The Chad-Cameroon Petroleum Development and Pipeline Project

HBS Case Nos.: A Case - 202-010; B Case - 202-012; Teaching Note: 5-202-032

Posted: 20 Dec 2001

Date Written: October 30, 2001


SUBJECT AREAS: project finance, emerging markets, business-government relations, business ethics, risk/return evaluation

CASE SETTING: June 2000, petroleum industry, $4 billion investment

On June 6th 2000, the World Bank's and International Finance Corporation's (IFC) Boards of Directors were scheduled vote on whether to approve funding for the $4 billion Chad-Cameroon Petroleum Development and Pipeline project. Although the project presented a unique opportunity to alleviate poverty in Chad, one of the poorest countries in the world, Chad had a President who had been described as a "warlord," and a history of civil war and oppression. One of the most contentious issues, however, was how this President would handle his newfound wealth - the project would increase Chad's annual government revenues by more than 50% (up to $125 million per year). To address this issue, the Bank Group had proposed a novel Revenue Management Plan (RMP) that would isolate Chad's project revenues and target them for poverty reduction programs. Whether this plan would work and what would happen if it did not were two questions that had to be resolved before the Directors could approve the deal.

The A case describes the project, the setting, and the Revenue Management Plan. It includes a discussion of the World Bank Group's reasons for participating in the deal - mainly an opportunity to alleviate poverty, enforce environmental standards, and minimize the impact on indigenous people. The case also describes the very public, and very ardent opposition to the project's environmental, social, and revenue management policies. Faced with a high-risk, but potentially high-return opportunity to improve conditions in Chad, students, as Directors, must decide whether to approve funding for the deal. The B case, set in January 2001 after Chadian President Deby spent part of a signing bonus on weapons to quell rebellions, forces students to reconsider their decisions as directors and project sponsors.

While this case was written for a course on project finance, it is appropriate for a wide variety of courses ranging from international finance to business-government relations to business ethics. The case illustrates not only the complexity of negotiating very large deals between public and private entities, but also the opportunity inherent in large-scale investment. Students must assess whether the benefits received by the host countries are commensurate with the risks they bear. This discussion raises critical ethical and moral issues related to investment in development countries: How do you decide what is an appropriate trade-off between project risk (environmental, social, and, in this case, political) and expected social returns (economic development)? With regard to project finance, the case illustrates the difference between project and corporate finance, and shows that risk sharing and risk mitigation are two motivations for using project finance.

Suggested Citation

Esty, Benjamin C., The Chad-Cameroon Petroleum Development and Pipeline Project (October 30, 2001). HBS Case Nos.: A Case - 202-010; B Case - 202-012; Teaching Note: 5-202-032, Available at SSRN:

Benjamin C. Esty (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

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