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EXXONMOBIL AND THE CHAD–CAMEROON PIPELINE (A)

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In November 1999, ExxonMobil CEO Lee Raymond faced the potential collapse of the
Chad–Cameroon Petroleum Development and Pipeline Project. Both Royal Dutch/Shell (Shell)
and France’s TotalFinaElf (Elf), ExxonMobil’s partners in the pipeline consortium, had just
withdrawn, citing environmental concerns among other things, thus leaving the pipeline’s future
temporarily in doubt. This withdrawal delighted many environmental groups long opposed to the

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pipeline. A spokesperson for the Rainforest Action Network (RAN), a grassroots environmental
organization and longtime pipeline opponent, said in a press release:

Based on its experience in Nigeria, Royal Dutch/Shell recognizes a bad situation


when it sees one, and Elf Aquitaine will avoid becoming part of the tragedy. The
human and environmental costs of proceeding with an oil pipeline that cuts
through the heart of Africa’s rainforest are simply too great.1
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In 1996, after years of economic and environmental feasibility studies of accessing oil
reserves in the Central African country of Chad, a consortium of oil companies that included
ExxonMobil, Shell, and Elf signed a memorandum of understanding (MOU) with the
governments of Chad and neighboring Cameroon. The Chad Development Project involved, over
the span of 25 to 30 years, developing oil fields in southern Chad, drilling approximately 300
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wells in the Doba Basin, and building a 650-mile underground pipeline through Chad and
Cameroon to transport crude oil to the coast for shipping to world markets. Cost of the project
was $3.5 billion; expected production was one billion barrels of oil; according to World Bank
estimates, the project would generate $2 billion in revenues for Chad, $500 million for
Cameroon, and $5.7 billion for ExxonMobil and its project partners.2
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1
“On Anniversary of Nigerian Executions, Shell, Elf Pull out of African Oil Project,” Rainforest Action
Network press release, November 10, 1999, http://www.rainforestinfo.org.au/wrr42/shellout.htm (accessed June 17,
2013).
2
For maps of the project, see http://www.esso.com/Chad-English/PA/Operations/TD_ProjectMaps.asp
(accessed January 9, 2007).
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This case was prepared by Jenny Mead, Senior Researcher; Patricia H. Werhane, Ruffin Professor of Business
Ethics; R. Edward Freeman, Elis and Signe Olsson Professor of Business Administration; and Andrew C. Wicks,
Associate Professor of Business Administration. It was written as a basis for class discussion rather than to illustrate
effective or ineffective handling of an administrative situation. Copyright  2003 by the University of Virginia
Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to
sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of the Darden School Foundation.

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Shell and Elf’s withdrawal threatened to sideline the whole operation and seemed to give
credence to those critics who thought that environmental and human risks of oil exploration and
extraction in the extremely poor countries of Chad and Cameroon were too great. The project’s
many issues burned in Raymond’s mind as he considered whether ExxonMobil should follow
suit or proceed with the pipeline project.

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ExxonMobil

At the time of their December 1998 merger, which some oil industry analysts called
“seismic,” Exxon and Mobil, each a multi-billion-dollar operation, were the world’s two largest
oil companies. In 1997, Exxon had a net income of $8.5 billion, a “AAA” debt rating, revenues

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of $137.2 billion. and sold 5.4 million barrels of petroleum products daily. It also had the largest
refining capacity in the world, 1.7 million barrels daily. Mobil had a net income of $3.3 billion;
revenues of $65.9 billion; and total petroleum product sales of 3.3 million barrels a day.3 Many
analysts attributed the merger to tough times for oil companies, which in the 1990s faced lower
prices, decreased demand, fierce competition, oversupply, and a general global economic
weakness.4 Nonetheless, the two companies had very different images in the oil industry. Mobil
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was seen as having a “combative feistiness,” whereas Exxon had a “relentlessly efficient
stuffiness.”5

By the mere fact that a growing population of environmentally concerned people


worldwide was skeptical of large oil companies and their promotion of fossil fuel use, both
Exxon and Mobil struggled with their public image. Exxon had the most damage to contain,
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however, because of the 1989 disaster in which the single-hulled oil tanker Exxon Valdez hit a
reef outside the shipping lane near Alaska’s Prince William Sound and spilled 53,094,510
gallons of oil. The spill covered 460 miles, took four years to clean up, and killed an estimated
250,000 seabirds, 2,800 sea otters, 300 harbor seals, 250 bald eagles, 22 killer whales, and untold
numbers of salmon and herring eggs.6 Worldwide public outcry was fierce, and Exxon’s
reputation was severely tarnished.7 The company’s clumsy handling of the Exxon Valdez episode
and its subsequent appeal of a $5 billion jury award to spill victims was viewed in general as a
No

public relations debacle.

