Em Chad
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Em Chad

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Em Chad Presentation Transcript

  • 1. EXXONMOBIL & THE CHAD-CAMEROON PIPELINE Corporate Social Responsibility
  • 2. Historical Overview
    • 1988:
      • Exxon consortium signed agreement with Chad to set framework for the pipeline project
      • Exxon Consortium also signed an agreement with Cameroon to build a 1,070-km (approximately 600-mile) underground pipeline to carry the crude oil to a shipping terminal just offshore from Kribi
    • Cost of the project was $3.7 billion
      • $1.5 billion Field System to extract oil
      • $2.2 billion Export System to transport oil to the coastal city of Kribi
    • 1999:
      • Geologic studies confirmed by independent consultants estimated that the fields contained total proven plus probable reserves of 917 million barrels
      • World Bank Group proposed the Revenue Management Plan to isolate funds for poverty reduction programs in Chad
    • Projected Revenue for the life of project
      • Cameroon - $500 million
      • Chad - $2 billion
      • ExxonMobil & Partners - $5.7 billion
    • Precedent for this issue was set by the factors surrounding Nigeria in the early 1980s
  • 3.  
  • 4. Ethical Issues
  • 5. Bank Involvement
  • 6. Projected Returns
  • 7. Ethical Situation
    • If ExxonMobil did not proceed with the pipeline project, undoubtedly another country or company would take its place.
      • Two possibilities
        • Sudan, which had financed its own pipeline
        • Libya, whose president Muammar Qaddafi had encouraged Chad to ignore the western oil companies and let Libya ship the oil (UV15)
    • As a World Bank press release pointed out, “Chad is not the only country with untapped petroleum reserves. Exploration is underway right across the continent to find new oil sources—which could prove cheaper and more accessible. If Chad does not seize this opportunity, it may well pass the country by” (UV15)
  • 8. Stakeholder Summary
  • 9. Chad
    • Approximately 80% of the 7 million citizens lived on less than $1.00 a day
    • Few natural resources and lacked rudimentary infrastructure needed for development
    • Less than 25% of the population had access to clean water
    • Life expectancy of 49 years compared to 78 in developed countries
    • Infant mortality rate of 115 deaths per 1,000 births compared to 3 to 6 deaths per 1,000 births in developed countries
    • 20% of children born in Chad died by age five
    • United Nations ranked Chad 167 out of 174 counties in terms of development
  • 10. Cameroon
    • Ranked 134 out of 174 countries on the UN Development Index
    • Ranked 99 out of 99 countries in terms of corruption according to Transparency International, a non-governmental organization (NGO)
    • A severe drop in commodity prices in the mid-1980’s threw the country into a decade-long recession
    • Gross domestic product (GDP) fell by more than 60% from 1986 to 1994
    • The government, with support from IMF and the World Bank, implemented several reform programs to accelerate growth and alleviate poverty
    • The economy responded favorably and grew at an average rate of 5% per year during mid to late 1990s
  • 11. Socioeconomic Comparison
  • 12. ExxonMobil
    • 1999 - ExxonMobil had 58 major projects under way in various countries
    • In all of its businesses, ExxonMobil made environmental responsibility a priority: “A core value of ExxonMobil is to conduct its operations safely and in an environmentally sound manner. ExxonMobil's policy is to conduct its business in a manner that is compatible with the balanced environmental and economic needs of the communities in which we operate. We are committed to continuous efforts to improve environmental performance throughout our operations”
  • 13. World Bank
    • conceived and founded in 1944, initially to help rebuild Europe after World War II (UV8)•World Bank involvement in the Pipeline Project did not become official until 1997 (UV8)
  • 14. World Bank
    • On its Web site, the World Bank explained its participation: “This project could transform the economy of Chad. The country is so poor at present that it cannot afford the minimum public services necessary for a decent life. By 2004, the pipeline would increase government revenues by 45% to 50% per year and allow it to use those resources for important investments in health, education, environment, infrastructure, and rural development, necessary to reduce poverty” (UV9) 
    • The Environmental Assessment Plan as submitted to the World Bank in mid-1999, took five years to compile; at completion, it was a 19-volume, 3,000-page study
    • World Bank explained its participation: “This project could transform the economy of Chad. The country is so poor at present that it cannot afford the minimum public services necessary for a decent life. By 2004, the pipeline would increase government revenues by 45% to 50% per year and allow it to use those resources for important investments in health, education, environment, infrastructure, and rural development, necessary to reduce poverty”
    • the Bank was the largest source of development assistance in the world
    • Eearning an average pre-tax financial return of 22% (A6)•more than 70% of the Bank’s investments achieved their development objectives according to the Bank’s Operation Evaluations Department (A6)•projects in Africa and in the oil and gas sector experienced lower returns and greater problems than other projects in the Bank’s portfolio (A6) •The 19-volume study contained contingency plans for almost every aspect of the project
  • 15. Environment
    • Petroleum exploration only exacerbated the situation, because every stage of this exploration involved cutting down trees. In order to ascertain the path of petroleum, oil companies used explosive devices in the ground; these explosions added to the damage caused by deforestation, particularly in chasing away wildlife. 
    • The drilling process itself had enormous environmental fallout, producing drilling wastes (water, fluid, mud, and rock cuttings, all often toxic). Waste management processes to lessen the toxic waste generated were expensive and thus often ignored by the oil companies (UV12)•many critics, such as the Dutch Commission on Environmental Impact Assessment, claimed that the report lacked key information, particularly about the effect on the two countries’ ecosystems and inhabitants (especially the Pygmies) and also lacked emergency response and compensation plans in the case of an oil spill (UV13)
  • 16. Study Findings
    • Fields contained 917 million barrels, and could produce up to 250,000 barrels per day
    • The Export System would consist of a 670-mile (1,070 km) pipeline buried one meter (3.3 feet) underground
    • Pipe would contain a monitoring system to detect leaks and be connected to a floating storage and offloading vessel, a stationary, single-hulled tanker capable of holding two million barrels of oil
    • Production end by 2032, when project would end