Projects and Loans in Africa

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Summary Table of Contents Introduction MDB Assistance Proposals - By Region & Country   > Africa      Africa (page 2)      Asia & Pacific      Europe & Central Asia      Latin Amer. & Caribbean      Middle East & N. Africa Acronyms 53     1. Western Africa: IDA/AfDB-Regional Hydropower Development (Mali, Mauritania, and Senegal) PROJECT DATA Projected AfDB: $20 million. IDA funding: $38 million. Projected Total Cost: $444 million. Tentative AfDB board date: Indefinite. WB board date: June 1997. Stage: AfDB negotiations completed in November 1997, but board consideration awaits a policy determination on multinational projects. World Bank approved its loan in June 1997. AfDB environmental category I. World Bank environmental assessment (EA) category A. WB project I.D.: SNPA46648. Project first entered: March 1997. Entry last updated: April 1999, with additional USAID notes, mid-2000, below. DESCRIPTION OF PROJECT The main objectives of this proposed project are to a) install power generation capacity to generate economic and financial benefits from the Manantali dam, which has already been built, and encourage cooperation and energy exchanges between the three member countries; b) help minimize the long-term cost of electricity supply to the three countries; c) provide hydropower to help meet increased demand for electricity and reduce fuel costs (in Dakar, Bamako, and Nouakchott); d) strengthen the Organization of the Development of the Senegal River (OMVS) and the power sector entities in the three countries and establish an effective organization to manage and operate the Manantali dam and project facilities with satisfactory procedures, in particular regarding safety, health, and environment protection; and e) contribute to development of traditional agriculture downstream through the rational management of the Manantali reservoir. The proposed project would include the following components: Construction of a 200-MW hydroelectric plant (5 units of 40 MW each and civil works); construction of a 225-KV high-voltage transmission lines to Bamako (306 km) and to Dakar (821 km) along the Senegal River and a 132-KV transmission line to Nouakchott (219 km); construction of 11 substations and a dispatching center; supervision of project construction; technical assistance and training (support to OMVS and the Sociétié de Gestio de l' Énergie de Manantali (SOGEM), including regulatory, reservoir management, health, and environment aspects and the recruitment of a private operator for the project). USAID'S COMMENTS - 1999 (See Update Below) The bank recognizes downstream and water management issues for the lower Senegal River in conjunction with this project. It has the potential to promote a win-win development program-by achieving sound development goals with economic, environmental, and social sustainability. However, it is not clear from the EA and other project documents that the project design takes full advantage of this opportunity. Background. Since its completion in the late 1980s, the Manantali Dam on the Bafing River in Mali, which controls about 45 percent of the total Senegal River flow, has aggravated environmental and socioeconomic conditions downstream, adversely affecting the well-being of hundreds of thousands of riparian households. The pre-dam flood regime supported a dense human and livestock population in a low-rainfall area. The flood made possible a sustainable seasonal succession of fishing, herding, flood-recession farming, reforestation, and aquifer recharge. The cessation of the natural flood and the inconsistent and flawed attempts to provide simulated floods have resulted in incidents of social conflict in the valley. Herders and fishers now must compete for land and water resources they previously were able to use mutually. Poverty and migration out of the area have increased, as productive yields have declined. Labor burdens for women, children, and the elderly have increased without corresponding increases in income. USAID realizes that this project is trying to rectify some of the downstream impacts that the dam has had, while trying to realize its economic potential through hydropower development. However, the environmental assessment summary (January 1997) does not analyze the downstream environmental and social impacts that the Manantali has had. Nor does it refer to a host of studies on the subject. Though the EA proposes a Water Management Optimization Program to address downstream issues, it is vague on what OMVS will be held accountable to. USAID supported the Institute for Development Anthropology's studies of resettlement upstream from the dam and environmental and socioeconomic impacts of the changed river regime downstream. These studies conclude that a properly managed release of reservoir waters replicating the natural flood would substantially restore the pre-dam production system without adversely affecting hydropower potential. The issue of dam management has been much debated and politicized. On the basis of the above research, the government of Senegal is willing to follow recommendations regarding a controlled release program. Mali has been indifferent on the subject, as long as power is generated, since most of the floodplain is downstream from the country. Mauritania is apparently resistant to the idea, since it is seeking a shift from traditional production to large-scale irrigation. USAID understands that the French agency ORSTOM has been selected to carry out an optimization study. It was USAID's perception that ORSTOM historically has shown little enthusiasm for maintaining the traditional production system, and its river-flow model for dam releases should be replaced by one based on rainfall and runoff data from the Fouta Djallon, where at least five collection stations are tied into the meteorological satellite network. The latter model would substantially enhance real-time forecasting and should be carefully considered. A comparative analysis of the two models would be in order. The World Bank reported that ORSTOM is using