After the Exxon Valdez incident, Exxon tried to establish an environmentally friendly
image and began using increasingly sophisticated navigational equipment, such as global
positioning systems, to guide its tankers through the waters. Much of ExxonMobil’s website
dealt with the issues of environment and sustainability and several acknowledged the damage

3
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“Exxon and Mobil Sign Merger Agreement,” Business Wire, December 1, 1998.
4
Tim Smart, “Increasingly, Size Counts; Falling Prices in a World of Plenty Drive Mergers Such as Exxon-
Mobil,” Washington Post, December 4, 1998.
5
“From Mobil to Exx-Mobil: Pegasus Gets His Wings Clipped,” Petroleum Review (January 1, 1999): 38.
6
“Oil Spill Facts: Questions and Answers,” Exxon Valdez Oil Spill Trustee Council website,
http://www.evostc.state.ak.us/facts/qanda.cfm (accessed June 17, 2013).
7
If there was an environmental silver lining, the Exxon Valdez disaster prompted passage of the long-debated
(14 years) Oil Pollution Act of 1990, 17 months after the spill.

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done in the Exxon Valdez incident and confirmed that the company had developed an “Oil Spill
Response Preparedness” program. The site also included a link to the company’s “Environmental
Performance Indicators,” which provided: statistics on the company’s marine spills, regulatory
compliance (number of penalty assessments), cogeneration capacity, greenhouse gas emissions,
and the reduction of nitrous oxide (NOx), volatile organic compounds (VOCs), and sulfur

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dioxide (SO2).

In part because it had suffered no disasters akin to the Exxon Valdez oil spill, Mobil’s
public image—on the surface at least—was different; the company, focusing on support of the
arts, sponsored Masterpiece Theatre and ran full-page “advertorials” featuring discussions of
timely issues. Aside from Masterpiece Theatre and PBS programming, the company had funded
community projects focusing on minorities, the handicapped, and the elderly.8 Perhaps

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foreshadowing its eventual participation in the Chad–Cameroon pipeline, Mobil had sponsored
“The Art of Cameroon,” a traveling exhibition, in 1984. Mobil had also initiated some
environmentally friendly programs, which included planting half a million trees around the
United States in the mid-1990s and proposing the same for Peru and Indonesia. In smaller, more
specific ways, Mobil had a softer image; in its service stations, the oil company had reinstated
the practice of having employees clean car windows and offer coffee to drivers.9 But the bottom
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line remained for Mobil, which in the early 1990s had exited the more environmentally friendly
solar power business “because it was not economically attractive.”10

Exploration areas

By 1999, ExxonMobil, leading almost 60 exploration projects worldwide, was considered


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one of the strongest oil companies in upstream operations.11 Its exploration and production
efforts were scattered throughout the world, including some emerging exploration areas in West
Africa, South America, the Middle East, the Caspian region, and Eastern Canada. See Exhibit 1
for ExxonMobil’s major areas of exploration.

Exploration options in the late 20th century


No

In a report, “Changing Oil: Emerging Environmental Risks and Shareholder Value in the
Oil and Gas Industry,” the World Resources Institute (WRI) examined and evaluated the state of
worldwide oil exploration in the late 20th century. In this 39-page assessment of the state of the
oil industry, WRI presented the following conclusions about the financial implications of
restricted access to oil reserves:
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8
“American Business and the Arts,” Forbes special advertising section, October 28, 1985.
9
“Merger of Exxon and Mobil: Opposites Attracted; Must Mesh Different Cultures,” Record (Northern New
Jersey), December 3, 1998.
10
“Tree Lover,” International Petroleum Finance, (Energy Intelligence Group), October 31, 1999.
11
Oil companies in general had four major divisions: upstream operations, for exploration and production of
crude oil and natural gases; downstream operations, for transportation and sale; chemicals, for the manufacture and
marketing of petrochemicals; and coal, minerals and powers, for mining exploration and the generation of power.

