Chad's oil dreams turning sour

KOME, Chad — Outside the gleaming white fences of a multibillion-dollar American petroleum complex here, a slum dreams of becoming a boom town.

Thousands of people have flocked to this village in southern Chad over the years, hoping their country's newfound oil wealth would translate into jobs and prosperity. But most remain unemployed, living in huts on garbage-strewn, dirt streets with neither electricity nor running water.

Relations between the village and an ExxonMobil Corp.-led consortium across the street are so strained that oil workers are now banned by their employer from patronizing bars and shops in the village. When fire raced through the slum in March, oil-company fire trucks watched from the other side of the fence, witnesses said.

"They said our children would get jobs," said Benoit Djimrane Njarounda, who moved to the area more than a decade ago and now serves as the village's chief. "There were so many promises. What happened?"

Where is money going?

Three years after this poor, landlocked central African country joined the league of oil-producing nations, there are growing — and familiar — complaints that petroleum money is not getting to those most in need. For most of this year, Chad's oil wealth has been frozen in London bank accounts after a dispute with the World Bank.

As he led an ox across a plot of dirt to plant millet for his family, Joseph Bailessem, 27, lamented that he lacked the skills and education needed for a job at the plant. Worse yet, he said, his children, who were helping him till the soil, are missing out on their education because promised classrooms have yet to open.

"Where is the oil money going?" he asked. "White people are the only ones benefiting."

Just a few years ago, Chad was held up as a model for how a developing nation could avoid the curse of oil and ensure that money did not disappear into bureaucrats' bank accounts, as seen in Nigeria, Sudan and Gabon.

After decades of internal strife and with its reputation as one of the world's most corrupt countries, this former French colony was unable to attract investment partners to develop its oil fields until the World Bank agreed in 2000 to back a $4 billion deal to build a pipeline from Chad to the Atlantic coastline of neighboring Cameroon.

In return for its participation, the World Bank secured strict conditions on how the Chad government's share of the profit could be spent. Some 10 percent would be set aside in a "future generations" fund; 72 percent was earmarked to fight poverty by spending on health, education and roads; 13.5 percent would go to government coffers and the remaining 4.5 percent to local communities affected by the development.

Benefits tough to track

By the end of 2005, the government of Chad had received about $420 million, nearly doubling its annual income.

But tracking where the money went is not so simple. A major chunk, more than $74 million in 2005, was allocated for new roads, according to Chad's independent oil-oversight committee.

Oil funds helped lay one new toll road to the south and are being used for a 400-mile highway to the east. Still, paved roads remain a rarity in Chad — three times the size of California — even in the capital of N'Djamena.

Aside from the new roads, government officials are hard-pressed to describe large-scale benefits of the oil money. They talk about smaller projects: a new school fence and some renovated classrooms in the capital, HIV-testing clinics, a water tower in the southern city of Doba.

Much of the work remains unfinished. Government leaders have urged patience.

"People are complaining because the programs haven't reached them yet, but they will," said Njarindo Milongar, a member of parliament and chairman of the committee that controls money earmarked for communities affected by oil development.

Critics, however, say much of the money is being squandered. Mekombe Therese, vice president of the independent oversight committee charged with monitoring the use of oil proceeds, said her group's analysis of spending in 2004 and 2005 found that 40 percent to 45 percent of oil money fell victim to waste, corruption, nepotism, shoddy work or delinquent contractors.

For example, a venture involving the brother of Chadian President Idriss Deby received one of the biggest road-construction contracts; committee examiners found a $1 million university grant was being held in the rector's personal bank account; a year after spending $800,000 for three new schools, none had been completed despite a six-month deadline.

"Oil war" beginning

Instead, Deby launched a campaign against the World Bank to seize control over more of Chad's oil royalties. Late last year, Chad's parliament unilaterally scrapped the 10 percent "future generations" fund, doubled the government's take of profit to 30 percent and expanded the definition of "poverty reducing" sectors to include such things as the military, energy development and legal reform.

Chad's oil riches represent both opportunity and peril for Deby, experts say. If Deby survives another year in office, he'll control assets worth billions of dollars. On the other hand, oil money has made the once-obscure African nation a much more attractive target, to both rebels and other countries.

Chadian officials accuse Sudan and China of backing its rebels. The U.S., which gets about 18 percent of its imported oil from Africa, also is taking a more active interest.

"The oil war in Chad is beginning," said Chadian economist Ali A. Haggar, a former adviser to Deby.

The World Bank has responded by suspending activities in Chad, effectively freezing the bank accounts holding the nation's oil money. As a result, none of the estimated $270 million in 2006 royalties has been released.

At one point, Deby angrily threatened to shut down the oil fields if the money was not released. Under a truce, the World Bank is preparing to disburse some money as long as Chad pledges to abide by some of the original conditions. Negotiations over a long-term settlement continue.

Still waiting

World Bank officials said they were left with little choice after the government altered the terms of the original agreement.

In some ways, rising oil prices have weakened the World Bank's hand in negotiations.

The oil consortium, including ExxonMobil, Chevron and Petronas of Malaysia, originally predicted that profit would not flow until 2008, based on projected oil prices of $15 a barrel for crude. With prices above $70 a barrel, the consortium began reporting a profit this year.

By taxing the consortium's earnings, the government now stands to receive a windfall next year that officials in Chad say could total $1 billion, far exceeding the royalties they've been receiving. There are no laws or World Bank provisions that restrict the use of such tax revenue, though World Bank officials hope to include that money in the new agreement.

Executives at ExxonMobil and its Esso Exploration & Production Chad subsidiary declined to comment.

On its Web site, ExxonMobil says it has spent nearly $610 million on goods and services from local suppliers, $8.75 million on community projects such as schools and wells, and more than $9 million in compensation to individuals and landowners affected by its operations. The consortium says 83 percent of its 7,300 workers are Chadian.

But few of those jobs have gone to the hopeful men and women living outside the gates of the oil facility. A few years ago, they dubbed their slum "Satan" for its bars and brothels. Later, they dropped the first letter and changed the name to Atan, which sounds like the French word for "wait," to reflect their growing impatience.