real-time (teledetection) modeling based on rainfall and runoff data upstream. It is also using real-time modeling on measured flows of downstream river tributaries (for better timing of the artificial flood). USAID suggested the following: The bank should try to leverage as much as possible a policy change at OMVS, to include as one of its fundamental objectives management of the Senegal River basin for recessional agriculture and other flood-based activities in an integrated way with electricity production. Loan disbursements should be conditioned on the successful implementation of this integrated approach. Especially, the private operator of the project should have incentives and disincentives in its contract that would ensure an optimal artificial flood while producing a maximum of electricity. The operator should not receive bonuses based on electricity production alone. Downstream villages should be given representation on the board of OMVS-or in some other significant way have an ongoing voice in reservoir management. The project's environmental assessment should be expanded to include (or refer to) an analysis of downstream environmental and social impacts. USAID and World Bank staff met regarding the above issues. The bank followed up with these comments: Although the EA summary of January 1997 is not clear on how the project would contribute to achieving the sound, use-balanced management of water resources from the Manantali reservoir, this issue is much better addressed in the Environment Impact Mitigation and Monitoring Plan (PASIE). The plan has just been finalized by OMVS and its consultant, as well as in the corresponding sections of the SAR on environment, social, and health aspects, which was to have been sent to the board during the first week of June 1997. These aspects will be discussed during credit negotiations. Specifically, agreements must be reached on 1) detailed actions and budget to carry out the environmental impact mitigation and monitoring program, in particular for involuntary resettlement and land acquisition, and 2) final terms of reference for preparing the Manantali reservoir management agreement. On background, the three countries will, through OMVS, undertake an agreement (charter) for the sound management of the Manantali reservoir. OMVS will be held accountable for monitoring the proper application of the agreement, while the private operator of the hydropower plant will be charged of the actual implementation of the reservoir management program. Adequate dispositions will be defined in detail during the studies financed under the project by IDA, the Canadian International Development Agency, and France. The study, contracted by the bank to a hydrology specialist during project preparation, confirms the results of other detailed studies regarding the need/feasibility of maintaining artificial flooding without adversely affecting hydropower potential. Also as background: after verification with bank staff working in the agriculture sector in this country, Mauritania is not "resistant to the idea [of a controlled release program], since it is seeking a shift from traditional production to large-scale irrigation." Indeed, in its report Mauritania clearly defines the important role that artificial flooding will continue to play in the valley, complementing the irrigation program. On USAID suggestions: That suggested in this section is precisely what will be done through the project—OMVS subscribing to a charter for sound management of the Manantali reservoir; dated covenant in credit agreements regarding this charter; and adequate incentives and disincentives in the contract of the private operator to ensure application of the charter's dispositions for artificial flooding. It is not planned, however, to expand the EA on downstream environmental and social impacts, because both the EA and the PASIE refer to detailed studies carried out on these aspects and in large part endorse their conclusions. The World Bank's financing of the project was approved and signed in June 1997. The African Development Bank's financing decision was delayed until early in 2000, pending passage of its policy on multinational projects. USAID remains concerned about how sound management of the Manantali reservoir will be achieved as the operating principles or objectives of the charter have yet to be defined. Agency review of the study concluded that it indicates hydropower would compete with flooding. USAID in May 1998 began work on disseminating information on the project to downstream water users and other stakeholders. The Agency will continue to work with the banks on these issues. Mid-2000 update. The board approved the loan in March 2000 despite continuing questions raised by the U.S. Environmental Protection Agency, USAID, and others. There were questions about moving forward when various aspects of assessment appeared incomplete, about resources that appear to have been unwisely spent since the dam was built in 1988, about the risk of corruption, and about the extent to which traditional seasonal flooding downstream would be replicated so as to sustain traditional fishing and agriculture and the ecosystem services overall. USAID's Africa regional bureau continues to monitor this multifaceted project. Benin: World Bank—Power PROJECT DATA Environmental assessment category A. US$35 million (IDA). Consulting services will be required for a) institutional reform and restructuring measures and b) engineering and preparation of the bidding documents. Societé béninoise d'électricité et d'eau (SBEE), Direction générale, Carré No. 9, BP 123, Cotonou, Benin, tel: (229) 31-21-62, fax: (229) 31-50-28, contact: M.C. Kohoue, directeur général. DESCRIPTION OF PROJECT Seventh Power: The project will support a) institutional reform measures, including privatization of the distribution utilities and reinforcement and expansion of the transmission and distribution systems; and b) creation of a business environment for private sector power generation. Appraisal mission was scheduled for January 2001. USAID'S COMMENTS The issues here include whether the government and market are ready to reap the maximum benefit from selling off utility resources while controlling negative impacts ranging from increased rates unaffordable by the poor to rapid expansion of the system without adequate assessment of the alternative generation and conservation options. 