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 As traditional oil-producing regions mature and yield progressively less oil, the industry
is increasingly choosing to explore and produce in new areas where environmental and
social controversies may be significant.
 New information technologies and emerging networks between NGOs ensure that

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companies’ activities become more transparent to their principal markets and
shareholders.
 In environmentally and socially sensitive areas, access to reserves can be denied,
restricted, or kept in limbo. Where access is permitted, opposition from local
communities can constrain production operations, making them more costly. One
prominent example is the case of Shell in Nigeria, where production has at times been cut
to 40% of capacity and lower due to opposition and sabotage from local communities.12

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The WRI report also touched on other issues facing the oil industry. Aside from
increasingly limited access to reserves, companies must deal with the issues of climate change
and environmental and social effects and how those would affect sales, operating costs, asset
values, and shareholder values. In the late 20th century, environmental issues had already had an
effect on oil companies and would have even greater influence on how these companies
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conducted business and how profitable they ultimately would become. Investors were (and
would be) increasingly eager to gauge the environmental “conscience” of a company, and any
lack of transparency would affect investor relations.

Alternative energy
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Despite pressure from environmental groups favoring alternative fuel sources,


ExxonMobil remained firmly committed to fossil fuels. Other sources such as solar, biomass,
water and wind power, and electricity were simply impractical, the company claimed, and were
“economical only in niche markets.”13 To illustrate the impracticality of these alternatives,
ExxonMobil utilized a Manhattan Institute senior fellow’s estimate that to power New York City
on solar power alone would take four times the area of the city to hold the required solar panels,
even on a sunny day.14 Ethanol alcohol, another fuel source identified by environmentalists as
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more earth-friendly, was not as harmless as claimed, according to ExxonMobil, because of all
the agricultural effort (and byproducts such as wastewater) that grain production required.15
Future efforts looked dim; in a 2000 corporate report publication, ExxonMobil claimed that
despite significant efforts to develop alternative energy sources such as solar or wind, those
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12
Duncan Austin and Amanda Sauer, “Changing Oil: Emerging Environmental Risks and Shareholder Value in
the Oil and Gas Industry,” (Washington, DC: World Resources Institute, July 2002), 25.
13
“An Anniversary to Celebrate,” ExxonMobil press release, http://www.exxonmobil.com (accessed June 1,
2000).
14
“An Anniversary to Celebrate.”
15
“An Anniversary to Celebrate.”

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sources comprised less than 0.25% of the world’s energy supply and would not, in the
foreseeable future, be economical without significant governmental subsidies.16

Chad and Cameroon

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In the late 20th century, Chad and Cameroon were two of the poorest countries in the
world. (See Table 1.) Both nations had rampant disease, poor nutrition, extreme poverty, and
very little safe drinking water. Although three times the size of France, Chad could claim only
166 miles of paved roads, no rail system, a substandard telecommunications system (only two
phones per thousand people), and overall insubstantial infrastructure and erratic access to
electricity (see Exhibit 2 for maps of both countries).

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Table 1. A socioeconomic comparison of Cameroon, Chad, and the United States.
Cameroon Chad United States
Per-capita GNP $610 $230 $29,240
Life expectancy 54 years 48 years 77 years
Infant mortality 77 per 1,000 births 99 per 1,000 births 7 per 1,000 births
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Literacy rate 80% men 49% men 97% (both sexes)
67% women 31% women
Country GNP $8.7 billion $1.7 billion $9,400.2 billion
Annual exports $2.3 billion $328 million
Source: Chad–Cameroon Development Project Fact Sheet 2001, Esso Exploration & Production Chad, Inc.,
page 2.
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Chad

Chad gained its independence from the French in 1960. Almost immediately, the country
was thrown into civil war, primarily between the Muslim northern rebel groups, called by one
journalist “an explosive ethnic mix,” vulnerable to outside manipulation (from Libya and Sudan,
among others), and the government in the south. Politically, culturally, and geographically, the
No

northern and southern regions of Chad were immensely different. The north was arid, desertlike,
primarily Muslim; the south tropical and animistic. Internal turmoil continued through the next
three decades, resulting in more than 20,000 deaths.

In 1990, French-trained 38-year-old General Idriss Deby staged a coup, ousting President
Hissene Habre. Deby, the fifth Chad head of state in the country’s 30 years of independence,
promised human rights, a multiparty system, and democracy; under his leadership; however,
corruption and human rights abuses ran rampant. According to Transparency International, a
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16
“ExxonMobil 200 Financial & Operating Review,”
http://www.exxonmobil.com/Corporate/Newsroom/Publications/shareholder_publications/c_fo_00/c_corporate_06.
html (accessed March 6, 2003).

