other activities. The company is not maintaining the infrastructures in question and they are slowly deteriorating, especially as a result of acts of vandalism.
263. Monitoring and security: COTCO’s long-term pipeline integrity monitoring procedures are part of the pipeline Right-of-Way Plan. These procedures include on-site inspections and regular air surveillance.
264. The Floating Storage and Offloading Facility does not yet have a security perimeter. COTCO submitted a complete technical file to the Government in April 2004. Government approval is required before the oil company can install the buoys it has selected. At the time of the IAG visit, COTCO was expecting a response from the CPSP but was unable to get even a time table from them.
265. Archeology: COTCO’s archeology program has reached an important stage. The archeological artifacts discovered during Project construction are ready to be handed over to the Cameroonian Government. COTCO’s team of experts is preparing an evaluation report of all this archeological material and is expected to finalize the report sometime in June 2004.
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266. The IAG was informed of a major dispute between the Ministry of Culture and COTCO concerning the implementation of compensation measures for the situation of level III non- compliance with the EMP pertaining to the two archeological sites that the ECMG noted at the beginning of 2003. COTCO began implementing compensation measures without discussing the details with the Ministry of Culture and without involving the Ministry in its approach for one of the components. There were also misunderstandings with the Ministry over another component. The IFC did not monitor these steps though it had participated in the negotiations on the terms of compensation.
VII.30 The IAG recommends that:
267. - COTCO and the CPSP ensure that all required conditions have been met to finish resolving the land-related issues;
268. - COTCO and the CPSP agree on a timetable for restoring the temporary Project infrastructures to the government and in the meantime, come to an agreement on what protection and maintenance procedures will be implemented in order to minimize their deterioration until the requesting local authorities can begin using them. COTCO and the CPSP should also agree on a cut-off date for restoring the land to its original pre-construction state;
269. - the CPSP follow up on the technical file submitted by COTCO on installation of the FSO security perimeter;
270. - COTCO, in collaboration with the CPSP, agree on the terms of implementation for the archeological compensation measures with the Ministry of Culture and make every effort to resolve this issue, knowing that there has only been one case of level III non-compliance found for the entire Project. The IFC, through the ECMG, should verify that the compensation measures have been adequately implemented.
6.3 FEDEC
271. FEDEC’s activities for sustainable environmental management, through its funding of the Campo Ma’an and Mbam-Djerem national parks and support for projects under the Indigenous Peoples Plan (IPP), which target the Bakola/Bagyeli populations in the forest region between Lolodorf, Bipindi and Kribi, are progressing at a satisfactory pace.
272. With regard to Campo Ma’an, the Foundation approved the outline of WWF’s working plan for 2004, 25 ecoguards are now in place and the process of finalizing the park management plan has begun, with MINEF approval expected by the end of the year. WWF has secured additional funding for micro-development projects for the population adjacent to the park over the next three years. In addition, the conclusions of the financial audit commissioned by FEDEC were satisfactory on the whole.
273. The liquidation of the Campo logging company could lead to a fresh wave of poaching and illegal logging in the park. Social measures targeting the populations adjacent to the park are planned as part of the National Plan for Participatory Development (NPPD) supported by the World Bank, but this program is not yet in place. A gap between the closing of the Campo logging company and the implementation of the NPPD, therefore, represents a risk for the park.
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274. With respect to Mbam-Djerem, the park where WCS is working, the project manager took up his post in April 2004 and a competitive exam for the recruitment of 25 ecoguards was held in May. However, the financial auditor commissioned by FEDEC recommended that funds for the project be suspended until improvements are made to WCS’s system of management, which has been deemed to be particularly defective.
275. Activities aimed at indigenous populations under the IPP are progressing well in several areas: agriculture, health, citizenship, education and habitat. The Foundation is preparing a project for Citizen Education and Integration of the Bagyeli/Bakola, or PREDICIBA, which is intended to deal with citizenship-related issues on a general level, such as their participation in the various elections. The problem of school dropouts, which was raised back in December 2003, will be the subject of a study by the Foundation.
