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Chad-Cameroon Oil Pipeline To Bring Wealth to African Nations - 2003-07-15

The landlocked central African nation of Chad is becoming the world's newest petro-state.

This week, oil is starting to flow from oil fields in southern Chad into a pipeline towards a terminal in the Atlantic Ocean off Cameroon.

The more than 1,000-kilometer pipeline was partly funded by the World Bank. It will take several months before the first tanker is loaded.

At full capacity, the project is expected to generate up to 250,000 barrels of oil a day. Over the next 25 years, oil revenues could amount to about $2 billion for Chad - a desert nation of eight million people, where most live on less than one dollar a day. Oil companies could reap $20 billion in profits.

More than 100 non-governmental organizations took part in negotiations to establish guidelines for the funding of the project. The guidelines cover such subjects as oil revenue management and environmental standards.

A leading advocate of this approach, Ian Gary, of the Catholic Relief Services, said if everything goes according to plan, oil production should benefit Chad's people.

"They've made a good first step in that the Chadian government in 1999 adopted an oil revenue management law," he said. "This was passed by parliament and it directs oil revenues to key sectors like education and health so there are specific legal earmarks for spending and they have also set up a joint civil society government revenue oversight committee which is a nine-person body and it's an innovation that people are watching closely in Chad."

A U.S.-based oil consultant for Global Pacific and Partners, Tim Zoba, agreed this new system is very exciting, but he warns it remains to be seen whether it will work. "This project represents really a new model which we refer to as oil paternalism because what the government has basically done is cede sovereignty over their oil revenue," he said. "It's really the first time such a model has been used for an oil development program. The sad fact is that large amounts of oil revenue have historically tended to add to instability rather than detract from it so it's a little too early to tell if this model will work successfully."

The World Economic Forum has recently ranked Chad as the most corrupt African nation, leading to some skepticism.

Chad's government has also been battling rebels in the north and has already used some of the advance oil money to buy weapons, leading to a cut in funding from the International Monetary Fund.

Instability in Chad during the 1990s led several major European oil companies to withdraw from the project, which is now led by U.S.-based ExxonMobil and Malaysia's Petronas.

Non-governmental organizations are calling on these companies to be more transparent in their finances as well, so Chad's government can be monitored more effectively as it embarks on a new era of oil production.