OPIM 5894 Advanced Project management The Chad Cameroon Petroleum Development and Pipeline Project Team 3 Richard Buskey Jonathan Weiss Daniel Mahzonni Prashant Mishra Vijay Gadigeppa Jonathan Koenig

Chad Cameroon Petroleum Dev. How are the sponsors financing this deal? How does the financing of the Field system differ from financing of the Export system? – Equity financing for the Field System Uncertainty with the Oil extraction Oil Companies interested in the oil futures; control of oil – Debt financing for the Export System Certainty with the oil sale profits Treated as a project

Chad Cameroon Petroleum Dev. Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective? – Risks Environmental Impact Indigenous People Long-term sustainability – Risks Mitigation 5 years of review and public debate: Sponsors came up with contingency plans on almost every aspect of the project – Waste Management – Oil spills – Regional development – Indeginous people – Offsite environment – Community health – Compensation and resettlement – Induced access management – Decommissioning – Cultural properties – Environmental Monitoring & Management

Chad Cameroon Petroleum Dev. Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective? – Returns were calculated by Oil price ($9 to $42 over the last 18 years with an average of $20 / barrel Volume consumptions (Could vary b/w 595 milion barrels to 1,038 million barrels) – Fairness to each party Chad – High risk: Environment Impact, Possible re-location of indigenous population – History shows Extraction of Oil does not equal development – Returns: would receive $ 1.8 bill. of cash flow from the project in the form of income taxes, royalties and dividends. Over the 10 years of production (2004 to 2013), income taxes would represent 16% of the total & royalties and dividends would represent the remainder.

Chad Cameroon Petroleum Dev. Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective? – Fairness to each party (Contd.) Cameroon – Most risk because of the pipeline going thru’ their indigenous population, impact to the environment; » Ground water contamination » Natural reserves, Lob waterfalls getting affected » No new job creation – Gets $ 535 million (based on Transit, Pipeline tax and Share of ROE)

Chad Cameroon Petroleum Dev. What is the World Bank/IFC’s role in this deal? Are they likely to be successful? – World Bank had extensive lending and policy experience with developing countries and had been working with Chad and Cameroon for many years – Project was commercially viable – Project would jump start Chad’s listless economy. – Bank could play an important role in protecting the environment as well as the indigenous people – Likely to be successful Based on their history and experience If opportunity is not capitalized, somebody else (Sudan/Libya) would take it over Most of the risks and issues addressed and mitigated as part of the 5 year project review Reputation of IFC Revenue Management Plan

Chad Cameroon Petroleum Dev. Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed? – Project Revenue: $ 14 bill.; Total distributions = $8 bill. – Chad would receive $ 1.8 bill. of cash flow from the project in the form of income taxes, royalties and dividends. – Over the 10 years of production (2004 to 2013), income taxes would represent 16% of the total & royalties and dividends would represent the remainder. – Govt. would have the discretion over how to spend the income tax revenues as long as they were used for general development purposes.

Chad Cameroon Petroleum Dev. Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed? – Royalties and dividends would be deposited into a Special Petroleum Revenue account and distributed in the foll. way: 10% would be deposited in foreign financial institutions and used to finance poverty reduction programs for future generations Of the remaining 90%, – 85% would be deposited in the Chadian commercial banks and used to finance development programs in 5 high priority sectors – education, health & social services, rural development, infrastructure, environment and water resources – 15% would go to the government budget and programs in the Doba region.

Chad Cameroon Petroleum Dev. Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed? – Aspects which need to re-visited Little chance of success without the will of the authorities or the confidence of the population Did not specify how decisions would be made; voting power would be determined Not enough representation from the civil society on the oversight committee; likely to be biased based on the government’s actions

Chad Cameroon Petroleum Dev. Would you approve the deal as a World Bank/IFC Board member? – It is an opportunity; studied the project for 5 years and addressed all issues and concerns. – Choice between not doing it or doing it – Rewards outweighs the risks