Pipeline: Cameroon earns 277.6 million U.S. dollars in seven years

Pipeline inauguration ceremony, Kribi, Cameroon, 2004. Photo: Esso

I came across an interesting article that appeared in the Cameroonian daily, Mutations, on December 28th. At a ceremony launching a COTCO-sponsored mosquito net distribution campaign, Guillame Kwelle, the COTCO public and governmental affairs manager, announced that Cameroon had earned nearly US$ 278 million from the pipeline.

Really?

There has been little financial information made available by the Cameroonian government since the pipeline became operational and critics of the project have often pointed to the total lack of transparency regarding Cameroon’s earnings. How much money does the pipeline actually bring in and where does it go? The earnings from the pipeline are part of Cameroon’s petroleum revenues, but there is no data available that would allow people to see what percentage of those revenues comes from the pipeline — as opposed to other oil operations — nor is there any way to know how those revenues are spent. Even if the transit fees are fairly easy to calculate (a fixed, per barrel fee), all the other assorted taxes and fees are harder to estimate. So, this announcement at a COTCO public relations event is newsworthy.

I’ve translated the main points of the article here and the original French article follows my comments at the bottom of the post.

277.6 million dollars. That is the amount that Cameroon has earned since the Chad-Cameroon pipeline began operating in 2003. These figures were revealed December 23rd in Yaounde by Guillaume Kwelle of the Cameroon Oil Transportation Company (COTCO), the company that operates the (Cameroon section of the) Chad-Cameroon oil pipeline.

The announcement was made at the launching of a campaign to distribute mosquito nets to the populations along the pipeline, an attempt to combat malaria up and down the pipeline corridor.

According to Mr. Kwelle’s statements, the amount includes transit fees, customs fees and other miscellaneous taxes, income taxes paid by COTCO, dividends that COTCO pays the Cameroonian government for its participation in the project (the government holds 5.17% of COTCO shares) and the participation bonus paid upfront to the Cameroonian government. According to Kwelle’s information, the transit fees are the main source of revenue for Cameroon, with a total of $US 145.1 paid so far. This amounts to nearly 50% of Cameroon’s total earnings over the past seven years….

According to COTCO figures, 2009 was the most profitable year to date for Cameroon, with total earnings of US$ 47.5 million…. If these earnings may look significant to some, they are nothing when compared to the earnings of the principal shareholders of the project….

In 2009, when Adolphe Moudiki, Director of the Cameroon State Petroleum Company, indicated that Cameroon intended to renegotiate its transit fee contract, he revealed that by 2006, only three years after the pipeline became operational, the ExxonMobil, Petronas and Chevron consortium (who owns 90.09% of COTCO) had already recouped its total investments (US$ 3.66 billion) and made US$ 5.05 billion in profits….

At the time, Moudiki pointed out that “the oil companies and the government of Chad had benefited immensely from the rising price of oil on the international market,” while, “Cameroon’s revenues were shrinking proportionally” as oil prices rose….Hence, the state oil company’s desire to renegotiate its transit fees.

As Christian Penda Ekoka pointed out when I interviewed him in Yaounde, the Cameroonian negotiators accepted a fixed-rate transit fee, despite his repeated efforts to convince them to demand a fee indexed either to inflation, the price of the barrel or both. The Cameroonian negotiators were certainly smart and competent. So why did they accept a small, fixed-rate transit fee on a 30-year project? Signing bonuses and other incentives may have been sufficient to cut negotiators’ desire to keep haggling for better terms. Cameroon’s bad deal is one of the many mysteries of this project.

Water collects at the bottom of the hill, creating a marsh. Photo: Christiane Badgley

The mosquito net distribution campaign is also interesting. COTCO distributed mosquito nets during the construction phase – all part of the community compensation efforts. For years, residents along the pipeline, particularly in forested areas, have complained about increased levels of malaria. As soon as you travel along the pipeline, you understand the problem. The pipeline easement – the cleared area over the pipeline – is often lower than the surrounding ground and stagnant water collects in the depressions, creating multiple mosquito-breeding grounds.

I don’t want to be cynical, but distributing mosquito nets to communities along the pipeline is much cheaper than moving ground and grading the surface to deal with the underlying issue. And, of course, a public ceremony is always the way to go.

I was recently given a copy of Cameroon’s national Oil Spill Response Plan (OSRP). This is the plan that was made public in November (i.e., last month), more than seven years after Cameroon should have produced the plan according to the terms of its World Bank loan. It seems that the Deepwater Horizon spill was the catalyst for getting this document out; I’ll write more about the OSRP in the coming days.

Original article:

This entry was posted on Wednesday, December 29th, 2010 at 10:58 pm.