African nations, World Bank back controversial Chad oil project

Reuters, 7 February 2000

N'DJAMENA—A regional bloc of African states has thrown its weight behind a controversial oil extraction and pipeline project in Chad which environmentalists oppose.

The 11-strong Community of Sahelian-Saharan States (CED-SAD) adopted a resolution backing the project at a two-day meeting in the country's capital N'Djamena which ended on Saturday evening.

The $3.5 billion project aims to develop 300 oil wells near Doba in the south of the impoverished, landlocked country.

It is expected to bring onstream between 200,000 and 250,000 barrels of oil per day in 2001, extracting the oil and transporting it via a 1,050 km (650-mile) pipeline to a terminal at the Cameroon port of Kribi on the Gulf of Guinea.

Environmentalists have long opposed the construction of the connecting oilfields because of the environmental and social costs of building the enormous pipeline through untouched rainforest.

The CED-SAD's 11 members are Libya, Burkina Faso, Chad, Mali, Niger, Sudan, Central African Republic, Eritrea, Djibouti, Senegal and Gambia.

The oil project has been suspended since November, when Chad's government said partners Elf Aquitaine and Royal Dutch/Shell had pulled out.

Chad's ATP news agency said in December that Elf and Shell were both still interested in the scheme, led by Exxon-Mobil, and Shell confirmed that its negotiations were continuing.

However, industry sources said last week that Malaysia's state oil firm Petronas was set to buy a 35 percent stake of the production side of the project by the end of February, with U.S. oil giant Chevron Corp taking 25 percent and Exxon Mobil keeping its 40 percent holding.

The sources said Petronas and Chevron were buying the stakes from Shell, which held a 40-percent stake, and Elf, which held 20 percent.

Despite environmental opposition, the pipeline project is being backed by a World Bank loan of $90 million at preferential rates to finance the two countries' equity stakes. The Cameroon government will take up $55 million and Chad will take up $35 million.

Work on the development was to have begun in 2000.

The project estimates it can yield 900 million barrels of oil over 15 to 20 years.

The World Bank's private sector arm, the IFC, is to finance a $100 million loan to the companies in the consortium and plans to mobilise a further $300 million in loans from commercial banks. The remaining funds are to be shouldered by the consortium.