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The Chad-Cameroon Petroleum Development Project

Autor:   •  April 12, 2015  •  Essay  •  452 Words (2 Pages)  •  514 Views

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Investing an important sum of efforts and resources in third world countries such as Cameroon and Chad involved serious risks, including the unstable political structure of Chad, Cameroon’s reputation regarding the corruption levels. However, the World Bank also considered other risky possibilities, such as the fact that any of the sponsors could abandon the project anytime and look to invest in other petroleum projects that took place in foreign countries, considering that Chad is not the only country in the world with recently discovered oil reserves. Additionally, there was a strong possibility that, considering their geographic closeness and diplomatic relations, Chad could join Libya and Sudan to develop such oil fields in a project that didn’t involve third parties that demanded rightfulness in the undertaking of the project.

In spite of said major risks, the World Bank acceded to participate for two reasons: (i) the outstanding benefits that would bring to Chad and Cameroon, and (ii) the projected revenues that assured important recovery of the invested capital. Additionally, the project had a well-organized plan that included, among other activities, contingency plans that addresses issues such as environmental impact, indigenous people, and long-term sustainability.

Even though that Chad was one of the riskiest countries to invest, the involved parties would not invest if there is no protection against political risk, an important factor to consider in this project. Moreover, the involvement of multilateral institutions and other lenders add complexity, yet enhance country commitment and mitigate political risk. However, projects in Africa and in the oil and gas sector experienced lower returns and greater problems than other projects in the World Bank’s portfolio. For that reason, the project was commercially viable, could help jump start Chad’s list-less economy, and the Bank could play an important role in protecting the

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