Quote of note:

The Making of an African Petrostate
By SOMINI SENGUPTA

GALABA, Chad - As night fell and the bright lights of the brand-new oil field wrapped this hamlet in their golden glow, Neurmbaye Elie, a local farmer, pointed across the field before him.

There, Mr. Elie said, just left of the blazing gas flare, under the streetlight, once stood the village initiation site. Animals were sacrificed there, spirits were supplicated, and the village boys became men. Then it became part of the oil complex, fenced in, a patch of earth not unlike the rest; the village got about $130 for it.

Now, he worries. What if the spirits, displeased, sprang from that sacred ground and spread willy-nilly across the land?

Oil is bringing big changes to Chad, some cultural, like the one Mr. Elie worries about, others practical, like the way the World Bank will be overseeing how Chad manages its new wealth. Chad, among the poorest countries in the world, is now Africa's newest petrostate.

Its $3.7 billion underground pipeline, stretching 670 miles, began ferrying crude oil through neighboring Cameroon to the Atlantic coast last year. The pipeline is the largest single private investment in Africa.

Because the pipeline stands to transform this landlocked country, for better or worse, Chad is under a special glare — from the oil industry, global lending institutions and development groups.

The investment has come with strings attached: the oil revenues are to be transparent, and the government is to use the wealth to better the miserable lives of its nine million citizens. A citizens' committee is to review all spending to see that it conforms to the law.

If the rules work as intended, they could set a new model for how oil business is done in Africa. But if the usual corruption sets in, if democratic reforms are postponed, it will be just one more case of the spectacular misery that has befallen Africa's oil states, like Sudan, where oil greased the engines of war, or neighboring Nigeria, where living standards plummeted since oil production began 40 years ago.

"You're dealing with a government that's certainly not a model of governance," said Jerome Chevallier, who oversees the pipeline here for the World Bank, which partly financed the project. "It's basically a high risk, high reward project. If you can use oil to lift Chad out of its extreme poverty, it's a win. The risks, of course we know."

It is the World Bank's first foray into oil development, and early missteps since ground was broken in 2000 suggest that the risks are indeed formidable.

When the group of oil companies offered a $25 million "signing bonus" four years ago, the government spent the first chunk on arms and another refurbishing ministers' offices. According to the oversight committee, one ministry tried to buy rice and millet at twice the market price. Another wanted six off-road vehicles. The oversight committee blocked many of those requests.

"We said, `No, no, no guys, too much," recalled its chairman, Mahamat Mustapha. [His future as chairman is unclear; President Idriss Deby's brother-in-law was recently appointed to the committee.]

This year, Chad will see its first share of oil royalties, about $100 million, an amount that will enlarge the government treasury by about 40 percent, virtually overnight. While this allotment will be closely watched, another $100 million from taxes and customs duties is entirely at the government's discretion.

Certainly, there is no dearth of need. Electricity and water are beyond the reach of a majority of people here, and the average Chadian can expect to die before his 45th birthday. The per capita income barely exceeds $1,000 a year. Chad ranks 165th of 173 countries on the United Nations Human Development Index.

Critics say it is foolhardy to expect a leadership dominated by one ethnic group (the president's) and with a record of repression and mismanagement to do anything but use its new wealth to crush opponents.

They point to worrisome signs: the banning of an antipipeline protest, the temporary closure of an irreverent radio station, the execution of criminals after what critics believe to be incomplete trials.

The most recent sign of trouble was a suggestion by supporters of Mr. Deby, a military ruler twice elected president, to amend the Constitution to allow him to run for a third term. "For those who lead us, the law is just a piece of paper," said Dobian Assingar, head of the Chadian League of Human Rights and a member of the oversight committee.

The government, for its part, points out that no country has ever opened its revenues to such scrutiny. "I can only say: `Wait. Wait until the revenues are spent,' " said Tom Erdimi, the state's liaison to the project.

No matter how the money is spent this year, Chad is certain to have more in its future. ExxonMobil has already found more oil, and a Canadian company, Encana, is busy exploring north of here.

The World Bank says the government has agreed to apply similar oversight in the future. The government is also likely to demand a larger share of the wealth; its current 12.5 percent in royalties is paltry compared with what is reaped by Africa's oil giants like Angola and Nigeria.

In Ngalaba, the farmer, Mr. Elie, remembered when the oil workers first started drilling in the middle of his village. The noise was so loud it was unlike anything people had heard before.

Today, many villagers are unhappy about the payment they got for the oil under their land. Villagers and oil company representatives deliberated for weeks about how much the land was worth, driving up the price of each mango tree to $1,000.

In the end, Chadian villages affected by pipeline construction received $6.3 million in compensation, an impressive amount by the standards of this country, but as some villagers note, a fraction of the investment made. Moreover, some complain, the one-time cash payment and the other changes that oil ushered in have done little to improve their lives.

A few villagers have managed to use compensation money to put tin roofs on their huts. Other have spent their windfall on beer.

But Mr. Elie pointed to the generally sorry state of his community. No school. No hospital. None of the things the villagers had hoped would come with oil, he said.

The oil wells sprouted in the middle of millet fields, and the social landscape was transformed. A schoolteacher took a job as guard for an oil well. Prostitutes and bartenders trickled in from across Central Africa. Carpenters and tinsmiths flocked here too, looking for shipping crates and scrap metal.

"A poor man is always looking for work," Abdel Kadre Ahmat said from under his workshop, where he makes hoes, shovels and cooking ladles from the carcass of an air-conditioner, a patch of aluminum siding and a rusty sign. He did not know what the materials had been used for previously, but he did not much care. They were free and, in his hands, very useful.

"I just know it's their garbage," he said.

ExxonMobil says that its compensation packages included schools and health centers for the most affected villages. At the peak of construction 10,000 Chadians got temporary jobs, the company says. The country's gross domestic product has shot up.

The novel oversight system is a boon for oil companies. In a sense, it exonerates them: here is how much your government is getting, the oil companies can say to its destitute neighbors, and now it is up to the government to spend it wisely.

That, said Ron Royal, president of the ExxonMobil subsidiary Esso Exploration and Production Chad Inc., has not stopped government representatives from beseeching the oil company for more: one asked for electricity, another an off-road vehicle. The president, a northerner, asked for a school in the north.

Mr. Royal declined. "What you have to get your mind around is having to say no to people and then explain why," he said. "They see we have so much. `Why can't you give a little?' Because there's a principle here. You've got this responsibility. We've got this responsibility."

World Bank officials say the pipeline represents a singular opportunity for Chad to become a viable state, if not a wealthy one. Mr. Chevallier, the bank's project manager, said the people of Chad's oil country have indeed profited from contact with the outside world. Speed limits are now enforced on the red dust roads. Seat belts are compulsory. He called it the "discipline of the industrial age."

If the rules work as intended, they could set a new model for how oil business is done in Africa. But if the usual corruption sets in, if democratic reforms are postponed, it will be just one more case of the spectacular misery that has befallen Africa's oil states, like Sudan, where oil greased the engines of war, or neighboring Nigeria, where living standards plummeted since oil production began 40 years ago.

If? If? We need to work from the assumption that there will be corruption (hell, we have corruption here) and work to mitigate and control that corruption.

The UN needs to get in this more... but the UN cielieng stops at facilitation of third world for big business then moves aside.
This also creates a massive economy of scale problem with neighboring lands. Gold rush days all over.

Make these oil companies be the ones respoinsibile for the health care per capita, pay a tariff tax for access that can go back through the UN.