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global organization monitoring corruption levels globally, Chad and Cameroon repeatedly had
two of the world’s worst records for corruption.17

Skepticism about Exxon’s dealings in Chad were exacerbated by a 1994 incident in


Doba, where a local peasant, having taken his family to watch an airplane land at the Exxon

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exploration field, was shot to death by the security forces guarding the Exxon staff.
Miscommunication was the cause: Security forces claimed that the peasant was a rebel, while
villagers claimed he was just a man who wanted to watch the “miracle” of a plane landing.
Ultimately, the cause of the incident was assigned to “language problems.” Other tragic incidents
occurred, most notably in 1998 when Chadian security forces allegedly killed 200 civilians in the
Dobara and Lara villages in the Doba region, a massacre that was never investigated. Amnesty
International accused the Chadian government of utilizing “extrajudicial killings and

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disappearances, illegal searches and wiretaps, home demolition, threat of death or grave bodily
harm, rape, and arbitrary arrest and detentions against its political opponents and their neighbors
and family members.”18

Cameroon
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Cameroon achieved independence in 1960, after years of foreign domination by the
Portuguese, Germans, British, and French. The next 20 years saw a repressive government under
President Ahmadou Ahidjou, although there was investment in agriculture, education, health
care, and transport. In 1982, the next Prime Minister, Paul Biya, under pressure from
Cameroonians, instituted a multiparty system. Although the country’s literacy rate was one of the
highest on the African continent, its development was slow because of widespread corruption
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and huge military and security expenditures.19 Government repression increased in the 1990s,
and while political parties were allowed to emerge, rampant fraud permeated the elections, and
the government arrested opposition leaders. In 1997, Biya was reelected president, although half
of the country’s population was excluded from voting for various reasons. This West African
country was 475,400 square kilometers—roughly the size of California—and possessed 402
kilometers of coastline. In the late 1990s, the population was approximately 16 million.
No

The Pipeline

Working with oil companies from various other countries, the Republic of Chad began
exploring its own oil resources in the late 1960s. By 1975, after many exploration wells had been
drilled, it was clear that oil was abundant. Further exploration was halted by Chad’s 1979 civil
war and did not resume until the late 1980s. In 1988, an Exxon consortium signed an agreement
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17
See Transparency International’s Corruption by Country/Territory website:
http://www.transparency.org/country#TCD (accessed June 26, 2013).
18
“Chad & Cameroon: Oil Pipeline Project Threatens Local Communities and Fragile Ecosystems,” Amnesty
International, www.amnestyusa.org/justearth/chad-cameroon.html (accessed March 6, 2003).
19
“Cameroon Profile,” BBC News, http://www.bbc.co.uk/news/world-africa-13146029 (accessed June 18,
2013).

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with Chad that set the framework for the eventual pipeline project; Exxon had 30 years to
develop the oil fields at Doba in southern Chad and produce and transport the oil to market.
Because Chad was landlocked, the Exxon Consortium signed an agreement with neighboring
Cameroon to build a 1,070-kilometer (approximately 600 miles) underground pipeline to carry
the crude oil to a shipping terminal just offshore from Kribi, on the Gulf of Guinea. In January

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1995, Exxon, through its affiliates, Esso Exploration and Production Chad Inc., signed an
agreement with Chad and Cameroon outlining the principal terms for the pipeline. In 1997, the
Chad government enacted an amendment to the 1988 Exxon Consortium convention, outlining
the relationship between the Consortium and Chad, “including the processes for environmental
protection, land acquisition, and compensation, as well as royalty and tax payments that could
approximately double the size of Chad’s annual budget.”20

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World Bank Involvement21

The World Bank was conceived and founded in 1944, initially to help rebuild Europe
after World War II. Though reconstruction remained an important mission, over the years the
bank expanded to lending money for relief from “natural disasters, humanitarian emergencies,
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and postconflict rehabilitation needs.” The 1980s was a critical period for the bank, which had
suffered from “macroeconomic and debt rescheduling issues,” and faced criticism from many
regarding its environmental and social positions. By the 1990s, the World Bank was focusing on
stimulating economic development throughout the world, particularly in poorer countries. In
1999, the bank lent approximately $15 billion to developing countries. Before becoming
involved in the Chad–Cameroon Oil and Pipeline Project, the bank had helped fund 10 other
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pipeline projects around the world. Its return on earnings had averaged 22% over the years,
although the returns on investments in Africa and oil and gas ventures were much lower.22 By
1999, the bank’s worldwide staff of 10,000 included 250 environmental experts and 800
employees working on sustainable development issues.23

Although World Bank involvement in the pipeline project did not become official until
1997 (a date for final project financing approval was not slated until 1999), the bank originally
No

took an interest in 1993. In 1995, to ascertain the various environmental and social risks, the
bank commissioned the governments of Chad and Cameroon, scientists, various
nongovernmental organizations (NGOs), and environmental engineers to analyze the pipeline’s
effect on the areas through which it would run and produce an environmental assessment plan.
Many of the villagers in the path of the pipeline were consulted, primarily through village
meetings. The Environmental Assessment Report covered a variety of topics including
environmental management, compensation and resettlement, regional development, and waste
management. The report, which was submitted to the World Bank in mid-1999, took five years
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to compile; at completion, it was a 19-volume, 3,000-page study.

