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(Graphics courtesy of CIA and WorldBank)
TED Case Studies
Number 650: November,
2001
Chad Oil Pipeline to Cameroon and Its Impacts,
by Shane Hough
Identification | Legal Cluster | Geographic Cluster | Trade Cluster | Environment Cluster | Other Factors
Last Updated December 12, 2001
IDENTIFICATION
1. The Issues (picture courtesy of the World Bank)
The main issues surrounding the Chad-Cameroon Petroleum Development and Pipeline project are the following:
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2. Description
The Chad-Cameroon Petroleum Development and Pipeline Project promises to be
an economic boon for both Chad and Cameroon. The project seeks to develop oil
fields in Southern Chad and to build a pipeline over 1,000 km long from Chad
to offshore oil-loading facilities on the Western coast of Cameroon. The project
is being undertaken by ExxonMobil of the US (40%), Petronas of Malaysia (35%),
and Chevron of the US (25%) with financing partly by the World Bank Group. The
consortium will provide approximately 81% of the investment funding with 16%
coming from market loans to Chad and Cameroon. The balance of investment in
the project will come from equity payments by the government of Chad and Cameroon
from World Bank loans. Construction and implementation of the plan began in
September 2000 with possible construction beginning 2003. According to the World
Bank, the project could result in nearly $2 billion in oil revenues for Chad
and nearly $500 million for Cameroon (stemming from the transportation of the
oil through the pipeline most of which runs through Cameroon and the offloading
on Cameroon's coast) over the expected 25-30 year life of the oil fields. (WBOVER)
Although touted by the World Bank and the multi-national oil corporations as one of the best options for bringing development to both Chad and Cameroon, there are many worries on the part of environmentalists and human rights activists. Both Chad and Cameroon have poor human rights records. Even after the project was agreed to there have been several incidents in Chad concerning Presidential elections and the detaining of opposition leaders. There has also been violence in the Doba Basin region where the oil fields are located. Cameroon has a similar story, having made Transparency International's number one spot among corrupt nations in both 1998 and 1999. Human rights activists are concerned that an influx of oil revenue will only worsen the problem, leaving the people with even less equity in the government and in their region and no voice in preventing damage socially or environmentally.
On the environmental front, initial environmental assessments done were vague and lacked specific measures, for example in the area of oil spill incidents. The area through which the pipeline will run supports many tributaries to Lake Chad, which has been retreating over the last decade. Any oil spill of significance in the area could easily pollute Lake Chad and cause fish kill as well as loss of livelihood to those who depend on the lake. Pipeline breakage through deficient maintenance or through planned sabotage would have a detrimental effect on a large area. Lax government regulation will not help to prevent spillage. In Cameroon the pipeline will run through secluded sections of rainforest where the Bakola, "Pygmy", peoples live. They are highly dependent upon the forest, and any damage to it will be significant to them. There is also substantiated concern that increasing access to the forest will increase deforestation due to illegal logging. It will also affect biodiversity as more people utilize the forest for hunting or for gathering exotic flora and fauna for export.
The project is going forward as of today, but only tomorrow will tell us if Chad and Cameroon were prepared for such a project, and if the multinational oil companies were ready to be responsible for the impact they have. It will also be testimony to the development strategy undertaken by the World Bank. If the project proves socially and environmentally responsible then it will be the first of its kind in sub-Saharan Africa.
3. Related Cases
Environmental Assessment and Damage due to Petroleum projects:
AZERI - Environmental Aspects of Damage or Destruction of Azerbaijan Oil Pipeline (consortium led by British Petroleum)
BOLPIPE - Bolivian Gas Pipeline Construction Project
CASPOIL - Implications of Oil found in and around the Caspian Sea
COLOMOIL - Columbian Oil Exploration in the Andes
EXXON - Environmental Damage Due to the Exxon Valdez disaster
JAPANOIL - Environmental Damage Due to the Nadhodka disaster off Japan
KAZAKH - Oil Exploration in Kazakhstan
KOMI - Oil Spill near Komi Republic in Northern Russia
MALAYOIL - Malaysia Marine Oil Spill, 1997
TURKMEN - Transportation Issues surrounding Oil in Turkemistan
Cultural Degradation due to Petroleum projects:
OGONI - The
Ogonis are the major ethnic group in the Nigerian Delta region where Shell Oil
has been drilling for oil for several decades. Issues include environmental
destruction and the removal of the indigenous people's ability to use the land
to grow crops. There are also cases of harassment and killings carried out by
the government in retaliation for Ogoni protests and sabotage threats to the
oil facilities.
