Chad's Oil: Miracle Or Mirage?
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Chad’s Oil: Miracle or Mirage? Following the Money in Africa’s Newest Petro-State Ian Gary Catholic Relief Services Nikki Reisch Bank Information Center Report Team Authors: IanGary StrategicIssuesAdvisor–ExtractiveIndustries CatholicReliefServices NikkiReisch AfricaProgramCoordinator BankInformationCenter GraphicDesigner: PaulO’Donnell SeniorGraphicDesigner CatholicReliefServices Translators: MikeFlynn Anne-MarieLavoie ResearchforthisreportwasconductedfromSeptember2002toNovember2004 andincludedfieldresearchinChadinSeptember2002,August2003andMayand October2004. Acknowledgements:TheauthorswouldliketothankCRSstaffatheadquartersin BaltimoreaswellasfieldstaffinAfricaforprovidinginvaluableassistancetomake thisreportpossible,especiallyPaulO’Donnell,BillO’Keefe,CecileSorra,Caroline Brennan,NicolePoirier,MargueriteDombaya,OliverMokom,JeanBaptisteTalla, JenniferNazaireandNellBolton.ThanksalsotoBankInformationCenterstaff, includingManishBapnaandGrahamSaul,fortheirsupportandfeedback. Thisreportwouldnothavebeenpossiblewithoutthecontinuedcollaboration,support andassistanceofnumerousindividualsandorganizationsinChad.Wewouldlike tothankthemembersofthecivilsocietynetworksmonitoringpetroleumactivities, includingtheCommissionsPermanentePétrole(CPPL/CPPN/RESAP);theJustice andPeaceCommissionoftheCatholicChurch;aswellasGRAMP/TC,Intermonand Swissaid.WewouldalsoliketothankmembersandtechnicalstaffoftheCollegede ControleetdeSurveillancedesRevenusPetroliers,includingMichelBarka,Thérèse Mékombé,DobianAssingar,NaïmbayelDjékondé,MoctarSaadatuAbdouand MahamatRamadaneDagache,fortheirgenerousassistance.Finally,wewouldliketo expressourappreciationtoFatherAntoineBérilengar,DelphineDjiraibe,Boukinebe GarkaPeugonbaandthemembersoftheCPPL,includingNadjiNelambaye,whowere tremendouslyhelpfulincoordinatingvisitstotheoil-producingregion.Thanksalso toKorinnaHorta,TawfikRamtoolah,MartinZintandFr.MichaelPerryforproviding usefulcommentsandphotosforthedraftreport. Notes: •Forconsistency,monetaryconversionsarebasedonanexchangerateof510CFAF (CommunautéFinancièreAfricainefranc)toU.S.$1. •ExxonMobilisreferredtointhisreportas“ExxonMobil”.Thecompanyisknown asEssoinChad,Europeandelsewhere.ExxonMobil’swholly-ownedaffiliatein ChadisknownasEssoExplorationandProductionChad,Inc.(EEPCI) Coverphoto:Chadvillagersreturningfromfetchingwaterwalkpastanoilwell drillingrigintheDobaoilfieldareaofsouthernChad.(TomStoddart,KatzPictures/ IPG/K2) ©CatholicReliefServicesandBankInformationCenter,February2005. Chad’s Oil: Miracle or Mirage? i Chad’s Oil: Miracle or Mirage Following the money in Africa’s Newest Petro-State Table of Contents Page Executive Summary . 1 Introduction: All Eyes on Chad . 4 1. Poverty, Politics and Petrodollars. 15 2. Chad’s Landlocked Treasure: Oil Exploration and Production . 23 2.1.DrillingandPumping–TheDobaProject .................................. 23 2.2.NewProductionandExplorationinChadandBeyond........................ 27 3. Chad’s Oil Revenues: A First Taste of Black Gold . 35 3.1.OilCompany–GovernmentAgreements:Secrecyinthe“Model” ofTransparency ....................................................... 37 3.2.DividinguptheRevenues:ALeakyRevenueManagementLaw................ 41 3.3.FillingOuttheLegalFramework–BuildingonLaw001 ...................... 45 3.4.TheEndoftheHoneymoon............................................. 48 4. “Just Add Oil”: Accountability from Scratch . 51 4.1.CollègeComposition................................................... 51 4.2.ObjectivesandResponsibilities........................................... 