276. With respect to FEDEC’s long-term operations, the Foundation organized a workshop in February 2004 to reflect on its vision, mission, objectives and values. Executing agencies, potential donors and government representatives were invited to attend. This workshop fueled the Foundation’s current thoughts about its future. Even so, a consensus still has not been reached within the Foundation as to the direction it will take in the long run. For the time being, the Foundation is pursuing its efforts to identify new funding sources. The financial audit of FEDEC found that its management is satisfactory on the whole, which should facilitate these efforts.
VII.31 The IAG recommends that:
277. - the World Bank give priority to funding and implementing social projects for the populations adjacent to the Campo Ma’an park, through the rapid implementation of the NPPD, so as to minimize the negative social impact brought about by the closing of the Campo logging company;
278. - FEDEC take official measures to temporarily suspend payments to WCS until WCS’s questionable accounting practices and operations can be straightened out;
279. - FEDEC reflect on how to increase the visibility of its various programs, based on the results obtained since it undertook its initial mission, so as to attract potential donors.
6.4 Non-Governmental Organizations
280. The Cameroonian non-governmental organizations (NGOs) that are monitoring the Project are currently evaluating the visible impact of the construction phase on the populations. To this end, they have expressed the need to obtain numerical data from the Government that will provide a picture of the economic results.
281. The NGOs are also interested in the information contained in the Project baseline studies. However, this information, which COTCO only distributed to universities and which is only available to students and researchers, is not accessible to the NGOs.
282. The NGOs are concerned about Cameroon’s management of the oil revenues. In this respect, the technical information about the transportation of oil, in volume and in value, has not yet been made public as in Chad.
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VII.32 The IAG recommends that:
283. - the capacity of NGOs monitoring the Pipeline Project be strengthened, in particular through an inclusive approach by COTCO and the CPSP. The Government can also involve them in its assessment of the construction phase;
284. - the CPSP implement a system to regularly furnish data and technical and financial results from the beginning of the production phase, so as to enable adequate monitoring of the Project by NGOs and the population.
285. - COTCO provide the Project baseline studies to the NGOs. The Groupe de Concertation et d’Actions [Consultation and Actions Group] has stated that it is willing to obtain these studies and distribute them to its counterparts.
6.5 All Parties
286. The IAG noted that on the whole, management by the various parties of routine Project activities since December 2003 has been defective in two respects: dialogue and communication.
287. The permanent framework for dialogue on the Project, which the IAG has long been recommending, has never materialized. However, it is still pertinent even during the production phase. This framework would allow the parties – civil society, COTCO and the Government – to meet and share information, concerns and difficulties, as well as adapt their Project-related activities so as to be better able to contribute to improving the well-being of the population. The NGOs that the IAG met with all expressed a willingness to initiate such a framework, since the CPSP has not taken any initiative.
288. The lack of communication between the parties impedes and slows down the implementation of many of the initiatives and also contributes to maintaining suspicions and grievances among the different parties.
VII.33 The IAG recommends that:
289. - the NGOs initiate a permanent framework for dialogue on the Project and the CPSP and COTCO agree to participate in a constructive manner;
290. - special efforts be made to improve communication among the parties on the various issues so as to attenuate weaknesses, uncertainty, cumulative delays and execution errors. Likewise, the CPSP should produce timetables for handling issues so that deadlines can be set and met and enable its partners to do their own planning.
CONCLUSION
291. This seventh mission to Cameroon was the first visit since the Project moved entirely into the operational phase. Although the challenge of activating the transportation, storage and offloading facilities for Chadian crude almost one year ahead of the initial calendar has been met, shortcomings, which the IAG has already noted in previous reports, still require corrective measures in order to ensure that the conditions have been met for safe production and the improvement of the population’s well-being.
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292. The legal and technical instruments for environmental protection against Project risks are still lacking. Numerous and various gaps need to be remedied through diligent efforts by the Government and COTCO ranging from the essential (securing the FSO, finalizing and adopting the PNLDAH and the implementing decrees for the Framework Law on the Environment and protecting the coastal zone and the marine environment) to the urgent (national park management plans and health programs for the populations adjacent to the pipeline) and the logical (early transfer by COTCO of abandoned infrastructures to the Government).