3. Cameroon: IDA—Railway Concession PROJECT DATA (2000) Environmental assessment category B. PID: CMPE54786. US$22 million (IDA). Consulting services to be determined. Infrastructure and Equipment Rehabilitation and Informatics. Components: CAMRAIL, 51, Rue Louis Blanc, 92400 Courbevoie, France, Tel: (33-1) 41-41-54-92, Fax: (33-1) 41-41-50-38, contact: Mr. Monpert; Management Capacity Development Component: Ministry of Transport, Ministry of Economy and Finance, Ministry of Public Investment, Yaoundé, Cameroon, tel: (237) 23-97-50, fax: (237) 25-51-08. Contact: Bassoro Aminou, president of the Privatization Committee. DESCRIPTION OF PROJECT Railway concession: The project will assist the government in concessioning the railway company to the private sector. Board presentation is scheduled for August 2000.USAID'S 2000 COMMENTS The issues here include whether the government and market are ready to reap the maximum benefits from privatizing a railway. These include the environmental and natural resource benefit of its being the most efficient land mode of transporting large weights and volumes and the reduction of the need for roads that have unintended effects upon wildlife and indigenous peoples such as increasing bush-meat harvest and trade and migration into the area. If allowed to decline in public or private hands, a lack of transportation results. Either can lead to excess attempted use of unimproved roads leading to public safety risks, road erosion, further runoff, siltation, and other problems. To the extent that USAID is asked to review economic viability, the Agency considers what the supply-and-demand situation is when selling off a large government industry that is vital to the public welfare, so that the institution and the government will both retain the ability to do their parts. 2001 UPDATE Transport Railway Concession: The project will assist the government in concessioning the railway company to the private sector. Board presentation is scheduled for February 2002. Environmental Assessment Category A. PID: CMPE54786. US$ 22.0 (IDA). Consulting services to be determined. Infrastructure and Equipment Rehabilitation and Informatics Components: CAMRAIL, 51, Rue Louis Blanc, 92400 Courbevoie, France, Tel: (33-1) 41-41-54-92, Fax: (33-1) 41-41-50-38, Contact: Mr. Monpert; Management Capacity Development Component: Ministry of Transport, Ministry of Economy and Finance, Ministry of Public Investment, Yaoundé, Cameroon, Tel: (237) 23-97-50, Fax: (237) 25-51-08, Contact: BassoroAminou, President of the Privatization Committee. 4. Chad—Cameroon: International Bank for Reconstruction and Development/International Finance Corporation—Petroleum Development and Pipeline OVERALL PROJECT DATA Stage: Approved, along with capacity building projects. World Bank environmental assessment category A. IBRD Project I.D.: TDPE44305. IFC Project I.D.: 4338. Project first entered: March 1997. Entry last updated: August 2001. DESCRIPTION OF OVERALL PROJECT This project is a cluster of projects summarized in the following short entries. The longer description, drawn in part from the entry in the 1999 USAID report and in part from action in 2000, is merely a summary of a complex series of reviews, meetings, and memorandums that continue as the relevant agencies of various governments and the World Bank follow through on commitments made in the approval process. Further information is available from USAID, the U.S. Treasury Department, and several NGOs—including Environmental Defense and the Center for International Environmental Law. The core of the project is a $3.7 billion pipeline from Chad to Cameroon's Atlantic coast and a port facility to load oil onto tankers. In January 2000, in response to the acknowledged need to increase the capacity of both countries' governments to regulate such operations and to manage the revenue from them, the bank added capacity-building projects. The project will provide support to the Chad and Cameroon governments in implementing the Chad-Cameroon pipeline, especially with respect to environmental issues and development of domestic oil resources. It involves developing Chad's oilfields and constructing a petroleum export pipeline from the south of Chad to the Atlantic coast of Cameroon and related marine installations. The objectives of the project are To promote the economic growth of Chad and Cameroon through the private sector-led development of Chad's substantial petroleum reserves and their export through Cameroon To strengthen Chad's management of petroleum revenues through a technical assistance component To strengthen the capacity of Chad and Cameroon to monitor the consortium's activities and develop and implement environmental safeguards The project involves Developing 300 production wells in Chad's Doba oilfields Constructing a 30-inch, 1,050-km buried pipeline (170 km in Chad, 880 km in Cameroon) from Chad's oilfields to Cameroon's Atlantic coast, and related pumping stations, ancillary facilities, and infrastructure Installing marine export terminal facilities in Cameroon (a moored floating storage and offloading vessel) and associated marine pipelines and related facilities The following are the elements included in this cluster of projects: 4-a. Cameroon—Environment/Governance. SUBPROJECT DATA (R) Petroleum Environment Capacity Enhancement (formerly Environment Oil Technical Assistance); (Cr. 3372-CM): approved 6 June 2000 by the executive directors. Environmental assessment category C. PID: CMPE48204. US $5.77 million (IDA). Consulting services to be determined. Implementing agency to be determined. DESCRIPTION OF SUBPROJECT The project will provide support to the government of Cameroon in implementing the environment mitigation plan for the Chad-Cameroon pipeline. 