The Chad-Cameroon Oil Pipeline--Hope for Poverty Reduction?

The constant search by the West for alternative suppliers of energy sources has led it to channel billions of dollars toward oil exploration and pipeline projects (including the Caspian Sea, Mediterranean, and Chad-Cameroon projects). Many developing countries see the exploration for and exploitation of oil as an open path to economic liberalization and an opportunity to control the influence of Western governments and international financial institutions from whom they have constantly begged for assistance and/or high-priced loans. To these countries, exploitation of the oil resource is seen as the best hope for economic, political, and social self-sufficiency, which would pave the way for a transition from a shaky subsistence existence to an industrial economy. The paradox surrounding such hopes is that a total transformation from reliance on primary products to finished processing entails a range of human and technical resources that are lacking or cannot be sustained in many of these countries. Consequently, they are forced to seek assistance to finance exploration of primary resources from the very entities from whom they seek to break.

In Chad, exploration wells revealed the presence of oil in 1975, but efforts to develop this potential were halted in 1981 because of a civil war, which had started in 1979. With the restoration of peace, exploration resumed, and the legal foundation for a Chad-Cameroon pipeline was put into effect in 1988. An agreement was signed that year between the government of Chad and a consortium of Shell, ELF (the French oil company), and ExxonMobil, which was granted an exploration permit valid until 2004. The 1988 agreement called for a thirty-year concession to develop the Doba oil fields in southern Chad and to produce and transport oil to market. However, on 7 February 2000, Shell and ELF pulled out of the consortium because the project was progressing painfully slowly and was becoming too costly. Subsequently, Chevron and Petronas indicated an intention to buy the shares in the consortium held by Shell and ELF. This essay examines the roles played by the governments of Chad and Cameroon, the World Bank, the oil companies, and other interest groups in developing a framework for the project and examines the flaws that are inherent in the project.

The Project in Context

In order to understand the context of the Chad-Cameroon oil development project, it is useful to recall that Chad is a landlocked country with a population of approximately 7 million in the central African region. It is one of the poorest countries in the world, with a per capita gross domestic product of $230 and 40 percent of its national product derived from agriculture, primarily livestock. Cotton and food products are grown in the wet season. In 1995, as Chad was emerging from a protracted era of economic and political crisis, the government embarked on an aggressive program of macroeconomic reform supported by the World Bank, the European Union, France, and Switzerland. The primary objective of this structural adjustment program was to institute meaningful economic reforms that would lead Chad out of the economic problems that had also paralyzed political life. By 1999, Chad had made substantial progress in its reform efforts, although its weak management capacity precluded abiding completely by the reform commitments. Since 1995, Chad has experienced annual growth rates of 5 percent and has maintained low inflation. ¹ But these reform efforts have not begun to address the chronic problem faced by so many: poverty. In fact, those who have suffered the most adverse effects of economic reforms have been those with the lowest incomes.

Cameroon is situated directly to the south of Chad. It has a population of about 14.7 million with an estimated per capita GDP of $650. The country is richly endowed with tropical rainforests, fertile soil, a favorable climate, and a variety of mineral resources. From 1960 to 1985, Cameroon experienced an average annual growth rate of 7...