52 4.3.PerformanceoftheCollègetoDate.......................................57 4.4.ChiefWeaknessesintheStructure,MandateandOperationoftheCollège........ 58 4.5.TechnicalSupporttotheCollège......................................... 64 4.6.ALawisOnlyasGoodasitsEnforcement................................. 64 5. Budgeting for the Boom: Spending Chad’s Oil Revenues . 68 5.1.BudgetBasics........................................................ 68 5.2.EarmarkingOilMoneyforPrioritySectors................................. 69 5.3.How“Oily”isthe2004Budget?......................................... 71 5.4.SpendingtheMoney:PrioritySectors..................................... 72 5.5.BudgetExecution:FromProblematicProcurementtoSkimpySpending .......... 74 5.6.The2005Budget:BigSpending.......................................... 75 5.7.RevenuesfortheOil-ProducingRegion .................................... 76 6. Changing Chad: The Role of External Actors . 79 6.1.DependenceonExternalFinancing:WillOilRevenuesDriveDonor79 DollarsAway?........................................................ 79 6.2.BuildingCapacity:TheWorldBankandtheTwo-SpeedProject................. 80 6.3.ChangingPolicies..................................................... 84 6.4.ChangingPolitics..................................................... 85 6.5.WaningDonorInfluenceOveranOil-RichGovernment? ...................... 86 Conclusion: A “Model Project” Hanging By a Thread . 88 ii Table of Contents (continued) Page Appendices . 98 • Law001ConcerningtheManagementofOilRevenues....................... 98 • AdditionalResourcesontheChad-CameroonPipeline.......................103 The following appendices are available online at http//advocacy.crs.org/oil • Decree240ConcerningtheStructure,OperationsandOversightCapacitiesofthe PetroleumRevenueOversightandControlCommittee(CCSRP–Collège) • Decree457ConcerningtheCreationofaProvisionalRevenueManagement CommitteefortheOilProducingRegion • CouncilofMinistersDeclarationonthePrinciplesfortheUtilizationofFuture OilRevenues • CommuniquéconcerningGovernmentofChaddisputewithExxonMobil Boxes 1. FinancingaProject:TheChad-CameroonOilandPipelineProject............... 6 2. TheInternationalPublishWhatYouPayCampaign............................ 7 3. TheWorldBank’sParticipationintheChad-CameroonProject................. 10 4. Chad’sOilRevenueManagementSystemataGlance......................... 11 5. MultipleMonitoringMechanisms:AllBarkandNoBite?..................... 13 6. EnvironmentalandSocialStandardsforNewOilDevelopments................ 28 7. ExplorationBeyondChad ............................................... 30 8. SocialandEnvironmentalImpacts:LastingEffectsandLessonsfor NewOilDevelopment.................................................. 32 9. NewRevenueforCameroon ............................................. 38 10.ClosingaLoophole?................................................... 45 11.Beremadji:TheManWhoKnewtooMuch................................. 63 12.TheElusiveNationalBudget............................................ 70 13.WeakEnvironmentalandSocialOversightbytheGovernment.................. 82 Charts/Graphs/Tables/Maps Chad-CameroonPetroleumDevelopmentandPipelineProject...................... 9 GovernanceResearchIndicatorCountrySnapshotforChad........................ 16 Chad’sOil:PermitAreasandFields.......................................... 24 Sub-SaharanAfrica’sOilProducers........................................... 27 WorldBankDisclosureofEscrowAccountActivity.............................. 36 Chad’sOilProductionandRevenueProfile..................................... 38 Chad’s“Take”inComparisontoOtherAfricanOilProducers ...................... 39 HypotheticalExampleofRoyaltyCalculation..................................