Will the Chinese use the Chad-Cameroon pipeline?

In this photo released by China´s Xinhua news agency, Chinese President Hu ... wn.com

I just stumbled across an interesting bit of news.  China and ExxonMobil may do business together in Chad.  I said, “may,” not “will,” but this could be a significant development.

It is fascinating the way information about the Chad-Cameroon pipeline is revealed. It’s really difficult to get interviews with government or oil company officials. I’ve tried off and on for months, to no avail.  So for some information I watch what comes through the (state-run) press.  Nothing is straightforward. Items often appear about events that occurred months earlier, for seemingly no reason, but sometimes interesting little nuggets of information are mentioned in passing.

If you’re not paying attention, they are easily overlooked. For example, a few days ago,  the Cameroon Tribune (government publication) ran an article about the pipeline with the headline, “36.75 million barrels of oil and 7.6 billion Francs” (That’s about US$ 17 million.)

The article, basically  highlights from the October 2010 Pipeline Steering and Monitoring Committee report, began with details on the quantity of oil that had transited across Cameroon during the first ten months of 2010, along with information on the transit fees. Apparently less oil was pumped in 2010 than in 2009. Okay. Chances are if you weren’t following the pipeline story you wouldn’t even read beyond the headline.

Yet, several paragraphs down, the article contained some intriguing information.

First some news about the Lom Pangar dam project. The government recently awarded the construction contract to a Chinese company and work is supposed to begin shortly. The Lom Pangar project has been in the planning stage for years; even before the pipeline was constructed there was talk of the dam. The pipeline route passed through a zone that would be underwater once the dam was built, yet nothing was done to prepare for this eventuality. So now, according to the article,  27 kilometers of the pipeline will be modified at a cost of approximately US$ 101.3 million. There is still no mention of who will foot the bill for this work. But we do learn that the head of the state petroleum company ( SNH) is “concerned” about pollution that could be caused by oil at Lom Pangar and will give this special attention.  Not terribly reassuring, as there’s no mention of what that “special attention” might entail.

Then, near the bottom of the article, two lines about a delegation from the China National Petroleum Corporation paying a visit to COTCO (ExxonMobil) headquarters in August. The Chinese, “did not hide their interest in using the Chad-Cameroon pipeline to move the oil they produce in Chad to the international market.”  What? The Chinese — the bad guys, the ones who don’t care about the people or the environment — may use the pipeline?

When ExxonMobil was trying to get the World Bank to sign on to this project, one of the tactics was to brandish the China menace: if Exxon doesn’t drill Chad’s oil, the Chinese will and they’ll take it out via Sudan. The Chinese, so the argument went, won’t make Chad sign any revenue management plans nor will they have the same environmental standards as a World Bank-backed ExxonMobil project. It would be terrible!

The World Bank signed on and Chad promptly ignored the revenue management plan. The Chinese are drilling in Chad; the Exxon project didn’t stop them.  In fact the Chinese may build a refinery near N’djamena, which would actually allow Chad to use some of its own oil. And if the Chinese do use the pipeline — and why wouldn’t they? — they’ll even bring more revenue to Exxon.

Of course, no one really believed that the ExxonMobil-led consortium would sink billions of dollars into a pipeline that was only going to move oil from one field. There has long been talk of pumping other Chadian oil, oil from CAR, northern Cameroon or even Nigeria through the pipeline. But if the Chinese do end up using the Chad-Cameroon oil pipeline that would be quite a story. I can imagine the headline: “From competition to cooperation.”

You can read the article (in French) here.

This entry was posted on Tuesday, January 18th, 2011 at 5:24 pm.