20
http://www.essochad.com/Chad/Project/Development/Chad_Development.asp (accessed March 6, 2003).
21
Much of the information in this material is taken from the World Bank website, http://www.worldbank.org/.
22
“Letter to World Bank,” July 20, 1998, http://www.edf.org/docs (accessed March 6, 2003).
23
Abid Aslam, “Environment: Taking the World Bank’s Measure,” Inter Press Service, September 26, 1999.

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The Environmental Assessment Report identified key problems and their potential
solutions. The report acknowledged that the pipeline would cross over and thus affect “a number
of ecological zones and a variety of socioeconomic groups.”24 The report also identified the
potential environmental and social costs to both Chad and Cameroon:

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 Oil spill costs
 Health costs
 Agriculture production losses
 Livestock fodder losses

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Forest and bush product losses
 Small emission of greenhouse gases25

The report acknowledged the “uncertainty in estimating incremental environmental and social
costs,” but it claimed that “most of these potential costs will be mitigated and/or compensated for
by the private sponsors, and any remaining impacts are expected to be negligible in comparison
to the large benefits that both Chad and Cameroon stand to gain from the project.”26 A result of
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the report and the research was the Environmental Management Plan, country-specific
documentation on construction and operations.27

The World Bank explained its participation:


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This project could transform the economy of Chad. The country is so poor at
present that it cannot afford the minimum public services necessary for a decent
life. By 2004, the pipeline would increase government revenues by 45% to 50%
per year and allow it to use those resources for important investments in health,
education, environment, infrastructure, and rural development, necessary to
reduce poverty.28
No

Pipeline foes derided the World Bank’s investment in the project, however. A Rainforest
Action Network spokesperson was cynical, claiming that if the bank were truly committed to the
environment and ending poverty, it would fund non-oil-related projects with direct benefits to
local communities rather than large corporations and “corrupt governments.”29 One World Bank
official conceded the occasional collision between the bank’s goals and environmental

24
“Project Appraisal Document—Chad–Cameroon Petroleum Development and Pipeline Project,” Washington,
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D.C., The World Bank, Report #19627-CM, Annex 14, March 30, 2000, 139.
25
“Project Appraisal Document—Chad–Cameroon Petroleum Development and Pipeline Project,” 74.
26
“Project Appraisal Document—Chad–Cameroon Petroleum Development and Pipeline Project,” 76.
27
For environmental assessment documents, see http://www.esso.com/Chad-
English/PA/Newsroom/TD_Documentation.asp (accessed January 9, 2007).
28
Frannie A. Léautier, Cities in a Globalizing World, (Washington, DC: World Bank Publications, 2006), 15.
29
“World Bank Approves ‘Nightmare’ African Oil and Pipeline Project,” Rainforest Action Network
Newsroom, http://www.ran.org/news/newsitem.php?id=118&area=newsroom (accessed March 6, 2003).

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responsibility: “The bank can’t run away from a project that might harm the environment when it
is being put forward by ‘a country which may not have many development options.’…Poverty
alleviation and the environment often are at odds. There are some real tradeoffs you have to
make.”30

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Environmental/Social Issues

Beginning in 1993, during the pipeline initial planning phase, ExxonMobil began an
evaluation of the project’s potential environmental and social issues. Company representatives
met with Chad and Cameroon government officials at all levels and with residents in the pipeline
area. By 1998, ExxonMobil had held many village meetings and met with approximately 20,000

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people in 65 affected villages. ExxonMobil also consulted with NGOs, including Africare, Care,
and the Worldwide Fund for Nature. The company set up informational reading rooms in
Cameroon, distributed a survey questionnaire, and set up consultations with indigenous
populations, including the Bakola Pygmies, many of whom lived along the pipeline route.

