Oil foil in Chad

N‘Djamena is not a big city, but on my last visit in April after a two-year absence, I got lost. Gone is the network of goat-filled side streets beside the airport, which turned to mud wallows – complete with floating plastic bags and mango stones – every time it rained. Gone is the higgledy-piggledy cluster […]

N‘Djamena is not a big city, but on my last visit in April after a two-year absence, I got lost. Gone is the network of goat-filled side streets beside the airport, which turned to mud wallows – complete with floating plastic bags and mango stones – every time it rained. Gone is the higgledy-piggledy cluster of sheds that made up a gendarmerie barracks, where at any time of night men in rag-tag uniforms could be seen loitering, cigarette-ends glowing in the dark.

Instead a new boulevard, La Place de la Nation, sweeps majestically from the airport to the presidential palace-a triumphal arch at one end, and a line of giant TV screens reaching along the other, complete with a bronze statue of freed slaves. All over the city buildings are springing up; tens of kilometres of roads have been paved and a new state-of-the-art airport is on its way.

All of this construction is thanks to oil. As Kenya, Tanzania and Uganda can expect with their discoveries, once the projects are up and running the money comes fast. Chad’s economy is booming – since 2003 when the main Kome oilfield was opened, the country has earned more than $8 billion from the resource. In 2011 alone the figure was $2 billion from the taxes paid by the operating company Esso. While many Western countries teeter on the brink of recession, the International Monetary Fund (IMF) estimates that Chad’s economy is expected to grow 6.9 per cent in 2012, a direct result of inflows of cash from oil exports.

And it does not end there. In 2009 the Chadians struck lucky again when the China National Petroleum Corporation (CNPC) signed a deal to exploit the Ronier oilfield in the Bongor Basin. Extracting some 10,000 barrels per day, the Chinese have also built a refinery at Djermaya, north of N’Djamena, where fuel for local consumption is now being processed. Overnight Chad’s dependence on fuel imports from neighbouring Cameroon and Nigeria was broken, and petrol at the pump is now sold at a fixed price, 70 cents a litre – considerably cheaper than when I was last there.

But not all is plain sailing.

Chad’s oil project would never have got off the ground had it not been for a World Bank loan to build the 1,000 kilometre-Iong Chad/Cameroon export pipeline. Chad’s oil had been known about for years, but the impracticality of getting the relatively small quantities out of a land-locked, warravaged country had put off most investors. The World Bank proposed a deal which at the time was envisaged as a groundbreaking solution to the’ curse of black gold’ – the repayment of the $140 million loan was made conditional on Chad spending most of the revenue on social services and putting a proportion of the money aside for future generations.

It was a disaster.

Chad broke the terms of the deal within months. In 2006 the national parliament rewrote the laws which governed the state’s spending. By 2008 the World Bank’s position had become untenable; the loan was repaid and it pulled out completely from the country.

With the World Banknow off his back (but of course still leaving Esso and the infrastructure), the new deal offered by the CNPC – including the promise of a refinery and much-needed infrastructure developments – was tantalising for President Idriss Deby. “There was a political element to all this,” says Roland Marchal, from the Centre for International Studies in Paris. “Chad hoped that by renouncing Taiwan in 2006 and welcoming the CNPC they would draw China’s influence away from their sworn enemy Sudan.”

But the Chinese were just doing business, and the relationship has subsequently proved strained. The refinery opened in late 2011, but the Chadian authorities have already closed it down twice in disputes over the price the CNPC receives for the refined fuel. The CNPC says it lost $4 million in the first six months of operating as Deby tried to force the pump price lower. Although details of the original deal are hard to come by, diploma tic sources in N’Djamena say that the final sale price of the fuel was never agreed in the original deal. Analysts say that this shows some degree of naivety in the Chadian approach to the Chinese. “There has been a big dose of reality recently,” says Jon Marks, editor of African Energy magazine. “This is the end of the first phase of the relations between China and Africa as Africa realises that China can be aggressive in its approach. It’s not all win-win,” he says.

And the fluctuating world oil price has also caught Deby off guard more than once. Buoyed by the all-time high price in 2008, which roughly coincided with the final defeat of the devastating Sudanese-backed rebellion that had plagued Chad since 2005, Deby set about commissioning huge infrastructure projects, with La Place de La Nation being the centre-piece in his vision of N’Djamena as La Vi trine d’Afrique, the show window of Africa.

According to the IMF, in 2009 almost all of Chad’s projected revenues for five years had been signed away in contracts for new hospitals, schools and roads. Then came the global economic crisis, the oil price more than halved in a matter of months and Chad’s revenues fell by 75 per cent. “Chad is incredibly vulnerable to these global shocks, and 2009 can easily be repeated,” says Jaroslaw Wieczorek, Chad desk officer at the IMF. The economy lacks diversification – tax collection is still poorly enforced, and made up just 31.5 per cent of the budget in 2010. “Chad needs to be able to plan and stand on its own two feet, and not only rely on the hope of new oil discoveries,” adds Wieczorek.

And Chad’s biggest problem is that there is not long to make that change – in fact on current calculations, Esso’s Kome oilfield, Chad’s biggest, will be exhausted by 2030. Civil society organisations such as the nongovernmental organisation Grampt-C, which was setup to monitor the oil revenues, have complained that the money is not being spent on long-term development such as training and education. Rather it is being wasted on so-called vanity projects which cannot be maintained if the money runs out.

La Place de la Nation has some symbolic value, and Deby is hoping that in a few years it will be in the history books,” says Marchal. “But this doesn’t wash with the city’s residents who have seen no significant change to their day-to-day lives. In fact they’ve seen their electricity cut to keep the enormous TV screens on the Place on.” This is a view shared by Najikomo Benoudjita, a prominent newspaper editor in the city. “N’Djamena does look nicer, but what difference does that make when all these new schools and hospitals have no teachers or nurses to work in them?”

This is perhaps the lesson that East African countries should take-lasting development is not always aesthetic, and may take many years to show its benefits.