LEONE - Mining,
predominantly diamond and gold mining, have resulted in deforestation, land
degradation, and other environmental maladies.
4. Author and Date: Shane Hough, December 12, 2001
Identification | Legal Cluster | Geographic Cluster | Trade Cluster | Environment Cluster | Other Factors
Last Updated December 12, 2001
LEGAL CLUSTER
5. Discourse and
Status:
There are few legal decisions in international courts regarding oil corporations
and developing countries. However, I would like to focus your attention on several
issues for which there are legal instruments in the international community.
These issues are as follows:
"the improvement of the conditions of life and work and levels of health and education of the peoples concerned, with their participation and co-operation, shall be a matter of priority in plans for the overall economic development of areas they inhabit. Special projects for development of the areas in question shall also be designed as to promote such improvement. Governments shall ensure that, whenever appropriate, studies are carried out, in co-operation with the peoples concerned, to assess the social, spiritual, cultural and environmental impact on them of planned development activities. The results of these studies shall be considered as fundamental criteria for the implementation of these activities."
"All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence."
The main issue at stake is the utilization
of the oil resources, and the loss of "means of subsistence" without proper
benefit or remuneration. This covenant looks at the issue of the multinational
corporations' as well as the governments' responsibility to make sure that an
appropriate part of the revenues from resources go to benefit the population.
Where the previously mentioned convention addresses indigenous peoples and their
specific areas, this covenant addresses all citizens of a country. It stabs
at the ability of corrupt governments and greedy multinational corporations
(all are not greedy, of course) to siphon out resources and leave little benefit
in the wake to those left living there. I would hope that both corrupt government
officials as well as multinational corporations could be prosecuted for flagrant
violations of this covenant under international law both in an international
court and in the court system of the country where the multinational corporations
have their headquarters or a significant presence.
Oil Pollution Damage on the Cameroon Coast
After completion of this project petroleum from Chad's oilfields will be
pumped to Cameroon's coast for offloading onto tanker ships. The possible environmental
impact of oil spillage and illegal dumping of sump waste would have a devastating
impact on those people who use the waters off the coast for their livelihood.
The Maritime arm of the UN, the International Maritime Organization, has set
up two different conventions to address this problem: the International Convention
for the Prevention of Pollution from Ships (the MARPOL convention) and the International
Convention on Civil Liability for Oil Pollution Damage.
The MARPOL convention might come into play during purposed or accidental discharge
of oil while a tanker is within 50 miles of the Cameroon coast. The main issue
is to protect the environment after the introduction of this new industry. The
particular issue addressed with this international convention is the environmental
safety of the offloading facilities on the coast of Cameroon. MARPOL also has
restrictions on sewage and garbage from ships and can be prosecuted under the
flag State law or the law of the State where the incident occurred.
The International Convention on Civil Liability for Oil Pollution Damage extends
the liability of oil dumping or spilling to ship operators. It holds operators
accountable for any restricted dumping and requires that large ships carry insurance
sufficient to cover the liability limit of one accident (currently a maximum
of $18 million per accident for large tonnage ships).
6. Forum and Scope: World Bank and Bilateral
The aforementioned hypothetical cases would be debated in an international court
of law or in the US federal court system since the major parties are US corporations.
The cases would probably be class-action on the behalf of an entire ethnic group
or citizens of a region and would be versus either the multinational corporations,
the World Bank, the Government of Chad or Cameroon (as the case may be) or a
mixture of these. There has been no legal precedent that could be applied to
this case (that I am aware of at the present). There have been many oil spillage
cases, for example the Exxon Valdez spill in Alaska, which could be sited.