4-b. Cameroon—Power/Pipeline SUBPROJECT DATA (R) Petroleum Development and Pipeline (Ln. 7020-CM): Approved 6 June 2000 by the executive directors. Environmental assessment category A. PID: CMPE51059. US$55 million (IBRD). Consulting services to be determined. Implementing agency to be determined. DESCRIPTION OF SUBPROJECT The project involves a) constructing a petroleum export pipeline from the south of Chad to the Atlantic coast of Cameroon and related marine installations and b) developing Chad's oilfields. 4-c. Chad—Power/Pipeline SUBPROJECT DATA (R) Petroleum Development and Pipeline (Ln. 4558-CD): Approved 6 June 2000 by the executive directors. Environmental assessment category A. The final environmental assessment is available from the World Bank's Infoshop. PID: TDPE44305. US$35 million (IBRD). Consulting services to be determined. Project Services Manager, Esso Exploration and Production Chad, Inc., 800 Gessner, Suite 400, Houston, Texas, USA 77024, fax: (1-713) 973-5230; Ministry of Mines, Energy, and Petroleum, BP 816, N'Djamena, Chad, tel: (235) 51-21-88, fax: (235) 51-25-65, 51-30-43; Société nationale d'hydrocarbures, BP 955, Yaoundé, Cameroon, tel: (237) 20-19-10, fax: (237) 20-46-51. DESCRIPTION OF SUBPROJECT The project will support a) constructing a pipeline to the coast of Cameroon, b) developing the Doba oilfields, and c) transporting oil from Chad to the coast of Cameroon. 4-d. Chad—Power/Governance SUBPROJECT DATA (R) Petroleum Sector Management Capacity-Building (formerly Petroleum Technical Assistance/Oil Sector); (Cr. 3373-CD): Approved 6 June 2000 by the executive directors. Environmental assessment category B. PID: TDPE48202. US$24 million (IBRD/IDA). Consulting services to be determined. Ministry of Mines, Energy, Hydraulics, and Petroleum, N'Djamena, Chad. 4-e. Chad—Management of the Petroleum Economy Project SUBPROJECT DATA Original unit: AFC07. Last updated: 27August 27 2001. Project status: active. Sector: public sector management. Subsector: other public sector management. Environmental category C. Bank team lead: Huybens Elisabeth. Project ID: P062840. Main Loan/Credit #: 33160. Approval Date: 27 January 2000. Closing Date: 30 June 2005. IBRD commitment: 0. IDA commitment: $17.5 million. IBRD+IDA Comm.: $17.5 million. Grant Amount: 0. Total Project Cost: $17.5 million. Product line: IBRD/IDA. Lending Instrument: specific investment loan. Borrower: government of Chad. Implementing Agency: Cellule Économique—Presidency of the Republic. DESCRIPTION OF SUBPROJECT This subproject was approved in January 2000, several months ahead of the other components it supports. The project development objective is to help Chad deploy oil revenue efficiently and transparently to reduce poverty. The proposed project accompanies the proposed IBRD participation in the Chad-Cameroon Petroleum Pipeline Project and an IDA technical assistance project to strengthen the management of the petroleum sector and environmental management. It also complements IDA operations supporting expenditure programs in the priority poverty reduction sectors. The project would build capacity in Chad to help integrate sector programs within a viable consolidated budget and public expenditure framework, manage macroeconomic distortions induced by oil exports, provide the analytical underpinning for the allocation of public resources to poverty reduction, implement the mechanisms mandated by law for the control and oversight of oil revenues, associate the civil society to policy formulation, and inform it on the outcomes of public resource use. The project would have five components: 1) strengthening of public financial management, by upgrading and rationalizing the budget cycle, including the macroeconomic and public expenditure framework, budgetary programming, revenue mobilization, expenditure circuits, debt and cash flow management, the internal control and audit systems, and financial reporting; 2) production of a poverty database and reporting system and participatory articulation of a strategy for poverty reduction; 3) support to civil service reform, including implementation of reform in key economic administrations; 4) implementation of oversight and control capacities in the Auditor General's Office and the Committee for Oversight and Control of Petroleum Revenue and information of the civil society on the implementation of the petroleum revenue management strategy; and 5) monitoring of economic reform. 4-f. IFC—Petroleum Development and Pipeline Project SUBPROJECT DATA Loans in the amount of $100 million in A-loans and up to $300 million in B-loans to the Chad Oil Transportation Company, S.A. (Project appraisal document, 13 April 2000, WB/IFC Report No. 19343 AFR). The pipeline contribution was changed by April 2000 from the early 1999 figures: Projected IBRD funding: $90 million. Projected IFC funding: $250 million of projected total cost: $3.5 billion. By April 2000 they had become IBRD loans of $39.5 million to Chad, $53.4 million to Cameroon, and IFC loans of $100 million in A-loans and up to $300 million in B-loans to Chad and Cameroon Oil Transportation Companies. Private sector sponsors: Exxon-Mobil International, Petronas, and Chevron. (Royal Dutch Shell and Elf Aquitaine withdrew.) Exxon's local affiliate was to be the operator of the project—as of April 2000 the operators were the Chad and Cameroon Oil Transportation Companies. DESCRIPTION OF SUBPROJECT The following is derived from the IFC's July 2001 description of the overall project. The project is to develop the oilfields at Doba in southern Chad (at a cost of US$1.5 billion) and construct a 1,070-kilometer pipeline to offshore oil-loading facilities on Cameroon's Atlantic coast ($2.2 billion). The sponsors are Exxon-Mobil of the United States (the operator, with 40 percent of the private equity), Petronas of Malaysia (35 percent), and Chevron of the United States (25 percent). The project could result in nearly $2 billion in revenues for Chad (averaging $80 million per year) and $500 million for Cameroon (averaging $20 million per year) over the 25-year production period. Rationale. This project could transform the economy of Chad. At the moment, the country is so poor