Cameroon’s indigenous people


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In central African countries, there were an estimated 250,000 Pygmies;31 Cameroon’s
Pygmies were primarily the Bagyeli (or Bakola) people, with a population of approximately
4,000; there were also the Baka and the Medzan in the southeastern section of the country.
Although the history of the Pygmies in Cameroon was somewhat unclear—were they the
original inhabitants of the forest, or did they move there with farmers and fishermen from
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elsewhere?—their connection with the forest was strong and clear: “They see the forest as a
personal god, fruitful and kind, and enact their relationship with it and with the spirits of the
forest in ritual and song…What they do have in abundance is an intimate knowledge of the
forest: the ability to read animal tracks, to know the flowering and fruiting cycles of plants, to
locate a bee’s nest from the flight of a bee. They know the individual properties of thousands of
plants for food or medicine.”32
No

The Chad Export Project’s Indigenous Peoples Plan (commissioned by the Cameroon Oil
Transportation Company, the pipeline project’s management) outlined the primary
characteristics of the Bagyeli Pygmies. They were sensitive to the ecological environment and
dependent on the forest resources; they had limited interaction with Cameroon’s mainstream
population, in large part because of “preexisting socioeconomic prejudice based on their way of
life and physical appearance.” The Bagyeli were also highly susceptible to disease, a condition
exacerbated by their poor access to health care and health facilities. The Bagyeli had little to no
access to formal schooling, and little motivation to acquire an education anyway. Because of
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30
Aslam.
31
Many of Africa’s indigenous people over time had grown to dislike the word “pygmy” because of its often
derisive use.
32
“Peoples of the Forest: Pygmies in Central Africa,” Background Sheet (London: Survival for Tribal Peoples
Organization, 1998).

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their hunting lifestyle and their lack of agricultural training, the Bagyeli were unable to farm for
subsistence or a living. In addition, the Bagyeli’s habitat had already been severely damaged by
industrial logging, which had started in the 1950s.33 In Cameroonian society, the Bagyeli were “a
highly marginalized and vulnerable group. They are not recognized as Cameroonian citizens,
have no identity papers, never participate in local elections, have no recognized collective land

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and property rights under law.”34

Cameroon’s environment

By the mid-1990s, Cameroon was one of the world’s top five exporters of tropical logs;
however, the logging that had taken place for more than 40 years had decimated much of the
country’s forests. Between 1959 and the late 1990s, 81% of the country’s unprotected forests had

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been logged. Although legislation to protect the forests was established in 1994, compliance with
the legislation was problematic: more than half of the licensees ignored the regulations.35
Cameroon’s forests were some of the most diverse in the Congo Basin, but they faced the worst
depletion. Experts agreed, “If managed properly, Cameroon’s forests could offer long-term
revenues without compromising the ecosystems’ natural function”36 but that this safeguarding
would require careful monitoring.
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The immense deforestation that had already occurred led to loss of biodiversity and
environmental benefits such as watershed protection, nutrient recycling, and climate regulation
that forests provided.37 Petroleum exploration only exacerbated the situation, because every stage
of this exploration involved cutting down trees. In order to ascertain the path of petroleum, oil
companies used explosive devices in the ground; these explosions added to the damage caused
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by deforestation, particularly in chasing away wildlife. The drilling process itself had enormous
environmental fallout, producing drilling wastes (water, fluid, mud, and rock cuttings, all often
toxic). Waste management processes to lessen the toxic waste generated were expensive and thus
often ignored by the oil companies. There was also the infrastructure that needed to be built to
support the drilling and pipeline communities; construction of roads affected both the
surrounding environment and communities. Indeed, in the extreme poverty both of rural Chad
and Cameroon, the simple loss of a piece of land or a fruit-bearing tree could severely affect a
No

family’s ability to survive.38

33
Information taken from the Chad Export Project, “Indigenous Peoples Plan, Environmental Management
Plan, Cameroon Portion, Volume 4,” May 1999.
34
Thomas Griffiths and Marcus Colchester, “Indigenous Peoples, Forests, and the World Bank: Policies and
Practice, World Rainforest Movement, August 2000, http://www.wrm.org.uy/actors/WB/IPreport2.html#box11
(accessed March 6, 2003).
35
For statistics and information on world forest depletion, see the World Resources Institute publication, “The
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Last Frontier Forests: Ecosystems and Economies on the Edge,” at http://pdf.wri.org/last_frontier_forests.pdf


(accessed January 9, 2007).
36
World Resources Institute, “An Overview of Logging in Cameroon,” Global Forest Watch report, 2000,
http://www.insituwildlifeconservation.org/logging%20cameroon.pdf (accessed June 18, 2013).
37
Steve Krentzmann and Shannon Wright, Drilling to the Ends of the Earth (San Francisco, CA: Rainforest
Action Network, 1998), 14–15.
38
Korinna Horta, “Fueling Strife in Chad and Cameroon: The Exxon-Shell-Elf-World Bank Plans for Central
Africa,” Multinational Monitor 18, no. 5 (1997): 10.

