April 18, 2002 - Thank you Mr. Chairman and Sub-Committee Members. I am
pleased to be here today to provide ExxonMobil's perspective on the
Chad-Cameroon Oil Development Project.
We have been working in Chad since 1977 and in 1992 began detailed project
planning. Through the past 10 years, we have worked diligently and
collaboratively with the World Bank Group and the Governments of Chad and
Cameroon to bring forward a project that meets the commercial interests of the
project sponsors as well as the poverty alleviation and development goals of
the World Bank Group and the Governments.
I want to use the time available to cover three areas:
First, to provide you a brief overview of the project including some of its
unique features.
Second; to update you on the current status of construction activities.
And finally; to briefly discuss key principles that guide us and others in
this project.
Before I begin, I would note that we have submitted to this Committee
background information on the Project along with the video to help illustrate
several key areas. And of course, I will be pleased to try to answer any
questions you may have.
The Chad-Cameroon Project will develop several oilfields in southern Chad. To
export the crude oil to world markets from the landlocked oilfields, the oil
will be transported by a 30" underground pipeline, a distance of 650 miles to
a marine terminal off the coast of Cameroon.
Approximately one billion barrels of oil will be produced over the 25-30 year
life of the Project. Production will average 225,000 bbl/day in the early
years. A consortium of subsidiaries of ExxonMobil, Chevron and Malaysia's
Petronas are conducting the development with Esso Chad, an ExxonMobil
subsidiary, designated as operator. The Project schedule anticipates start-up
in 2003.
The total Project investment is approximately $3.5 billion. The Upstream
portion, which consists of the oilfield production facilities and wells, will
be 100% owned by the co-venturers. The pipeline will have minority ownership
by the governments of Chad and Cameroon and will be financed by a combination
of equity and loans.
Approximately 97% of the project funding will come from the co-venturers
(ExxonMobil, Chevron and Petronas) or through market-rate loans arranged by
the International Finance Corporation, export credit agencies and commercial
sources.
The remainder will come from equity investments by the governments of Chad and
Cameroon in the two pipeline companies. To fund their investments, the two
host countries have received approval for a total of approximately $140
million in loans from the World Bank and the European Investment Bank.
These financing facilities establish a linkage with the World Bank so that it
can provide important support to the development aspects of Chad. For example,
the Bank has assisted Chad in developing a unique Revenue Management Plan,
enacted into law by the Chadian National Assembly and the President. This law
provides for long-term management of the project revenues, ensuring these
benefits reach the citizens of Chad. A nine-member College of Control and
Surveillance has been appointed and are preparing to oversee the funds. This
nine-member group includes representatives of the judiciary, senate and
finance ministry as well as local NGO's, labor and church representatives.
To avoid or mitigate social and environmental impacts, the consortium has
worked with a team of scientists and engineers. A 19-volume set of documents
form the foundation of the Project's environmental and socioeconomic plans.
The environmental management plans, in particular, spell out in detail the
Project's commitments related to environmental and socio-economic matters,
including for example, establishment of an offsite Environmental Enhancement
Program to protect biodiversity and an Indigenous Peoples Plan to benefit the
Bakola people in coastal Cameroon.
Each of the Project's primary contractors have competed specific environmental
management plans to conform with the overall environmental management plan.
To support successful implementation, an extensive environmental monitoring
system is in place. Full-time environmental supervisors and monitors are
operating throughout the Project area, monitoring the work of our contractors.
The results of the monitoring can be found in publicly available quarterly
reports.
The consultation program for this Project continues today and is built on a
base of public involvement at all levels in the design process that began in
1993.
Tens of thousands of people in Chad and Cameroon have had the opportunity to
express their views on the Project in over 1800 public meetings. In addition,
the consortium has consulted with over 250 non-government organizations during
the course of the past eight years. This level of consultation is
unprecedented in Africa and perhaps in the world.
Let me now give you a brief update on the Project's status...
Construction is on schedule with the initial focus in 2001 on infrastructure.
This included building 18 work camps and 11 storage yards as well as upgrading
roads and bridges, improving existing airstrips and building new ones. The
project has now completed the upgrade of about 600 kms of roads in both Chad
and Cameroon.
We have also completed a key bridge linking Chad and Cameroon. This bridge now
forms an important link both for the transportation of Project material and
also for other commercial users in the future.
One hundred percent of the line pipe has been manufactured and over 90% has
arrived in Cameroon. By June 2002, all pipe will be stockpiled in the storage
yards awaiting final installation.
Pipeline construction began in November 2001 with two construction crews
working from Cameroon into Chad. To date, we have installed about 25% of the
650 mile pipeline. Drilling of the 270 development and exploration wells began
in Chad in December 2001. Five new drilling and completion rigs are now in
Chad.
The Project currently employs about 10,000 people, with 85% of these
Cameroonian or Chadian nationals. Once operational, the project will require
over 500 full-time employees in addition to several hundred contractors.
We recognize the high expectations of local citizens regarding employment and
give preference to qualified nationals. We have established training
facilities in-country as well as providing nationals with specialized training
in oilfield operations in countries outside Chad. With respect to local
contracting, our primary contractors have identified numerous local companies
for subcontracts from an extensive database created during the past few years.
In 2001, the Project spent over $160 million on required goods and services
supplied by over 2200 local businesses in both countries. Examples of the
types of services include: trucking, housing, site clearing, civil works,
catering, cars and drivers and surveying. Our clear commitment is to give
priority to local Chadian and Cameroonian business and we have been pleased by
the skills and services available in both countries.
Finally, let me close with some general observations and by summarizing the
common principles that continue to guide ExxonMobil on this Project.
I am aware of no other project in Africa or perhaps the world that has
conducted public consultation to the level of the Chad Project - we are proud
of what was accomplished and the input received from local citizens and
knowledgeable others, has been invaluable. Some have called the Chad Project a
new model; I see it as applying ExxonMobil's basic business model which
includes our high standards for safety, health, and environmental management
along with the high standards of business conduct and ethics to the unique
issues Chad presents. For example, in Chad, we had the opportunity of applying
this model on a clean slate. There was no prior history of development to deal
with.
We have approached the Chad-Cameroon Project with a focus on detailed and
rigorous planning, uncompromising ethical business practices and adherence to
all laws while respecting local culture and customs. In the absence of local
engineering and construction codes, we have applied U.S. standards to the Chad
Project's design and implementation.
As we invest to meet the world's energy needs, we are mindful of our
responsibilities as a corporate citizen. We are committed to developing
relationships that are mutually beneficial to the citizens of those countries
where we operate as well as to our shareholders, employees and contractors.
Our goal is not to assume the role of government, but to support government in
its efforts to see that resource development improves the quality of life for
its citizens.
We expose leading-edge western business practices to countries like Chad and
Cameroon, supporting democratic and capitalistic reforms as well as providing
example-setting ethical behaviors.
As we conduct our business, we do so in a manner that recognizes the balanced
environmental and economic needs of the community and the country. We achieve
this by investing wisely and paying careful attention to environmental
protection and mitigation as well as safe work practices. To do this, we need
to have the input of local citizens and others knowledgeable on local matters
through our comprehensive consultation processes.
The key to our success is our company's philosophy of managing our business
for the long-term and applying the highest standards consistently to every
aspect of our business.
Thank you for the opportunity to appear today.
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