Document of The World Bank Report No: ICR0000553 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-33730) ON A CREDIT IN THE AMOUNT OF SDR 17.4 MILLION (US$ 23.7 MILLION EQUIVALENT) TO THE REPUBLIC OF CHAD FOR A PETROLEUM SECTOR MANAGEMENT CAPACITY-BUILDING PROJECT June 30, 2007 Sector Department COCPO Country Department AFCC1 Africa Region CURRENCY EQUIVALENT Currency Unit = CFA Franc (CFAF) Currency Unit = SDR US$1 = 651 CFAF (at project US$1 = 1.36 SDR FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immune Deficiency Syndrome ASDEC Association for the Development of Savings and Credit CAS Country Assistance Strategy COTCO Cameroun Oil Transportation Company, S.A., the owner/operator of the Doba pipeline in Cameroun CPPL Coordination Permanente Pétrole Locale CTNSC Comite Technique National de Suivi et de Contrôle DCA Development Credit Agreement DEELP Directorate of Studies and Petroleum Legislation Doba Petroleum Project Petroleum Development of the Kome, Bolobo and Miandoum fields in the Doba region in southern Chad under the Chad/Cameroon Petroleum Development and Pipeline Project DPU Doba Project Unit ECMG External Compliance Monitoring Group EMIS Environmental Management Information System EMP Environmental Management Plan Esso Chad Esso Exploration and Production Chad, Inc., the operator of the Doba oil field development Exxon Exxon Mobil Corporation (USA) FACIL Fonds d'Actions Concertées d 'Initiative Locale FGF Future Generations Fund GNI Gross National Income GoC Government of Chad IAG International Advisory Group IBRD International Bank for Reconstruction and Development IEC Information, Education and Communication IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund MIS Monitoring and Information System MEWR Ministry in charge of Environment and Water Resources (Ministère de l'Environnement etde l'Eau) MMEP Ministry in charge of Mines, Energy, and Petroleum (Ministère des Mines, de 1'Energie et du Pétrole) MOF Ministry in charge of Finance (Ministère des Finances) MP Ministry of Petroleum MTR Midterm Review NGO Non-Governmental Organization PDF Pilot Development Fund (FACIL) PIU Project Implementation Unit PRML Petroleum Revenue Management Law Private Sponsors Consortium of international oil companies, led by Exxon, investing in Chad's Doba oilfields PRGF Poverty Reduction and Growth Facility RDP Regional Development Plan STDs Sexually Transmitted Diseases TA Technical Assistance TOTCO Tchad Oil Transportation Company, S.A., the owner/operator of the Doba pipeline in Chad TTL Task Team Leader Vice President: Obiageli Katryn Ezekwesili Country Director: Marie Francoise Marie-Nelly Sector Manager: Peter van der Veen Project Team Leader: Silvana Tordo ICR Team Leader: Silvana Tordo COUNTRY Project Name Petroleum Sector Management Capacity Building CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 6 3. Assessment of Outcomes.......................................................................................... 14 4. Assessment of Risk to Development Outcome......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 20 6. Lessons Learned ....................................................................................................... 26 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 27 Annex 1. Project Costs and Financing.......................................................................... 29 Annex 2. Outputs by Component ................................................................................. 30 Annex 3. Economic and Financial Analysis................................................................. 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 35 Annex 5. Beneficiary Survey Results........................................................................... 38 Annex 6. Stakeholder Workshop Report and Results................................................... 39 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR..................... 40 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders....................... 49 Annex 9. List of Supporting Documents ...................................................................... 