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The pipeline was slated to go through the pristine M’bere Rift Valley and Deng Deng
Forest, home to rare plant life, endangered species, and several thousand Pygmies who used the
area for their hunting grounds, settlements, and sacred sites. The Rainforest Action Network
(RAN), a major pipeline foe, claimed in a November 1999 press release that “[T]he African
Rainforest Pipeline project will slice through the heart of pristine rainforests, and will put

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hundreds of millions of dollars into the pockets of Exxon and two corrupt governments.” The
African Forest Action Network (AFAN), a network of 60 West and Central African
nongovernmental organizations, concurred with RAN’s fears that the pipeline threatened
biodiversity, forests, and the watersheds, pointing out that the 670-mile pipeline would cross 17
rivers used extensively by local communities for bathing, drinking, and washing, as well as five
habitat zones. As it approached the Cameroon coast, the pipeline would run extremely close to a
coastal national reserve with endangered marine life, as well as the Lob Waterfalls, one of the

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world’s few falls which flowed directly into the ocean.39

In addition to the forests, the pipeline posed particular danger to mangroves and coral
reefs, both of which played a vital role “in sustaining local communities, particularly for
thousands of indigenous cultures around the globe that depend on them for their economic
survival, cultural grounding and spiritual relations.”40 Mangrove trees were an important part of
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the ecosystem, serving as a spawning and nursery area for many species such as fish, water birds,
crustaceans, and aquatic mammals. Groves of mangrove trees helped prevent erosion, mitigate
climate change, and buffered land against rising sea levels generated by storms. Because they
were coastal trees, mangroves could suffer greatly from any marine oil spills or pollution
generated by offshore rigs.41 Studies showed that it could take more than a century for mangrove
trees (as well as coral reefs) to recover from damage caused by an oil spill, primarily because
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once their shallow roots were covered with oil, the trees could not breathe and consequently
would die off. Cameroon had large expanses of mangrove trees along the Rio del Rey and Cross
Rivers estuary; those trees were important for the country’s large fishing industry.

Although ExxonMobil had commissioned an “Environmental Impact Assessment” for the


pipeline project in the mid-1990s, many critics, such as the Dutch Commission on
Environmental Impact Assessment, claimed that the report lacked key information, particularly
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about the effect on the two countries’ ecosystems and inhabitants (especially the Pygmies) and
also lacked emergency response and compensation plans in the case of an oil spill.42 Critics even
derided Exxon’s decision to place the pipeline three feet underground to avoid tampering and its
leak-monitoring system.

Even with the latest state-of-the-art technology, oil leaks in pipelines can go
undetected until a huge amount of damage has been done. The most sophisticated
technology has a detection capacity of a leakage of 0.002% of the oil passing
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39
Horta, 10.
40
Krentzmann and Wright, 30.
41
Horta, 10.
42
Krentzmann and Wright, 22–24.

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through. [T]his means that under the best of circumstances 2,000 gallons could
leak a day without being noticed.43

Other critics pointed out the dangers to Cameroon’s Atlantic Littoral Forest, one of the
world’s most undisturbed classified rain forests, home to a myriad of plant and animal species,

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such as chimpanzees, elephants, gorillas, black rhinos, as well as the Bakola Pygmies.44 As this
forest was opened up to pipeline construction, critics argued that it would be more susceptible to
logging and poaching, thus putting the forest’s health and survival at risk.45 Still other opponents
argued that the consortium’s stationary offloading vessel off the coast of Cameroon was only a
single-hulled tanker, which was not as protective as a double-hulled tanker.

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History of Oil Drilling in Less-Developed Countries (LDCs)