7. Decision Breadth: People along the pipeline
Any legal decision would have the capacity to affect thousands of people all along the pipeline's planned route. Many different cultures and languages are present through the roughly 1,000 km path although involving only two countries. The mostly Bantu peoples of the Doba Basin in Southern Chad will be subject to the actual oil exploration and drilling involving many foreign workers (probably many Nigerians) bringing their own social and cultural problems with them to mix with those of the local communities. HIV/AIDS is also an issue in this context as the disease could make inroads into places where incidence is still relatively small. Environmental degradation and heavy use of fresh water could cause long-term effects on the mostly agrarian societies in the Doba Basin. Farther along into Cameroon we find the Bakola "Pygmy" people who inhabit Cameroon's rainforests in the North. The pipeline will require roads to provide maintenance increasing access to the interior of the forest and increasing things like illegal logging and export of exotic animals and plants. The Bakola may not be culturally prepared for the onslaught of outside ideas and the problems that come with them, not to mention their heavy dependence on an ecosystem that could be unbalanced by the intrusion of the pipeline. For the Bakola, this could be a life-and-death or at the least a very very significant life-changing project. Further along at the terminal point of the pipeline many Cameroonians in the Kribi area depend on the sea for their livelihood. An offloading terminal near the coast area with the accompanying ship traffic could cause widespread environmental degradation. The ships alone bring with them industrial waste and garbage, which is sometimes dumped overboard illegally. In the event of a massive oil spill thousands of people in the area would lose their livelihood, and hundreds of plant and animal species would be damaged.
8. Legal Standing: Treaty
Identification | Legal Cluster | Geographic Cluster | Trade Cluster | Environment Cluster | Other Factors
Last Updated December 12, 2001
GEOGRAPHIC CLUSTER
9. Geographic Locations (picture courtesy of CIA)
a. Geographic Domain: Africa
b. Geographic Site: West Africa
c. Geographic Impact: Cameroon
10. Sub-National Factors: No
11. Type of Habitat: Temperate including marine and rainforest
Identification | Legal Cluster | Geographic Cluster | Trade Cluster | Environment Cluster | Other Factors
Last Updated December 12, 2001
TRADE CLUSTER
12. Type of Measure: World Price of Brent Crude Oil
Although the type found in Chad would be considered Doba Crude Oil, the World Bank calculates returns based on Brent Crude Oil in this case probably due to the similarity in price and characteristics.
13. Direct v. Indirect
Impacts: 14. Relation of Trade Measure
to Environmental Impact
a. Directly Related to Product: Yes, Oil
b. Indirectly Related to Product: No
c. Not Related to Product: No
d. Related to Process: Yes, Habitat Loss
15. Trade Product Identification: Oil 16. Economic Data With the World Bank's help the government
of Chad has developed the "Strategy for the Management of the Petroleum Economy" (WB19343, pg. 95) which sets forth a plan to use the new revenues in a socially responsible way.
This strategy is the basis for the Revenue Management Program, which was written
into law by the parliament of Chad under President Idriss Deby on December 30,
1998. Act No. 001/PR/99 concerning Oil Revenues Management does seven basic
things (WB19343, pg. 96) :
17. Impact of Trade Restriction: Low
18. Industry Sector: Energy
19. Exporters and Importers: Chad-Cameroon and Mainly the Industrialized West (Table 1) World's
Top 10 Producers of Oil and Oil Products (1,000 barrels per day) *OPEC country World's
Top 10 Importers of Oil and Oil Products (1,000 barrels per day) Identification | Legal Cluster | Geographic Cluster
| Trade Cluster
| Environment Cluster
| Other Factors Last Updated
December 12, 2001 ENVIRONMENTAL CLUSTER 20. Environmental Problem
Type: (picture courtesy of Amnesty USA)
21. Name, Type, and Diversity
of Species
Name: Many types of flora and fauna found in Cameroon's Atlantic Littoral forests will be affected, gorillas and chimpanzees major among them (EDF, pg.11). The forest itself could be affected by logging and overuse because of better access.
Type:
Diversity:
22. Resource Impact and
Effect: High and Product
23. Urgency and Lifetime: Medium and 10 Years (although effects will be seen after construction starts in 2003)
24. Substitutes: Conservation and slower, more sustainable, use of the oil reserves and rerouting of the pipeline in the more sensitive forest areas of Cameroon.
Identification | Legal Cluster | Geographic Cluster
| Trade Cluster
| Environment Cluster
| Other Factors Last Updated
December 12, 2001 OTHER FACTORS 25. Culture: 26. Trans-Boundary Issues: No
27. Rights:
There are several issues involving
rights to be considered. Human Rights and Property Rights are
two such issues heavily involved in the Chad-Cameroon Pipeline project.
