Thursday, October 05, 2006

The battle for Chad's oil

The Central African country of Chad is the scene of an intriguing battle of wills involving a corrupt local government, big oil, Darfur and the World Bank. Chad is one of the world’s newest oil exporters and produces 160,000 barrels of crude oil a day which amounts to 6.7 million gallons of oil (there are 42 gallons to the barrel according to BP.) That’s a lot of oil but nowhere near the big league players. In 2004 middle ranking countries such as the UK and Venezuela both produced over two million barrels a day and top-dog Saudi Arabia produced ten million a day. Nonetheless Chad’s oil industry is a significant part of the economy of the 5th poorest country in the world. The landlocked former French colony in the “dead heart of Africa” is now looking to take more control of its oil industry.

On 26 August, President Idriss Déby announced he was kicking the US oil company Chevron and Malaysian-owned Petronas out of the country for non-payment of taxes. Together these two companies own 60% of the consortium running Chad's $4bn oil pipeline. In a statement on state radio he gave the companies a deadline of 24 hours to start making its exit plans. Deby claimed the international companies had avoided paying tax and Chad would now take over the running of its own oil fields.

Chad is one of the newest oil exporting countries in the world, first coming online in 2003. It is not a member of OPEC and uses its oil revenues to subsidise its most poor agricultural economy. Chad has long been handicapped by its landlocked position, poor communication networks, high energy costs, scarce water and a history of political instability. The oil finds are starting to transform a country that previously relied on foreign aid and capital for public and private sector projects. Exxon-Mobil led the consortium that included Chevron and Petronas. The 1000 km oil pipeline was partially funded by the World Bank and links its southern oilfields to terminals on the Atlantic Ocean via Cameroon. In the two years from 2003-2005 Chad earned $US 307 million in oil revenues which amounts to 12.5% on each barrel exported.

However, at least $30 million of this was diverted to buy arms to keep Deby in power. This has placed them directly in conflict with the World Bank and its new President ex-Bush staffer Paul Wolfowitz. According to Forbes, Chad is now the most corrupt country in the world. Idriss Deby has been in power since a coup in 1990. He graduated from the army where he was Commander-in-Chief in the 1980s. He was forced to flee to Libya and Sudan after being accused by then-president Hissène Habré, but organised an insurgent group which eventually took the capital, N'Djaména in December 1990. He has since been elected three times as president in 1996, 2001 and May this year. Each victory occurred under a cloud of electoral irregularity and the opposition boycotted the latest May poll.

Chad fought a costly war with its western neighbour Sudan between 2005 and early this year which was an overflow from the catastrophic Darfur conflict. The conflict started with a border incursion by Sudan which killed 100 people in the Chadian town of Adre. It escalated to involve troops from countries, as well as France and independent military groups such as the notorious Janjaweed group responsible for many of the atrocities in Darfur. In February the two sides signed a peace agreement in Libya. The accord lasted just two months until rebel forces attacked the Chad capital N'Djamena. Deby kept control but was forced to dig deep into his oil reserves to finance his campaigns.

In July, Chad and the World Bank signed a Memorandum of Understanding under which the Government of Chad has committed 70 percent of its budget spending to priority poverty reduction programs, and provided for long-term growth and opportunity by creating a stabilization fund. In September Chevron announced they would pay an unspecified amount of additional taxes in return for being allowed to stay in the country. Though Deby has declared Chad's newly created oil company, Société des Hydrocarbures du Tchad (SHT), should have a 60% stake in the oil pipeline, the country does not yet have the capacity to run its own industry.

What Chad desperately needs now is a lasting peace so that the agreement hammered out with the World Bank can be honoured for its long suffering people. With Darfur still in turmoil, it looks a doubtful prospect.

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