ExxonMobil Says Backs World Bank Stance In Chad Oil Fund Dispute

ExxonMobil, which leads an international consortium producing oil in Chad, says it supports efforts by the World Bank to persuade the government not to abandon its earlier commitment to earmark the vast majority of its new-found oil revenues to battle poverty in one of the world's poorest nations, reports Platts Commodity News   (12/15).

           
But non-governmental organizations active in Chad and elsewhere in the developing world charge that the supermajor, and its partners in the $4.2 billion project, Chevron and Malaysia's state Petronas, are not using their full powers to hold Chad's government to its word. Nicole Poirier, the head of Catholic Relief Services' operations in Chad, said ExxonMobil and other oil companies there, along with the World Bank and other international entities, have the wherewithal to hold the government to its promises.

           
When the World Bank provided the more than $300 million in financing for the pipeline that would bring from Chad's three Doba fields 670 miles to Cameroon for export abroad, the Chadian government agreed to having most of its oil revenues put into a London escrow account, and under the eye of a joint government-civil society oversight committee, use those funds to fight poverty. Among the funds going into the account was 10 percent set aside into a "Fund for Future Generations" for use once Chad's oil reserves were gone.

           
But faced with a small-scale insurgency, hundreds of thousands of refugees from neighboring Sudan's war-torn Darfur region, and concerned about its own palace coups and with a history of violent changes of regimes, the government in October said it would instead use more of its oil revenues for security efforts and less to battle poverty. The proposed changes included abandoning the Fund for Future Generations, and immediately taking the $27 million so far compiled there. The moves would allow the government to spend up to 30 percent of its oil revenues without oversight, double the current amount.

           
For its part, ExxonMobil said, in response to questions about the Chadian government's plan, that it believes "the overall structure and framework of the Revenue Management Plan are sound and should be retained. We are supportive of efforts through dialogue between the World Bank and the Government of Chad to address financial difficulties the Government of Chad may be facing." The major went on to point out that while the law currently covers only three producing fields, the government's proposal would expand revenue payments to the escrow account to any later-developed fields.

           
The Bank Information Center (BIC), a watchdog group on the activities of multilateral lending institutions, said ExxonMobil could do more. BIC said that ExxonMobil and the Doba consortium "has a responsibility to defend the revenue management system in which it, too, has a reputational stake."

           
The Washington Post meanwhile writes in an editorial on Sunday (12/18) that unless Chad backs down, it will become harder for the World Bank to justify future oil projects in poor countries. Western oil companies that invest in such places will face more criticism, too. The Bank's Chad experiment was always a gamble. Having failed during the 1980s to improve developing countries' policies by attaching conditions to its loans, the World Bank hoped that the creation of a new oversight institution staffed with forceful officials might succeed. This hope has been at least partially vindicated. The flow of petrodollars to Chad's government has remained transparent, which is more than can be said in many African oil states.

The new monitoring agency has reported on how the petrodollars are being spent, criticizing mismanaged projects with an openness that's good for Chad's political culture as well as its efforts against poverty. But the new attitude from Chad's government threatens this progress. The World Bank's new boss, Paul D. Wolfowitz, is belatedly pressuring Chad's government to reconsider this option. But Wolfowitz needs high-level help from other outsiders, notably the American and French governments and Exxon Mobil Corp., which leads the consortium that developed local oil.