Human Rights in Chad and Cameroon
The 1999 Country Reports on Human
Rights Practices authored by the US State Department summarized Chad's human
rights practices as remaining poor, and there are continued "serious problems
in many areas" including restrictions on citizens' right to change the government,
extrajudicial killings, and other physical abuses carried out by the state security
forces (army, gendarmerie, police, National and Nomadic Guard, Rapid Intervention
Force, and the National Security Agency). The same report for Cameroon showed
similarly poor human rights practices. (USDSChad & USDSCam)
Chad's 2001 Presidential Elections:
In May, 2001, shortly after Presidential elections in which President Idris
Deby was re-elected, Chadian security forces seized six opposition leaders,
all of whom had contested the election results. One of these detainees was Yorongar
Ngarleyji who was an outspoken opponent of the pipeline project prior to the
elections. Yorongar had filed a request in April, 2001 with the World Bank's
Independent Inspection Panel to investigate claims that deficiencies in the
pipeline project design had and would lead to damage to residents and the environment
in the project area. According to Amnesty International Chadian security forces
have killed more than 200 unarmed civilians in the Doba oil region. No investigations
into the killings have taken place. (AMNUSA)
28. Relevant Literature
Identification | Legal Cluster | Geographic Cluster
| Trade Cluster
| Environment Cluster
| Other Factors Last Updated
December 12, 2001
The World Price of Brent Crude Oil has a definite direct affect on the project. If the world price drops below the oil consortium's risk tolerance such that potential political
risks (like unrest or violence as has happened in other similar situations in
Africa) outweigh potential profit incentives then the venture will fail. With
Chad's current economic state it will continue to produce and sell oil as long
as there is any profit to be made. However, the government of Chad will depend
on the multinational corporations for the technical and infrastructural support
to sell their oil. The political atmosphere in the region will be weighed against
the profit to be made and that depends on the world price of brent crude oil.
Other factors to consider are:
Chad has an estimated 917 million barrels of crude oil that has yet
to be tapped. Extraction and export of oil from Chad should begin by the end
of 2003. At an average future price of $15.25 US per barrel, total revenues
should be approximately $14 billion US over the next 25-30 yrs. Chad should
see revenues of nearly $1.8 billion US and a dramatic improvement in physical
infrastructure while Cameroon will realize about $540 million US from the charges
arising from the transport of Chad's oil and the use of the pipeline to transport
the oil to the Atlantic offloading dock.
In keeping with the spirit of the 1998
law President Deby was quoted in June 2000 as saying:
"We need to create higher
institutions of learning so that our children and our brothers can stay home
to learn what is needed instead of going to the four corners of the world to
look for knowledge."(AFROL)
A bonus sum of US$25 million was paid
(partial payment) to the government of Chad in August, 2000 as a signing bonus.
President Deby had earlier affirmed that the money would be used in the spirit
of the 1998 law, although the signing bonus wasn't covered by any World Bank agreement.
In September, 2000 a World Bank / IMF mission sent to assess Chad's inclusion
in debt relief under HIPC found that US$15 million of the bonus had already been
paid out with US$4.5 million spent on military expenditures (30% of the US$15
million and 18% of the total US$25 million). The World Bank and IMF suggested
to the government of Chad that the remaining funds be frozen and governmental
oversight mechanisms be put in place to oversee the remaining funds. It went on
to say that without the completion of these actions there would be no offer of
debt relief under HIPC. In April 2001, the government completed these actions
including the adoption of a budgetary amendment allocating 100% of the remaining
bonus funds to priority spending by the Petroleum Revenues Oversight Committee.
Chad received debt relief under HIPC in May, 2001 (BONUS, pp. 1-2).
To get a general view of the petroleum industry worldwide and who imports /
exports the most, the following two tables identify the major world players (see Table 1 - OPEC). Chad is expected to produce approximately 917 million barrels of oil over its 28 year lifespan resulting in less than 90,000 barrels per day on average, a very small player in the world petroleum market.
Country
Oil Production
Crude Oil Exports
Exports of Refined Petroleum Products
Country
Crude Oil Imports
Imports of Refined Petroleum Products
Chad is considered a very small producer on the world oil market.