that it cannot afford the minimum public services necessary for a decent life. By 2004, the pipeline could increase government revenues by 45-50 percent a year and allow it to use those resources for important investments in health, education, environment, infrastructure, and rural development—all necessary to reduce poverty. Status. On 6 June 2000 the Board of Directors of IBRD, IDA (the World Bank's lending arm for the poorest countries), and IFC approved lending for the Chad-Cameroon Petroleum Development and Pipeline Project and two related capacity-building projects, one project each in Chad and Cameroon for petroleum, environmental, and social aspects associated with petroleum development and export. The board approved an IDA credit for revenue management in Chad in January 2000. Physical implementation of the project has started. The first contractors for the infrastructure works and the oil-field facilities were mobilized in September 2000. Project description and financing. The Petroleum Development Project involves a) developing Chad's Doba oilfields, b) constructing a buried pipeline (1,070 km in length, 76 cm in diameter) from Doba to Cameroon's Atlantic coast near Kribi, related pumping stations, ancillary facilities, and infrastructure, and c) installing an offshore moored floating storage, offloading vessel 11 km out to sea, associated marine pipelines, and related facilities. Construction will take three years. Oil could begin to be exported by the end of 2003. Chad and Cameroon are likely to benefit from oil revenues over the 25-year production period, in amounts totaling more than US$1.8 billion (in royalties, dividends, and taxes) for Chad and more than $500 million (in transit fees, dividends, and taxes) for Cameroon. Total project costs are estimated at about US$3.7 billion, with $1.5 billion for development of the oilfields in Chad (field facilities) and $2.2 billion for the pipeline and marine facilities (the export system). The project's private sponsors (led by Exxon-Mobil, the operator, Petronas, and Chevron) are financing about $3 billion or 81 percent of the project costs from their own resources, including 100 percent of the field facilities. About $600 million in debt financing for the export system has been obtained by the sponsors from export credit agencies and commercial banks. The World Bank Group is providing $92.9 million in IBRD loans ($39.5 million to Chad and $53.4 million to Cameroon, amounting to about 3 percent of project costs) for financing the two governments' minority holdings in the joint-venture pipeline companies (TOTCO in Chad and COTCO in Cameroon). The World Bank's private sector affiliate, the IFC, is providing an A-loan of $100 million ($85.5 million to COTCO and $14.5 million to TOTCO), about 2.7 percent of the total debt, and has mobilized another $300 million (for COTCO and TOTCO) in commercial lending under a B-loan umbrella. Additional borrowing for the export system has been obtained from U.S. and French export credit agencies. The European Investment Bank is providing $41.5 million to finance Chad's and Cameroon's equity in the two joint-venture oil companies, TOTCO and COTCO ($15 million and $25.5 million, respectively). USAID'S COMMENTS We will first summarize the improvements achieved through the intervention of the USG and others. We will then review the process that led to those improvements and some of the questions or issues that remain. Summary of Reviews and Improvements Achieved By the Time of the Board Vote USG internal review of this project was the most extensive interagency process ever run by the USG for an MDB project. This included perhaps a dozen different meetings, with World Bank staff, NGOs and several agencies. These were accompanied by an extensive volume of informal communications by USG agencies, both internally and with outside groups. The project contains an array of safeguard measures, some of which are unprecedented for World Bank operations. Over the years leading up to the World Bank Board approval, significant improvements were made to the project at U.S. urging. For example, a revenue management plan intended to provide both transparency and accountability in the handling of oil revenues was introduced in Chad. The government and Parliament approved the structure of this plan under the Revenue Management Law. Under the plan, oil revenues will be directed to a series of sub-accounts including commercially managed off-shore escrow accounts, a "Future Generations" savings account, and special commercial bank accounts. Also, a portion will go directly to the budget for general government budgetary purposes. Eighty percent of the direct revenues will be earmarked for priority social investments such as health and education; five percent will go directly to the oil-producing region. An oversight committee, nearly half comprised of civil society/NGO representatives in addition to a member of the Supreme Court and two Parliamentarians, will have authority to authorize disbursements of oil revenues from the commercial banks to the general government budget. Significant improvements were also made, again with U.S. active engagement, with respect to environmental issues. The World Bank rejected the original Environmental Management Plan (EMP) as inadequate and, as noted earlier, worked with the project sponsors to reroute significant parts of the pipeline to avoid certain sensitive wildlife habitats and resettlement of indigenous communities. In addition, two new national parks in Cameroon were designated as "offsets" to compensate for losses of special wildlife habitat that will occur. Provisions for monitoring the Environmental Management Plan were improved by providing that the normal monitoring by the private sponsors and governments will be supplemented by external consultants and experts. The Bank also agreed to an independent high level international advisory group, which the U.S. and other shareholders had sought. The Bank included conditions or "covenants" in its loan and project agreements that could lead to suspension of disbursements and accelerated repayment of World