Press Releases

Chad Government Announces the Start of Oil Production in the Country

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Eric Chinje

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Washington, D.C., July 14, 2003—Chad’s petroleum project enters its production phase today with the first flow of oil from wells in the south of the country.  Esso Explorations and Production Chad, Inc., the consortium drilling for oil in the Doba Basin, and the Government of Chad have informed the World Bank Group that implementation of the $3.7 billion project was a year ahead of schedule and that oil should reach loading facilities off the coast of Cameroon and the international market around the end of 2003.  The official inauguration of the project is scheduled for September 30, 2003.

The project is expected to generate substantial revenues for Chad, and the government is committed to using its oil revenues for poverty reduction in accordance with a December 1998 law on revenue management passed by the country’s parliament.  The law set out the government’s poverty reduction objectives and arrangements for the use of revenues:

        Ten percent of royalties and dividends will be held in trust for future generations;

        Five percent will be earmarked for regional development in the oil producing area;

        Eighty percent will be devoted to education, health and social services, rural development, infrastructure and water management.

“This project provides a unique opportunity to raise living standards in one of the world’s  poorest countries,” said the World Bank’s Vice President for Africa, Callisto Madavo. “The World Bank will approach post-production activities with openness and thoroughness, and will  continue working intensively with all stakeholders to ensure that the country is indeed able to use oil revenues  in a transparent manner and for purposes of poverty reduction and development.”

The revenue management law also created an oversight committee, including representatives of civil society, parliament, the Supreme Court and government, to monitor the use of all revenue.  Expenditures from the Special Oil Revenue Account have to be authorized by the oversight committee.  Annual audits of petroleum accounts will be published and regular expenditure reviews will be carried out by the government and the World Bank.

The World Bank has been working to strengthen the capacity of the oversight committee and of the public administration to improve delivery of social, economic, and infrastructure services and to monitor the environmental impact of the project.  

“I am quite confident that the structures are in place to ensure that petroleum resources will result in visible poverty reduction over the coming years and improve living standards in the country,” Gregor Binkert, the World Bank’s Country Manager in N’Djamena said. “Chadian officials are fully aware of what oil has done in some neighboring countries and they certainly do not want to go that road.  Members of government here are keenly conscious of the need to take advantage of this rare opportunity to make a difference in the lives of their citizens and are committed to avoid the problems that have beset other countries in converting oil revenues into lasting benefits for the population..”

Additional benefits from the project include infrastructure improvements in Chad and, to a lesser extent in Cameroon, employment generation, a spur in private investment, and further oil exploration and development in both countries.

“The World Bank Group has also launched an initiative to support the growth and development of small businesses in Chad,” said Peter Woicke, Executive Vice President of the International Finance Corporation. “The IFC is investing in several projects, including a microcredit bank, and is implementing training and technical assistance programs in the country.  We believe the pipeline project will continue to provide opportunities for private sector development in both Chad and Cameroon.”

The IFC, the private sector arm of the World Bank Group, raised $200 million in financing for the project. Woicke noted that this project had “raised the bar” for large, cross-border initiatives, thanks to foresight in the design process, and the continued vigilance on the part of all parties involved.  In the coming years, he said, “we expect that the collaborative effort of the World Bank Group, governments, and project sponsors will ensure that the project continues to meet our stringent policy and safeguard guidelines and sets the standard for similar projects in the region.”

Chad has a population of nearly 8 million, with 80 percent living below the poverty line.  Most of the country is desert or semi-arid land, with a harsh physical environment and a very narrow economic base. Judicious use of oil resources should improve living conditions for the majority of people.  

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