ExxonMobil faced another challenge: the history of oil company exploration in less
developed countries. The most publicized case was Shell’s operations in Nigeria. Shell had
drilled for oil in Nigeria since 1937 and until the mid-1990s was the largest oil operation in that
country. In the early 1990s, its joint venture with Elf and Agip produced more than 900,000
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barrels of oil a day, mostly from a region inhabited primarily by the Ogoni people, one of
Nigeria’s 240 minority tribes. At the same time, between 1982 and 1992 approximately
1.6 million gallons of oil were spilled in the Nigerian oil fields, some precipitated by dissident
Ogoni unhappy with the oil ventures, the environmental degradation, and the lack of improved
social effect the drilling had on the local villages and communities. Although Shell claimed to
have invested more than $100 million in environmental projects in Nigeria, there was little to
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show for this investment. Even the Wall Street Journal described Ogoniland as “a ravaged
environment.”46 Finally, when Shell did not try to intervene or protest the government’s
assassination of a number of prominent dissidents, including Ken Saro-Wiwa, the worldwide
media attacked Shell for what was perceived to be complicity in these deaths.47 Despite
$300 billion earned from oil since 1975, Nigeria’s per-capita income dropped 23% in that time
period.
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A similar controversy assailed Canadian Talisman Energy, Inc., which came under fire in
1999 for drilling oil in Sudan, Africa’s biggest country and a place notorious for its human rights
43
Kenneth Walsh, “World Bank Funding of Chad–Cameroon Oil Project,” Environmental Defense Fund,
March 17, 1997, http://www.hartford-hwp.com/archives/32/031.html (accessed March 6, 2003).
44
There were an estimated 1,000 Bakola Pygmies in the entire pipeline project area.
45
Rachel Naba, “Oil Exploited, Nature Disturbed,” http://theearthcenter.com/chad.html (accessed March 6,
2003).
46
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Geraldine Brooks, “Slick Alliance: Shell's Nigerian Fields Produce Few Benefits For Region's Villagers,”
Wall Street Journal, May 6, 1994.
47
William E. Newberry and Thomas N. Gladwin, “Shell and Nigerian Oil,” in Ethical Issues in Business:
Philosophical Approach, 7th Edition, eds. Thomas Donaldson, Patricia H. Werhane, and Margaret Cording (Upper
Saddle River, NJ: Prentice Hall, 2002), 522–40. In 1993, Shell shut down its operations in Ogoniland but continued
to drill for oil and gas in other parts of Nigeria. Shell then dramatically revised its code of ethics, invested at least
$100 million in cleaning up Ogoniland, and pledged more than half a billion dollars in exploring alternate energy
sources. (information from http://www.shell.com; accessed March 6, 2003).

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abuses. One journalist wrote that Sudan was “a place of epic misery…In this largely arid and
badly eroded land, rogue militias routinely enslave women and children…At the centre of this
conflict stands a fundamentalist Muslim government that has bombed hospitals, torn down
Christian churches, and denied famine relief to its people.”48 To accommodate oil drilling, the
government had displaced approximately 4.5 million of its 33 million inhabitants.

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Conclusion

If ExxonMobil did not proceed with the pipeline project, undoubtedly another country or
company would take its place. Two possibilities were neighboring Sudan, which had financed its
own pipeline, and Libya, which had encouraged Chad to ignore the western oil companies and

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let Libya ship the oil. ExxonMobil certainly could look elsewhere for oil reserves both in Africa
and other continents. As a World Bank press release pointed out, “Chad is not the only country
with untapped petroleum reserves. Exploration is underway right across the continent to find new
oil sources—which could prove cheaper and more accessible. If Chad does not seize this
opportunity, it may well pass the country by.”49
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All these issues went through Lee Raymond’s mind as he considered the course of action
that ExxonMobil should take.50
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48
Andrew Nikiforuk, “Oil Patch Pariah,” Canadian Business Magazine, December 10, 1999.
49
“World Bank Group Approves Support for the Chad-Cameroon Petroleum Development and Pipeline
Project,” World Bank press release, June 6, 2000.
50
When the news of Shell and TotalFinaElf’s withdrawal became public on November 11, more than 10,000
Chadians took to the streets of capital city N’Djamena to protest the withdrawal.

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Exhibit 1
EXXONMOBIL AND THE CHAD–CAMEROON PIPELINE (A)
Major Areas of Exploration

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North America Gulf of Mexico
Eastern Canada Nova Scotia, Newfoundland
Western Canada Cold Lake Field
South America Argentina, Venezuela, Brazil, Trinidad, Guyana
Europe North Sea, Netherlands, Germany, Norway, United Kingdom
Africa Nigeria, Equatorial Guinea

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West Africa Angola, Chad, Cameroon
North Africa Egypt
Asia-Pacific Malaysia, Australia, Indonesia (North Sumatra)
Caspian Azerbaijan, Kazakhstan
Middle East Abu Dhabi, Yemen, Qatar, Kuwait
Russia Sakhalin Island
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Source: ExxonMobil annual report, 1999.
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Exhibit 2
EXXONMOBIL AND THE CHAD–CAMEROON PIPELINE (A)
Maps of Chad and Cameroon

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Chad

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Source: https://www.cia.gov/library/publications/the-world-factbook/geos/cd.html (accessed June 17, 2013).

Cameroon
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Source: https://www.cia.gov/library/publications/the-world-factbook/geos/cm.html (accessed June 17, 2013).

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