Bank loans if the Chadian revenue management plan and/or elements of the EMP are not developed or implemented. Thus, at the time of the Board vote, the project had substantially improved, both conceptually and with respect to specific design elements. To the majority of agencies, the overall structure of the project appeared sound. USAID'S COMMENTS (BEFORE 2000) This is said to be the largest construction project in sub-Saharan Africa. The project is mentioned in the World Bank's country program strategies for Chad and Cameroon. Local environmental NGOs have shared with USAID their concerns regarding the three alternative pipeline routes and how they would affect sensitive ecosystems. These NGOs indicated their sense of inadequate public consultation in conjunction with the environmental impact assessment (EIA) because the document was not readily available within Cameroon. While clearing for construction preparation had begun south of Kribi, the EIA could be read only inside a certain office where photocopying was not possible. The U.S. executive director's office hosted a January 1999 briefing by bank staff for interested U.S. government agencies. In 1999 USAID understood the Bank staff to have announced that they would produce a "unified environmental and social assessment" that would include all assessment and related documents): Environmental assessments for Chad and Cameroon received November 1997 Environmental mitigation plan for Chad—November 1997 Environmental mitigation plan for Cameroon—February 1998 Chad compensation/resettlement plan—February 1998 Cameroon compensation plan—September 1998 Chad and Cameroon environmental mitigation plans (including technical specification Chad compensation/resettlement plan Cameroon compensation plan Chad rural development plan Community health outreach program Oil-spill response plan Decommissioning plan Indigenous peoples plan in Cameroon Environmental offset program in Cameroon Bank staff were hoping for a July 1999 board date. But this was ultimately delayed a year owing, in part, to the withdrawal of a major project partner and, in part, to a 120-day requirement for public review of the environmental assessment before the board vote. Until the unified environmental assessment document and supporting material are on file at the World Bank, the U.S. government does not begin to count the 120-day period required by both the Pelosi Amendment and by World Bank policy. According to staff, preliminary disclosure and consultation with local peoples would happen before the official transfer of the final project documents. Revisions to many of the aforementioned documents were made after review by the World Bank, the executive directors' offices, the Chad and Cameroon governments, in-country public review, and international NGOs. Progress was made on the pipeline rerouting issue. A meeting was held with the government of Cameroon, the consortium, and bank staff, during which rerouting was discussed extensively. The pipeline will avoid, in part, some sensitive areas that were of concern: The Mbere Rift Valley near Chad has been avoided (the pipeline will follow the ridge); most of the Deng Deng forest was to be avoided (the pipeline will now follow a railroad through central Cameroon); environmental offset areas were still pending as new sites for protection have yet to be chosen by the government of Cameroon. The proposed trust fund would underwrite costs for the management of the new protected areas. The pipeline must go through coastal forests to get to the shore. By April 1999 some resettlement in Chad had occurred. There were no plans for resettlement in Cameroon—only compensation for lost land. In early 1999 there was still no indigenous peoples plan for the project, nor had the associated trust fund plan been established. The bank was consulting with the Global Environmental Facility on how to manage the trust fund. A new revenue management law was passed in Chad, though it is unclear to what degree this law will affect the project. In 1999, USAID noted that the World Bank's leverage to push for equitable revenue sharing on the Chad side is limited, but the Bank said that it would include language in the loan agreement stipulating that Chad's failure to comply with requirements will negatively affect future Bank funding for the country. Questions continue to surround the security situation and the role of the military in Chad. Other issues were discussed at the 1999 Bank staff briefing, including additional oil production areas in Chad and their possible connection to the project, project design capacity, the regional development plan, and the policy letter approved by Chad's parliament. USAID'S COMMENTS (IN MID-2001) While the opportunities from this project are great, so are the risks. This is a large and complex project and Chad and Cameroon have poor underlying policy environments. Both countries have severe governance problems and limited capacity. More generally, the history of oil development projects in Africa is poor. Like Angola and Nigeria, this area is rife with strife though it has not yet seen its richest natural resources tapped. The central question is whether the countries are ready to ensure that those resources contribute to development and not to a cycle of degradation and conflict. In January 2000, in response to the acknowledged need to increase the capacity of both countries' governments to regulate such operations and to manage the revenue from them, the bank added capacity-building projects. The Bank categorized these as category B and C loans, which the Bank does not require to have full environmental assessments. The EA that had been circulated for the pipeline project itself was from the oil consortium. In USAID's view, a more comprehensive EA could have addressed more clearly and officially many questions, especially about a) financing and legal and institutional responsibility for oil spills and b) establishment and management of parks set aside to conserve biodiversity reduced by the direct and indirect impact of the project, and the role of the governments of Chad and Cameroon in