Chad hiding behind an oil-rich facade

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“I don’t understand how the oil is being extracted on my doorstep, yet by the time it reaches me it’s more expensive than before!” exclaims Abangar Basswa, a resident of Koudalwa village, near Bongor in south-western Chad. Basswa’s comments are symptomatic of the local community’s frustration that the cost of bringing refined oil back to the region in tankers along badly built road means that any benefit from its original cheaper price has been lost.

The Guardian reports that two giant storage tanks of a central processing facility for China National Petroleum’s oil extraction project now stand near Koudalwa; just four years ago, the site was thick bush. According to the author, “Pipelines stretch far into the distance, and a constant roar and a whiff of petrol reminds villagers of the gas flare that burns day and night a few kilometres away.” Those pipelines stretch 300 kilometres to a refinery built by the Chinese at Djermaya, near the capital, N’Djamena. Locally produced fuel has been on the market since 2011.

Although Basswa may not getting the benefits of cheap oil, he does admit that the project has had a positive effect on the village: it had a new school and several water pumps, thanks to CNP. “Like everyone, we just want the best future for our kids,” he says.

However, not all is as rosy as it seems. When Chad’s oil project kicked off in 2003, it came with a monumental effort to ensure that most of the oil revenue would be used for poverty reduction and social development. One aspect of this deal was that 5 percent of royalties were earmarked for developing the Doba producing region in southern Chad.

One of the projects was to build a university. Although a university was built, two years later, it still does not have enough benches for the students, and library does not have a single book. Critics have also asked why a town of 50,000 people needs a university, particularly when only about 6,000 students nationally passed the annual baccalaureate exams this year.

Stories like this abound in Chad, which had earned US$10 billion since the oil began to flow. This outweighs the original projection of about US$2.5 billion for the 30 year life of the project. There’s clearly no shortage of money, but after 10 years of elevated income, the country still performs poorly across a host of development indicators – literacy is 34 percent, under five mortality is 169 per 1,000 live births, and the country was 184th of 187 in the UN’s latest human development index.

             According to the Guardian article, Estimates suggest Chad’s oil could be exhausted by 2030, and Esso has experienced a sharp fall in productivity, from 225,000 bpd in 2003. The IMF has been vocal about the economy’s heavy dependence on oil, while other key sectors such as agriculture are ignored. When oil prices crashed in 2009, the government’s fiscal situation was precarious as it had already committed to infrastructure projects based on expectations of high prices.”

It seems Chad is seeing country-changing revenues from its oil projects, but little has changed beneath the surface. When combined with an economy so dependent on oil, the country may soon find itself in a worrying situation.

(Further reading: http://www.theguardian.com/world/2013/may/21/chad-oil-revenue-share-discontent)

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One thought on “Chad hiding behind an oil-rich facade

  1. Pingback: Chad suspends China firm CNPC over oil spill | theoilandgasworld

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