Chad Cameroon Pipeline Project

PRESENTED BY

DARSHIT PAUN 20131010

MANIT BRAHMBHATT 20131020

PREETI PAL 20131034

RAMAN SHAHI 20131040

RAVI BHUT 20131042

PRESENTED TO

PROF. LALIT KHURANA

Project Site

3

Chad - Cameroon

Exxon 40%

Petronas 35%

Chevron 25%

Corporate Financed $ 1.5 Billion to extract

oil from Doba Basins Develop 300 Wells Treatment facility to up-

grade Oil Operation Centre to

Support Production Probable Reserves – 917

Bbn

Project Finance $ 2.2 Billion for 1070

Kms Export Pipeline Buried 1 Mtr Under-

ground Through Cameroon at

Kribi Coast

$ 3.7 Billion Chad-Cameroon Petroleum Development and Pipeline Project

Field System Export System

Equity-$2.3 Bn 62.4%

Exxon - $883 MnPetronas - $772 MnChevron - $551 MnTotal - $2.206 Billion

Chad Govt. - $37 MnCameroon Govt. - $70 MnTotal - $0.117 Mn

Debt-$1.5 Bn 37.6%

Capital Markets - $400 MnECA Loans - $600 MnTotal - $1 Billion

IFC A – Loan - $100 MnIFC B – Loan - $300 MnTotal - $400 Mn

Financing

• Own and Finance the Field SystemUpstream Consortium100% Equity - $1.521

Bn

• JV between Upstream(89%) and Tchad Government(11%) for Chad Pipeline

TOTCO - $322 Mn38% Equity- 62%

Debt

• JV between Upstream(89%) and Tchad(5%) and Cameroon(10%) Government for Chad Pipeline

COTCO - $1.88 Bn

36% Equity-64% Debt

• Wholly Owned Subsidiary of Exxon for Project Coordination and Upstream Operation

EssoChad

Project Insecurity

Chad

• War Country• Political Instable• Poorest Country• Overflow of cash

may lead to Havoc

• Closed Land

Cameroon

• Highly Corrupt• Dense Forest• Environmental

Issues• Indigenous

People

Private Players

• Political Risk• High Finance Risk• Nationalization• Long Term

Sustainability

Project Returns

Chad

• Low Risk High Returns

• $1780 Million for the whole Project

• GDP growth by 50%

• Poverty Reduction• Economic Growth• IRR (42% to 90%)

Cameroon

• $535 Million Revenue from taxes, royalties etc.

• IRR of 34 to 40% as Low investment

Private Players

• High Risk High Returns

• $ 5753 Gain on normal scenario

• IRR of 0 to 27%• Long Term Returns

• Returns are calculated on Oil Prices Scenario ($9 to $42) averaging at $20

• On Oil Reserves (595 Billion Barrels to 1038 Billion Barrels)

Why World Bank ??

Experience and Motive to develop the poorest countries of world

Develop a Risk Mitigation Plan for all the risks identified such as Environmental impacts, resettlement of indigenous people etc.

Protection to other lenders and encourage them to invest in the project

Stabilizing the economy of Chad as it is one of the poorest econ-omy of the world

Chad would lose the opportunity of investment

Large influx of revenue could lead to economic distortion

Revenue Management Plan

Formation of Special Petroleum Revenue Account

10% - For Future Generation76.5% - For Five Sectors (Health, Education, Social etc)13.5% - Govt. Budget and Doba Region

9 Member Committee (7 Govt, 2 NGO)

Planned Annual Expenditure under the monitoring and approval of World Bank – Contractual Obligation in form of Loan

Will RMP work?

Lacks detailed insight and effective oversight

No outlay to take decision in committee

No Detailed Layout of Expenditure by Region / Sector

Lack of Will from authority and people to accept the RMP

Should the World Bank approve the Project?

For Opportunity to alleviate Poverty

from Chad

Commercially viable Project

RMP Formulation

In-depth Assessment of Environ-mental and Social Impact

Other Investment Opportunities

If self developed then no control over funds

Against High Corruption

Inefficient RMP

Irreversible Environmental Dam-ages

Past History of Private Players

Chad would be in War Culture

No Real Transparency, no partici-pation and no oversight from Lo-cal Authority

Other Risks Construction risk: very low with “super majors” in the oil in-

dustry.

Operating risk: low. But can be influenced by sovereign risk.

Financial risk: low. (Very high debt service coverage ratio, ex-4a). but high country credit rank (country default chance), high total debt % of GDP, volatile exchange rate are some-what worrisome.

Sovereign risk: High. Civil unrest, threat from rebel groups, high corruption perception index (Cameroon). (All stakehold-ers) Mitigated by WB?

Environmental risk: high. Groundwater contamination from oil leak (Cameroon)

Other social risk: human rights issues from resettlement of lo-cal residence. (Chad & Cameroon)

Conclusion: Is it fair deal to all parties in regarding returns and risk? The project could bring higher returns to the otherwise underde-

veloped chad. The money if effectively used will create a win-win situation for all the stakeholders.

Private sponsors bear most oil reserve risk in terms of its NPV till 2012, while private sponsors get the largest portion of projected return and NPV.

The return and risk distribution to Cameroon seems appropriate, but most environmental risk should be borne by them.

Thank You