opim 5894 advanced project management the chad cameroon petroleum development and pipeline project n.
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OPIM 5894 Advanced Project management The Chad Cameroon Petroleum Development and Pipeline Project. Team 3 Richard Buskey Jonathan Weiss Daniel Mahzonni Prashant Mishra Vijay Gadigeppa Jonathan Koenig. Chad Cameroon Petroleum Dev.

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opim 5894 advanced project management the chad cameroon petroleum development and pipeline project
OPIM 5894 Advanced Project managementTheChad Cameroon Petroleum Development and Pipeline Project

Team 3

  • Richard Buskey
  • Jonathan Weiss
  • Daniel Mahzonni
  • Prashant Mishra
  • Vijay Gadigeppa
  • Jonathan Koenig
chad cameroon petroleum dev
Chad Cameroon Petroleum Dev.
  • How are the sponsors financing this deal? How does the financing of the Field system differ from financing of the Export system?
    • Equity financing for the Field System
      • Uncertainty with the Oil extraction
      • Oil Companies interested in the oil futures; control of oil
    • Debt financing for the Export System
      • Certainty with the oil sale profits
      • Treated as a project
chad cameroon petroleum dev1
Chad Cameroon Petroleum Dev.
  • Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective?
    • Risks
      • Environmental Impact
      • Indigenous People
      • Long-term sustainability
    • Risks Mitigation
      • 5 years of review and public debate: Sponsors came up with contingency plans on almost every aspect of the project
        • Waste Management
        • Oil spills
        • Regional development
        • Indeginous people
        • Offsite environment
        • Community health
        • Compensation and resettlement
        • Induced access management
        • Decommissioning
        • Cultural properties
        • Environmental Monitoring & Management
chad cameroon petroleum dev2
Chad Cameroon Petroleum Dev.
  • Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective?
    • Returns were calculated by
      • Oil price ($9 to $42 over the last 18 years with an average of $20 / barrel
      • Volume consumptions (Could vary b/w 595 milion barrels to 1,038 million barrels)
    • Fairness to each party
      • Chad
        • High risk: Environment Impact, Possible re-location of indigenous population
        • History shows Extraction of Oil does not equal development
        • Returns: would receive $ 1.8 bill. of cash flow from the project in the form of income taxes, royalties and dividends.
      • Over the 10 years of production (2004 to 2013), income taxes would represent 16% of the total & royalties and dividends would represent the remainder.
chad cameroon petroleum dev3
Chad Cameroon Petroleum Dev.
  • Analyze the risks and returns to Chad, Cameroon and the Private sponsors? How were the returns calculated? Are the risks and returns fair from each party’s perspective?
    • Fairness to each party (Contd.)
      • Cameroon
        • Most risk because of the pipeline going thru’ their indigenous population, impact to the environment;
          • Ground water contamination
          • Natural reserves, Lob waterfalls getting affected
          • No new job creation
        • Gets $ 535 million (based on Transit, Pipeline tax and Share of ROE)
chad cameroon petroleum dev4
Chad Cameroon Petroleum Dev.
  • What is the World Bank/IFC’s role in this deal? Are they likely to be successful?
    • World Bank had extensive lending and policy experience with developing countries and had been working with Chad and Cameroon for many years
    • Project was commercially viable
    • Project would jump start Chad’s listless economy.
    • Bank could play an important role in protecting the environment as well as the indigenous people
    • Likely to be successful
      • Based on their history and experience
      • If opportunity is not capitalized, somebody else (Sudan/Libya) would take it over
      • Most of the risks and issues addressed and mitigated as part of the 5 year project review
      • Reputation of IFC
      • Revenue Management Plan
chad cameroon petroleum dev5
Chad Cameroon Petroleum Dev.
  • Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed?
    • Project Revenue: $ 14 bill.; Total distributions = $8 bill.
    • Chad would receive $ 1.8 bill. of cash flow from the project in the form of income taxes, royalties and dividends.
    • Over the 10 years of production (2004 to 2013), income taxes would represent 16% of the total & royalties and dividends would represent the remainder.
    • Govt. would have the discretion over how to spend the income tax revenues as long as they were used for general development purposes.
chad cameroon petroleum dev6
Chad Cameroon Petroleum Dev.
  • Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed?
    • Royalties and dividends would be deposited into a Special Petroleum Revenue account and distributed in the foll. way:
      • 10% would be deposited in foreign financial institutions and used to finance poverty reduction programs for future generations
      • Of the remaining 90%,
        • 85% would be deposited in the Chadian commercial banks and used to finance development programs in 5 high priority sectors – education, health & social services, rural development, infrastructure, environment and water resources
        • 15% would go to the government budget and programs in the Doba region.
chad cameroon petroleum dev7
Chad Cameroon Petroleum Dev.
  • Will the Revenue Management Plan work? Are there aspects of the plan that you think should be changed?
    • Aspects which need to re-visited
      • Little chance of success without the will of the authorities or the confidence of the population
      • Did not specify how decisions would be made; voting power would be determined
      • Not enough representation from the civil society on the oversight committee; likely to be biased based on the government’s actions
chad cameroon petroleum dev8
Chad Cameroon Petroleum Dev.
  • Would you approve the deal as a World Bank/IFC Board member?
    • It is an opportunity; studied the project for 5 years and addressed all issues and concerns.
    • Choice between not doing it or doing it
    • Rewards outweighs the risks