293. Finally, it is important to identify and define actions each of the parties can accomplish in order to ensure smooth, ongoing management of the Project.
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ACKNOWLEDGEMENTS
The IAG thanks all of the interlocutors who accompanied us on our field visits, welcomed us and shared their concerns, aspirations and satisfaction in response to the implementation of this Project. Each of them made a significant contribution to the Group’s information and understanding of the evolution of the stakes that affect the fate of the people.
The IAG also thanks the Governments of Chad and Cameroon, the Consortium members and the World Bank whose welcome, availability and logistical support all contributed to a smooth visit.
The IAG welcomes written reactions and comments pursuant to this report and will be pleased, upon request, to post these on its web site (at www.gig-iag.org), in accordance with the terms of use of the site.
The IAG in particular encourages its principal partners to provide it with information on actions taken in response to its recommendations, on a regular basis and before the Group’s next visit.
All reports of the IAG’s working visits are available on its web site, at www.gic-iag.org, and on the World Bank site, at www.worldbank.org/afr/ccproj.
International Advisory Group Mamadou Lamine Loum, Chair Jane I. Guyer Abdou El Mazide Ndiaye Dick de Zeeuw Jacques Gérin, Executive Secretary
IAG Secretariat 5 Place Ville-Marie, Suite 200 Montreal, Quebec Canada, H3B 2G2 Tel: + 1 514 864 5515; Fax: +1 514 397 1651 E-mail: [email protected] Web site: www.gic-iag.org
PR93125.018-ENG.doc 36 International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
Appendix 1 Chronology of Meetings
Sunday, May 16, 2004 – N’Djamena - IAG internal working session
Monday May 17, 2004 – N’Djamena - World Bank, IMF, IFC - Coordination Nationale - EEPCI
Tuesday May 18, 2004 – N’Djamena - Ministre du Pétrole and Head of Doba Project - Encana International (Chad) Ltd. - JMN Consultants
Wednesday May 19, 2004 – N’Djamena - Ministre de l’Économie et des Finances and working session with representatives from the following technical administrations: Direction du Pétrole, Direction du Budget, Direction du Trésor, Direction des Impôts, Direction des Finances extérieures (and divisions under its control), Institut National de la Statistique, des Études Économiques et Démographiques (INSEED), Cellule Économique - Institut pour la Démocratie et le Développement au Tchad
Thursday May 20, 2004 – N’Djamena - Ministre du Plan, du Développement et de la Coopération and working session with representatives from the following technical administrations: Direction de la planification du développement, Comité de Pilotage de la Stratégie Nationale de Réduction de la Pauvreté, INSEED - International NGOs: Catholic Relief Services, Bank Information Center, Open Society Institute and a representative of Columbia Law School
Friday May 21, 2004 – Komé 5-Bébédjia - Komé: Esso Chad EMP team EEPCI teams in charge of construction and operations
- Bébédjia: Sub-Prefect of Bébédjia ITRAD FACIL
Saturday May 22, 2004 – Moundou - CotonTchad - GTZ and local partners - Union des Groupements Maraîchers de Moundou [Moundou Union of Market Farmer Associations] - Moundou Chamber of Commerce and Logones Economic Operators Association - CPPL
PR93125.018-ENG.doc Appendix 1 i International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
Sunday May 23, 2004 – Canton Miandoum-Komé 5 - Maïkeri village - Komé 5: Waste treatment facilities - Dildo village - IAG internal working session
Monday May 24, 2004 – Komé 5 - CTNSC on-site supervision - Unité de Pétrole Doba on-site supervision
Tuesday May 25, 2004 – N’Djamena - EEPCI - Ministère des Travaux Publics et des Transports - Ministère de la Santé Publique
Wednesday May 26, 2004 – N’Djamena - Ministère de l’Environnement et de l’Eau - Ministère de l’Éducation Nationale - IAG internal working session
Thursday May 27, 2004 – N’Djamena - CCSRP - DGMP - Civil society: NGOs, labor unions, press
