Angelo Acosta

083868
November 17, 2014

The Chad-Cameroon Petroleum Development

and Pipeline Project
Benjamin C. Esty
Harvard Business School

Executive Summary
A consortium of oil companies including Conoco, Chevron, Exxon and Royal Dutch/
Shell has discovered oil in Chad, Africa in the early 1970s. The consortium then decided to mine
the oil with the help of the World Bank and International Finance Corporation as their main
funder, analyst and consultant.
There is now a decision to be made by the World Banks and the International Finance
Corporations Boards of Directors on whether they are going to approve funding for the $4
Billion Chad-Cameroon Petroleum Development and Pipeline Project. There are both supporters
and opposes of the project due to the effect it will have with the natural environment and political
environment of the project.

Statement of the Problem

There are certain questions which are needs to be answered when undertaking the ChadCameroon Petroleum Development and Pipeline Project. They are:
1.
2.
3.
4.

How are the profitability and the feasibility of the Project?

How will it affect the Political Environment of Chad and Cameroon?
How will the project affect the Natural Environment of Chad and Cameroon?
How will the citizens of each of the countries be affected? Both Urban and Rural Citizens
These are the most important questions which needed to be given good consideration by

the Board of Directors of World Bank and International Finance Corporation in order to give the
answer of whether they will go ahead with the project, postpone or cancel.
Causes of the Problem
We would now go into the detail of each of the stated problems above.
How are the profitability and the feasibility of the Project?
The project would consist of known technologies which includes an Export System
which is a 670 mile pipeline buried one meter underground.. It would contain a monitoring
system to detect leaks. It would employ as many as 7000 people during construction and as much
as 500-800 once operations began.
The proposed structure of financing is $2.3 Billion of equity of which $2.2 Billion would
come from private sectors. The base case would produce 883 million barrels with an average
price of $15 per barrel and cost of $5.2 per barrel.
As can be seen this project is highly profitable due to the huge contribution margin and
highly feasible due to the available of the man power and capital once approved by the World
Bank and International Finance Corporation.

How will it affect the Political Environment of Chad and Cameroon?

The project would give a lot of income to both the government of Chad and Cameroon.
There is just a question of these new income would be utilized by the government. As seen from
the background of the government of these 2 countries, there are a lot of uncertainties with
regards to how the money would be utilized.
The World Bank and International Finance Corporation are trying to enforce transparency
and Development projects to ensure that these funds will be used for the betterment of the life of
the citizens.
How will the project affect the Natural Environment of Chad and Cameroon?
There are certain risks that natural environment would be destroyed due to oil spills and
the construction of the pipeline. There is the instance of a fresh waterfall with the possibility to
be destroyed when the project is undertaken.
How will the citizens of each of the countries be affected? Both Urban and Rural Citizens?
Some Rural Citizens would need to be displaced and relocated as they are going to be
prone areas when the project is undertaken. They therefore need to have protection and be
subsidized throughout the relocation process.
Decision Criteria and Possible Solutions
The Decision Criteria would be a weighing with Disadvantage and Advantages of
undergoing the project. The Possible Solutions are:
1. Go Ahead with the Project
These would entail that the budget would be approved by the World Bank and the
International Finance Corporation.
2. Delay the Project
Delay the project again for certain number of years for the constraints to improve
or completely disappear.
3. Cancel the Project
Consider a project elsewhere and just scrap this project.
Recommended Solution

My recommendation is to delay the project. With the current political situation in the
countries, the project would tend to be unstable and unsustainable due to lots of conflict and risks
which are uncontrollable.