Chad-Cameroon pipeline sets precedent - World Bank
Copyright 2001 Reuters
November 16, 2001
Story by Barbara Lewis
LONDON - A controversial oil pipeline project in Chad and Cameroon has set new standards for ethical financing in difficult environments, a senior official at the World Bank's International Finance Corporation said yesterday.
"Our involvement has raised the bar with respect to environmental and social issues," Eme Essien, investment officer at the International Finance Corporation told a conference on oil and gas financing.
She also predicted that the current steep fall in oil prices could make investors more inclined towards projects involving international financing bodies, which provide a "comfort level".
The 1,070 kilometre (664.9 miles) pipeline will allow oil to flow for the first time from land-locked Chad across Cameroon and to the Atlantic Ocean, with the first very heavy crude expected by 2004.
Over the project's 25-year lifespan, impoverished Chad is expected to earn around $2 billion, while Cameroon should earn around $500 million.
But environmental and human rights groups remain staunch opponents, saying they are sceptical about its benefits, while Friends of the Earth reiterated calls for a moratorium on World Bank financing for oil and gas projects.
"When one of the greatest problems the world faces is climate change... pumping huge amounts of money into something like oil and gas does not make sense," said Craig Bennett, corporate accountability campaigner for Friends of the Earth.
"It's money that could be going to sustainable energy."
U.S. oil giant Exxon Mobil Corp is the main backer of the more than $3.5 billion project, but the IFC's provision of some $200 million in loans was vital to kick-starting the project last year.
"It provided a comfort level for investors," said Essien.
LOW OIL PRICES COULD ACT AS STIMULUS
Contrary to the wishes of Friends of the Earth, it is possible that there could be more rather than fewer projects of this kind in the future.
"Oil prices were so high, that they (companies) didn't want our financing," Essien said. However, there is another complication now in that "there is a perception of more political risk," she said.
Bert van der Toorn, deputy director of natural resources at the European Bank for Reconstruction and Development said it was possible the pursuit of higher returns could drive some investors to riskier political environments in which case they might seek the reassurance of financiers such as the EBRD.
"What the EBRD (like the World Bank) will seek to extract in return is transition impact, corporate governance," he added.
To answer environmental and ethical concerns, Essien said the IFC had insisted on consultation and monitoring.
Rather than a straight line to the coast, the pipeline had been re-routed to minimise the impact. She said there was negligible" resettlement of about 150 households.
At the same time, the roughly 10 square kilometres (3.861 sq mile) of rain forest which have been lost, are being replaced by more than 500 square kilometres.
Human rights groups remain unconvinced. Bronwen Manby, deputy director of the Africa division at Human Rights Watch, conceded it was "a step forward," but said she was sceptical.
"Yes, it has raised the bar in that it's an innovative project. The question is whether it's going to make any difference. I would be sceptical."