Friday May 28, 2004 – N’Djamena - Ministre des Mines et de l’Énergie - Ministère de l’Élevage - Ministère de l’Agriculture - Diplomatic corps and donors - Ministère de la Justice
Saturday May 29, 2004 – N’Djamena - Ministère de l’Aménagement du Territoire, de l’Urbanisme et de l’Habitat - Ministère de l’Enseignement Supérieur, de la Recherche Scientifique et de la Formation Professionnelle - IAG internal working session
Sunday May 30, 2004 – N’Djamena - IAG internal working session
Monday May 31, 2004 – N’Djamena - Working session with the WB, CN and EEPCI - IAG internal working session
Tuesday June 1, 2004 – N’Djamena - Debriefing - The Prime Minister
PR93125.018-ENG.doc Appendix 1 ii International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
Wednesday June 2, 2004 – N’Djamena-Yaounde - Travel from N’Djamena to Yaounde - IAG internal working session
Thursday June 3, 2004 – Yaoundé - WB - Offices of the Prime Minister - COTCO - FEDEC
Friday June 4, 2004 – Yaoundé - MINEF - Visit to Ngoya I village - Diplomatic corps and donors - Cameroonian NGOs - CPSP
Saturday June 5, 2004 – Yaoundé - Visit to Mvomndoumba village - Director of Cultural Heritage (Ministry of Culture) - IAG internal working session
PR93125.018-ENG.doc Appendix 1 iii International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
Appendix 2 List of Abbreviations and Acronyms
AIDS Acquired Immune Deficiency Syndrome ASOSRP Area Specific Oil Spill Response Plan BEAC Banque des États de l’Afrique Centrale / Bank of Central African States CAPECE Cameroon Petroleum Environment Capacity Enhancement Project CCSRP Collège de Contrôle et de Surveillance des Ressources Pétrolières / Oil Resources Control and Monitoring Group CN Coordination Nationale / National Coordination COTCO Cameroon Oil Transportation Company CPPL Commission Permanente Pétrole Locale / Local Standing Committee on Oil CRO Community Relations Officer CTNSC Comité Technique National de Suivi et de Contrôle / National Technical Committee for Monitoring and Control DAF Administrative and Financial Directors DGMP Direction Générale des Marchés Publics / Government Procurements Directorate EA Executing Agency ECMG External Compliance Monitoring Group EEPCI Esso Exploration and Production Chad Inc. EMP Environmental Management Plan FACIL Fonds d’Actions Concertées d’Initiatives Locales / Local Initiatives Development Fund FEDEC Foundation for Environment and Development in Cameroon FFG Fund for Future Generations FSO Floating Storage and Offloading Facility GEEP Projet de Gestion de l’Économie à l’Ère Pétrolière / Management of the Petroleum Economy Project GTZ Gesellschaft für Technische Zusammenarbeit (German cooperation) HIPC Highly Indebted Poor Countries HIV Human Immunodeficiency Virus IAG International Advisory Group IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund INSEED Institut National de la Statistique, des Études Économiques et Démographiques National Institute of Statistics and Economic and Demographic Studies IPP Indigenous Peoples Plan
PR93125.018-ENG.doc Appendix 2 1 International Advisory Group Report of Visit to Chad and Cameroon May 17-June 5, 2004
ITRAD Institut Tchadien de Recherche Agricole pour le Développement / Chad Institute of Agricultural Research for Development LCC Local Community Contact MINEF Ministère de l’Environnement et des Forêts / Ministry of Environment and Forests (Cameroon) NGO Non-Governmental Organization NPPD National Plan for Participatory Development NPRS National Poverty Reduction Strategy OFDA Oil Field Development Area ORT Organisation for Rehabilitation and Training - International PEPFL Projet d’Encadrement des Producteurs de Fruits et Légumes / Fruit and Vegetable Producers Supervision Project PNIDAH Plan National d’Intervention en cas de Déversements Accidentels d’Hydrocarbures / National Oil Spill Intervention Plan PRGF Poverty Reduction and Growth Facility PSFE Forest Environment Sector-Based Program PSMC Pipeline Steering and Monitoring Committee PSMCBP Petroleum Sector Management Capacity-Building Project RDP Regional Development Plan STD Sexually Transmitted Disease WCS Wildlife Conservation Society WWF World Wildlife Fund
PR93125.018-ENG.doc Appendix 2 2