According to the World Bank some environmental threats associated with this project are as follows (but not limited to) (WB19343, pg. 31):
The World Bank has developed an environmental management plan for the project which includes (WB19343, pg. 131):
"(i) measures to mitigate biodiversity loss through environmental offsets, (ii) provisions for compensation and, where necessary, resettlement of affected people, (iii) programs to offset the indirect impacts of the project on local communities, including indigenous people, and (iv) an oil spill contingency plan as well as (v) all of the normal environmental precautions associated with oilfield development and with building and operating a pipeline and an offshore loading facility"
There are also environmental issues surrounding the offshore offloading facility on Cameroon's Atlantic coast. An oil spill there would severely affect the ability of people living in the area to fish and maintain their livelihood, not to mention the fouling of the surrounding beaches and loss of wildlife and flora.
Further Risks and Problems identified by Friends of the Earth International as possibly happening are as follows (FOEI, pp. 7-9):
Several social problems may occur as a result of the pipeline project. Some to consider are (FOEI, pp. 7-9):
Acronyms in Red are Parenthetical Reference Codes and are used throughout the text to refer to the following literary and web sources.
(AFROL)"Chad-Cameroon Pipeline Finally Under Closer Supervision" - AFROL News. Available at http://afrol.com/ms_index.htm
(AMNUSA)"Chad Cracks Down on Dissent" - Amnesty International USA. Available at http://www.amnestyusa.org/justearth/countries/chad-cameroon2.html
(BONUS)"Note on the Use of the Petroleum Bonus" - World Bank Group; June, 2001.
(DEV)"Declaration on the Right to Development" - UN High Commissioner for Human Rights (UNHCHR). Available at http://www.unhchr.ch/html/menu3/b/74.htm; adopted December, 1986.
(EDF)"The Chad Cameroon Oil and Pipeline Project: Putting People and the Environment at Risk" - Environmental Defense Fund, USA. Available at http://www.environmentaldefense.org/pubs/Reports/ChadCameroon/pipeline.pdf; Sept, 1999.
(EIA)"Chad Country Analysis Brief" - Energy Information Administration, US Department of Energy. Available at http://www.eia.doe.gov/emeu/cabs/chad.html; Last updated April 3, 2001.
(ESSO)"EssoChad Executive Summary and Update" - ESSO. Available at http://www.esso.com/eaff/essochad/documentation/summary/1.html;
(FOEI)"Broken Promises - The Chad Cameroon Oil and Pipeline Project; Profit at Any Cost?" - Friends of the Earth International. Available at http://www.foei.org/; June, 2001.
(INDIG)"Convention (No. 169) concerning Indigenous and Tribal Peoples in Independent Countries" - UN High Commissioner for Human Rights (UNHCHR). Available at http://www.unhchr.ch/html/menu3/b/62.htm; adopted June, 1989; entry into force Sept 5, 1991.
(OPEC)"OPEC Fact Sheet" - Energy Information Administration, US Department of Energy. Available at http://www.eia.doe.gov/emeu/cabs/opec.html; Last updated Sept. 6, 2001.
(Statement)"Statement to the European Parliament's Development Committee" - World Bank Group; June 21, 2001.
(USDSCam)"1999 Human Rights Reports - Cameroon" - US Department of State. Available at http://www.state.gov/www/global/human_rights/1999_hrp_report/; February 25, 2000.
(USDSChad)"1999 Human Rights Reports - Chad" - US Department of State. Available at http://www.state.gov/www/global/human_rights/1999_hrp_report/; February 25, 2000.
(WBOVER)"Project Overview" - World Bank Group. Available at http://www.worldbank.org/afr/ccproj/project/pro_overview.htm; Last updated July 18, 2001.
(WB19343)"Project Appraisal Document - 19343 AFR" - World Bank Group. Available at http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2000/10/21/000094946_00102111244720/Rendered/PDF/multi_page.pdf
"International Covenant on Economic, Social and Cultural Rights" - UN High Commissioner for Human Rights (UNHCHR). Available at http://www.unhchr.ch/html/menu3/b/a_cescr.htm; adopted Dec, 1966; entry into force Jan 3, 1976.
"International Convention on Civil Liability for Oil Pollution Damage (CLC), 1969" - UN International Maritime Organization (IMO). Available at http://www.imo.org/Conventions/mainframe.asp?topic_id=256&doc_id=660
"International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto (MARPOL 73/78)" - UN International Maritime Organization (IMO). Available at http://www.imo.org/Conventions/contents.asp?doc_id=678&topic_id=258
"Universal Declaration of Human Rights" - UN High Commissioner for Human Rights (UNHCHR). Available at http://www.unhchr.ch/udhr/lang/eng.htm; adopted June, 1989; entry into force Sept 5, 1991.
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