each aspect of the overall project from environmental assessment to de-commissioning. There also were questions about the funding adequacy of the indigenous peoples plan, the governance capacity of both governments, the cumulative impact of the project on the poor and displaced peoples (particularly pygmy minorities), and the details about an international advisory group (such as its budget, its powers, and its relationship to other aspects of project oversight). USAID noted these concerns in meetings and memoranda. This cluster of loans was considered in interagency meetings and bank briefings throughout the first six months of 2000. After requesting and receiving copies of the loan agreements between the consortium and the governments, USAID felt they contained unresolved legal questions that could potentially lead to environmental problems. For example, though the capacity-building projects were aimed in part at building the capacity to regulate oil development, it was unclear whether adequate environmental laws and specific standards and controls would be in place in time before the oil began to flow and enforceable by the consortium and the governments. The effect of the project on the indigenous Bakola (whom some refer to as pygmy) people was and remains another issue of concern. It is addressed in the Indigenous Peoples plan, but the adequacy of the consultation and the plan itself is uncertain. This is attributable, in part, to unclear land titles and competition for the use of declining forest resources. Others warned that these problems and others, such as the risk of disease, would be made worse by the in-migration of thousands of job-seekers. Other basic risks also may make the project vulnerable. For example, USAID pointed out that the project still relies on a single-hulled holding ship, feeding oil to single-hulled tankers, instead of double-hulled tankers. Oil-spill risks can be reduced with planning and adequate investment and training, but the extent of that was not determined by the bank in the detail USAID sought at the time of the vote. The specific legal and technical requirements for spill response, management and funding for parks created to offset the harm done by the pipeline to natural areas, and other issues were unclear and scheduled to be clarified after the loans were approved. As noted above, the Chad-Cameroon pipeline project was improved by the time it was approved in mid-2000, but in USAID's view it had then and still seems to have many shortcomings. For example, the project, at the time of Board vote, had no controls for likely exotic invasive species infestation through the dumping of ballast water as tankers take on oil. USAID asked the National Council on Invasive Species to address the question during interagency consideration of the loans. The NCIS pointed out in a memo sent to USAID and the U.S. Treasury Department that [F]or several years, it has been U.S. government policy to reduce the risks associated with introductions of organisms via ballast water. Failure to take cognizance of this issue in the pending project would be inconsistent with this policy. In interagency meetings and in a meeting with Exxon, USAID raised the question of how the invasive species issue would be addressed. Copies of the loan agreements for projects are generally not released to the public, but neither the loan agreement nor any other document we have reviewed to date addressed this issue. US agencies, however, intend to follow up on a number of issues, including concerns about invasive species. Concerning the loan to help Cameroon regulate oil's environmental effects, USAID asked if agreements predating the capacity loans and their improvements would limit the ability of the governments to further regulate oil production and revenue. The answer was and remains unclear as to what extent the revenue controls and environmental mitigation plan and environmental assessment controls would apply to new oil (from wells beyond the 300 cited) flowing through this pipeline. The wording of the above Environment/Governance loan to Cameroon in particular was vague as to the timing and application of oil production regulations. The loan does not call for new regulations to control this project and there is a question as to the extent to which any new regulations will be able to control the project or liability arising from it given the various agreements and conditions of different dates. Draft loan agreements, as well as the existing contracts or "conventions" between the governments and the consortium which were made available to agencies before the Board vote, in the opinion of USAID, raised nearly as many questions as they resolved and appeared to be at best unclear as to which environmental and resource protection elements controlled which actions. USAID recommended in interagency meetings that in addition to the authority of the bank to trigger macro-level measures, that in order to ensure environmental and indigenous peoples' protections, that the bank require the anti-corruption measures that the General Accounting Office had recommended in its April 2000 report on World Bank management controls to fight corruption (GAO/NSIAD-00-73) be put in place. USAID also recommended that the loans require early establishment and funding of enforcement systems that would respond to local complaints or allegations of violations of either Bank policy, corporate covenants, or local law with specific remedies in cases where the complaints were found to be justified. USAID continued to remain concerned about governance problems at the time of the pipeline loan and it was our understanding that Cameroon had not yet agreed to take part in the bank's full anticorruption and governance program. The Bank's International Waterways policy requires informed consent of nearby countries such as Equatorial Guinea when the risk of environmental harm from a Bank project is significant. USAID raised this point and asked how Equatorial Guinea had been informed of the risks and how it had given its consent. USAID also noted that the bank's project appraisal document rated the