50 MAP A. Basic Information PETROLEUM SECTOR Country: Chad Project Name: MANAGEMENT CAPACITY BUILDING PROJECT Project ID: P048202 L/C/TF Number(s): IDA-33730 ICR Date: 06/28/2007 ICR Type: Core ICR Lending Instrument: SIL Borrower: CHAD Original Total XDR 17.4M Disbursed Amount: XDR 17.4M Commitment: Environmental Category: C Implementing Agencies: Comite Technique National de Suivi et de Controle Unite du Projet Doba Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/10/1996 Effectiveness: 03/23/2001 03/23/2001 Appraisal: 07/28/1999 Restructuring(s): Approval: 06/06/2000 Mid-term Review: 10/31/2003 Closing: 12/31/2005 12/31/2006 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Unsatisfactory Quality of Supervision: Moderately SatisfactoryImplementing Moderately Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Performance: Unsatisfactory Performance: Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project Yes Quality at Entry None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Unsatisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 41 41 Oil and gas 22 22 Other social services 37 37 Theme Code (Primary/Secondary) Environmental policies and institutions Secondary Secondary Pollution management and environmental health Primary Primary Regulation and competition policy Primary Primary Social analysis and monitoring Primary Primary E. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Jean-Louis Sarbib Country Director: Marie Francoise Marie-Nelly Serge Michailof Sector Manager: Peter A. van der Veen Mark D. Tomlinson Project Team Leader: Silvana Tordo Michel E. Layec ICR Team Leader: Silvana Tordo ICR Primary Author: Sati Achath F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project.s development objective is to strengthen Chad's capacity to: manage the development of its petroleum resources in an environmentally and socially sound manner; minimize & mitigate potential negative environmental and social impacts of the Doba Petroleum Project on the producing region, strengthen local capacity in the region, and provide opportunities for the region.s residents to improve their living conditions; and establish an effective framework for further sound private investment in the petroleum sector, and engage effectively with investors. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Effective Government monitoring of the implementation of the Doba Petroleum Project (including financial and technical aspects) When Doba project work The ministries of Value started, the Government Petroleum and Ministries of quantitative orhad almost no capacity to Finances monitor Petroleum, Finance Qualitative) monitor the and Environment implementation of the effectively the monitor the project project. project Date achieved 10/01/2000 12/31/2005 12/31/2006 Comments (incl. % Partially achieved. Improve revenue forecast and exchange of information among achievement) sector ministries. Conduct regular audits of the entire value chain. Indicator 2 : Effective imlementation of the Doba Petroleum Project Environmental Management Plan (EMP), in particular as concerns social impact aspects The EMP of Doba have become The EMP of Doba environmental are part of an guidelines that will Value EMP prepared by a environmental form the basis for quantitative orconsultant and agreed decree related to future Qualitative) upon by the Bank, Esso, Environmental environmental and the Government Assessment of regulations related infrastructure to hydrocarbon project exploration and production activities in Chad. Date achieved 10/01/2000 12/31/2005 12/31/2006 Comments (incl. % Partially achieved. The EMP guidelines were finalised in December 2005. achievement) Indicator 3 : Social infrastructure improvements in the producing region Value One existing hospital in Nine major and 30 Nine major and 22 quantitative or Doba micro micro Qualitative) infrastructure infrastructure. More than 8000 people carried out various income generating activities. Date achieved 10/01/2000 12/31/2005 12/31/2005 Comments (incl. % Fully achieved. achievement) Indicator 4 : Substantially increased Government dealings with potential new private investors All past geological No past geological and and geophysical data have been Active promotion Value geophysical data have acquired and of the sector by the quantitative or been acquired and stored stored in a GoC. Three new Qualitative) in a systematic manner and easily available to systematic manner concessions potential investors and easily awarded. available to potential investors Date achieved 10/01/2000 12/31/2005 12/31/2006 Comments Partially achieved. Geological, geophysical, and petrophysical data are stored by (incl. % oil companies on behalf of the GoC. Lack of funding under the Project achievement) prevented the GoC from investing in data storage. (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Oil price comparators reflect pertinent international price Chadian team of Chadian team of the Value the Ministry is Ministry