Construction on the pipeline began this quarter in Cameroon.

- Workers began clearing the pipeline right of way in the vicinity of the Kribi/Lolodorf Road in late June, several months early in order to employ a technique that will reduce environmental impacts.

- Three pipe mills are in operation in France and Germany. Nearly 500 kilometers of pipe have been manufactured so far.

Construction has also started in the oilfield.

- Sites for two of the initial 50 identified well locations have been completed in preparation for the start of drilling in the fourth quarter.

- Two of the five drilling rigs being built for the Project have also been completed and are ready to be shipped to Africa in the third quarter.

Infrastructure facility construction has moved ahead.

- Site preparation has been completed on 95 km of the roads being upgraded in Cameroon. Earthwork and laterite paving in these sections are underway.

- Concrete pouring has begun on the M'béré bridge and is proceeding despite the arrival of rainy season.

- All pipe storage yards are either under construction or are about to start to be constructed. Two completed yards are full or nearly full of pipe.

The final loan documents were executed in London and Washington, D.C., on June 15, 2001 clearing the way for financial closing in the third quarter.

The number of non-compliance reports dropped significantly during the period.

- There have been no critical (Level III) non-compliances.

- Level II non-compliances were cut by more than half.

- The number of Level I non-compliances dropped 15%.

- There was an overall 20% reduction in non-compliances.

There were four reportable spills in the period, all onto land and all involving sewage from a faulty sewage treatment facility at the Bam work camp in Chad.

Worker safety performance continues to be comparable to or better than records compiled by similar projects in Europe and the U.S.

- The Project's cumulative Recordable Incident Rate is .43 per 200,000 hours worked. The Lost Time Incident Rate is .04.

- There was one lost time incident in the period (an injury auto accident).

A communications initiative has been launched with a local media briefing day in Cameroon, with another to follow in Chad. The goal is to ensure that residents of the host countries have easy access to information about the Project.

Individual compensation has been completed in Cameroon. In Chad, individual compensation for the field facilities and pipeline is completed and compensation has begun for the first 50 well drilling pads and is about 70% complete along the road upgrade right of way.

The host countries have put their first environmental monitors into the field.

The work force has reached 5,000 people. Wages paid in the quarter totaled 2 billion CFA ($3.1 million) flowing into the economies of the host countries.

Spending with local businesses increased by 40% for the quarter, a 20.4 billion CFA ($31.4 million) beneficial impact to the economy of the two countries.

In-migration mitigation measures are in place at the spontaneous settlement at Dompta. The package includes a water system, an HIV/AIDS prevention education program, and the first Community Health Outreach Program initiative for Cameroon.

The Project and its contractors conducted 700 training sessions, with 14,000 attendees (with many of the 5,000 total employees at quarter end having attended more than one training session).

The Archaeology survey of the pipeline right of way in Cameroon has begun. The team of specialists will walk the entire length of the route in Cameroon.

The Roll Back Malaria program has been initiated in Chad. It includes training of nurses and other health professionals and distribution of 20,000 mosquito nets.

Two Environmental Foundation Management Board meetings were held. The Board has accomplished the last steps required to achieve full status for the Foundation under Cameroonian law. It also set up the escrow account to receive the Project's $3.5 million endowment.

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