project's overall risk as "significant" and that historically there have been concerns of corruption in the countries involved. In light of such concerns, USAID opposed the project as presented, recommending that the package be revised to address these concerns, reviewed as a coordinated whole through the EA process, and timed to develop confirmed management capacity first, followed by oil development. USAID resolved to work with other agencies and concerned parties and to follow up on the project as a whole, and on particular details such as invasive species prevention measures. That particular matter may not be clarified until the area-specific oil-spill plans are published, despite the fact that invasive species and oil spills are separate concerns. Issues Arising After Board Consideration In the first few months following Board approval of this project, there were developments that required faster implementation of the Government of Chad's Revenue Management Oversight Plan. On April 25, 2000, the Government of Chad received a $25 million signing bonus from Chevron and Petronas, the two new members to the oil company consortium, as a form of compensation for the tax relief that the two previous members of the consortium (Shell and Elf) had negotiated. The tax relief package previously negotiated by Shell and Elf was based on their substantial investments in oil exploration; the $25 million payment to the government of Chad allows Chevron and Petronas to benefit from that same negotiated package without having made the same investments. The bonus payment technically falls outside the scope of the legal covenants or agreements between the World Bank and the government of Chad. Nonetheless, in mid-May, Chadian President Deby committed to the IMF and World Bank to use the bonus money in accordance with the Revenue Management Law. In September 2000, reports confirmed that the bonus was being spent outside mechanisms planned for under the Revenue Management Law. Although the spending of the bonus outside the Revenue Management Law structure did not constitute a breach of the legal agreement or the covenant with the World Bank, it did violate President Deby's commitment. In response to this breach of commitment, the World Bank raised the issue in a number of high level meetings between the Bank and the government of Chad. In a joint IMF/World Bank letter dated October 13, the institutions suggested that the government of Chad take the following actions: freeze the remainder of the bonus until the Oversight Committee is put in place and a commitment is made to spend the rest of the bonus on priority sectors; issue a public report on the spending of the oil bonus to the appropriate institutions, including the Chadian Parliament and the Oversight Committee; fully disclose to the World Bank and IMF all existing government accounts and commit to providing monthly information on their balances; commit to not approve and execute any government spending outside the official monthly treasury cash plan. After a delay in Chad's HIPC decision point, all of these conditions were finally met. Issues Requiring Continued Monitoring Given the inherent risks to this project, the unprecedented nature of the project improvements, and the safeguard measures that were put in place, the USG continues to remain engaged. We have continued the inter-agency review process for monitoring the early implementation of the project. Agencies have been particularly focused on ensuring the following gets done: Area-specific oil spill response plans should be completed and released to the public six months prior to oil shipment. The World Bank and private sponsors need to report on further detailed development of the general oil spill response plan. Invasive species control measures must be proposed and put in place. The World Bank and private sponsors need to assess and report on the adequacy of the funding and management of the offset parks. The World Bank and private sponsors need to assess the need for any possible additional work on the Indigenous People's Plan and then to rectify any uncovered deficiencies. The Revenue Management Oversight Committee's authority may need to be strengthened. There must be public release of the audits of offshore escrow accounts holding the oil revenue. World Bank-supported public expenditure reviews need to be regularly updated and available to the public. Project monitoring reports must be regularly updated and made available to the public. Dissemination of project information to local Chadians and Cameroonians needs to assured. The Bank must clarify the form and frequency of the International Advisory Group (IAG)'s communication and interaction with the Board and public and on the nature of the IAG's operational relationship with the World Bank. Must ensure the adequacy of funds available for the supervision and monitoring of this project. The bank's Interim Fuel for Thought report declared the Chad-Cameroon project to be a model example of a project under its third objective "To promote environmentally sustainable development of energy resources." A fundamental question in USAID's assessment remains: To what extent will the presence of the bank and its capacity-building loans enable affected people to protect themselves from environmental risk or to remedy environmental harms that result either from violations of bank policy or other standards that apply to the pipeline and oil production? USAID believes that the capacity-building loans should be used to build such remedies. On March 22, 2001 the Inspection Panel of the Bank received a Request for Inspection alleging actions in regard to the pipeline and Chad management capacity loans that the Panel initially found could constitute violations of several of the Bank's policies and procedures. On September 12, 2001 the Inspection panel recommended an inspection to resolve differences between the Bank management and the complainant. It was approved by the Board by October 1, 2001, and the inspection, or investigation, began in full. Next Section: Africa continued

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