A Pipeline of Good Intentions

This case is unique where it has a catching name where if you read the case it is in the opposite of it’s name, the government of Chad which is a corrupted government discovered in 1990s that it has oil in one of the cities specifically Doba unfortunately Chad is landlocked where they wanted to build a pipeline that pass by the southern west of Chad and it ends up near the Gulf of Guinea, Chad is a very poor country plagued by civil wars, dictatorships, and invasions by foreign powers. Chad is also landlocked, meaning that a pipeline through neighboring Cameroon had to be built to allow for the shipping of Chad’s oil. It had no source of funds where it had to seek the world bank for help they asked them to loan them the funds along with the oil firms that was ExxonMobil, Petronas of Malaysia and Chevron. The governments of Chad and Cameroon, the World Bank, and a consortium of oil companies agreed on funding terms for the pipeline project, as well as on how the government of Chad would spend the proceeds from the transportation and sale of the oil, where the spending where to be 80% on health and education services, 15% on general governmental needs, and 5% on oil producing region. Their main emphasis was to ease poverty and to avoid oil curse which might lead to government corruption. The Chad royalties where to be deposited in an escrow account in Citibank the branch London. in 2005 Chad’s National Assembly voted to significantly modify the framework for spending oil revenues. This was seen as a breach of the lending agreement with the World Bank, and the World Bank suspended all new grants and loans to Chad. The consortium of oil firms is now caught in the middle. It has decided to withhold all revenues until Chad resolves its dispute with the World Bank. Chad’s government has stated that unless the consortium releases the funds, the government will demand that all oil production in Doba cease.

Case questions:
1. What is the oil curse? Why do you think