is able to (quantitative No oil price comparator able to run the run the model and or Qualitative) model and to analyze the to analyze the discount discount Date achieved 10/01/2000 12/31/2005 12/31/2006 Comments Partially achieved. The model requires monthly input of freight rates and oil (incl. % prices as published by Platts Oilgram. The Ministry has not been diligent in achievement) keeping its subscription current. As a result the model is not regularly used. Indicator 2 : Environmental regulations for the petroleum sector are developped and a new hydrocarbon code is prepared Value Petroleum code dated Petroleum law (quantitative 1962. No reference to Regulation and adopted in May or Qualitative) environment code adopted 2007. Date achieved 10/01/2000 12/31/2005 12/31/2006 Comments Partially achieved. The preparation of the Petroleum Law was financed by the (incl. % GoC entirely. No implementing regulations and no Environmental Decree were achievement) adopted. However, EMP implementation guidelines were prepared in 2005. Indicator 3 : Capacity in Ministry of Environment and CTNSC to monitor environmental and social aspects of petroleum activities is strengthened Persons trained in the following specialities : 33 CTNSC staff Biophysical 4 were trained in 12 Value persons training sessions on (quantitative No capacity Socio economics 4 biophysical, soico- or Qualitative) Health 2 economics, health, IEC and conflict and conflict management 4 management. Oil spill response 4 Date achieved 10/01/2000 12/31/2005 10/31/2004 Comments Achieved prior to deadline but not sustained. Due to lack of funding and lack of (incl. % intervention by the GoC, all the staff recruited and trained by the CTNSC have achievement) left the PIU. Part of the staff has joined the Ministry of Environment. Indicator 4 : The pressure of migrating population on the region is mitigated Substantial infrastructure works in producing region: storm drainage systems, Value Nine major and 30 garbage-disposal (quantitative One hospital in Doba micro sites, urban waste- or Qualitative) infrastructure collection points, 30 rural wells, water-tower and supply system, 11 schools and 7 bridges. More than 1000 micro-loans. Date achieved 10/01/2000 12/31/2005 12/31/2005 Comments (incl. % Fully achieved but sustainability issues. achievement) G. Ratings of Project Performance in ISRs Actual No. Date ISR Archived DO IP Disbursements (USD millions) 1 01/02/2001 Satisfactory Satisfactory 0.00 2 06/27/2001 Satisfactory Satisfactory 2.54 3 12/31/2001 Satisfactory Satisfactory 2.55 4 06/13/2002 Satisfactory Satisfactory 4.42 5 02/04/2003 Satisfactory Satisfactory 8.59 6 11/17/2003 Satisfactory Satisfactory 17.59 7 06/29/2004 Satisfactory Satisfactory 21.47 8 12/30/2004 Satisfactory Satisfactory 23.35 9 06/14/2005 Moderately Satisfactory Moderately Unsatisfactory 23.86 10 12/21/2005 Moderately Satisfactory Moderately Unsatisfactory 23.93 11 07/05/2006 Unsatisfactory Unsatisfactory 23.93 12 01/10/2007 Unsatisfactory Unsatisfactory 23.93 H. Restructuring (if any) Not Applicable I. Disbursement Profile 1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 1.1 Context at Appraisal Country and Sector Background: With a population of 8.6 million (2003), a Gross National Income (GNI) per capita of US$260, a life expectancy of 48 years, and a literacy rate below 50 percent, Chad is one of the most impoverished countries in the world. On the basis of the 2003 household survey, the incidence of poverty (defined as the proportion of households with annual spending below what is necessary to meet minimal food and non-food needs) was estimated at 55 percent of the population. With annual GoC non-oil revenues of the order of US$250 million (which corresponds to a bit less than 40 percent of total expenditures), Chad's prospects for growth would continue to be limited in the absence of its oil resources. General Sector Issues. Chad faced a variety of issues in the energy sector relating to the use of forest resources, management of the power sector, and development of the petroleum subsector. Chad's primary domestic energy resource is its forests. The accelerated exploitation of wood had caused deforestation around major urban areas. Chad's power sector was characterized by high tariffs and limited access to power supply, as well as unreliability and poor quality (load shedding). GoC interference was constant and investment was lacking. The petroleum sub-sector faced various major hurdles, relating both to production and consumption. Even though oil was discovered in Chad about 30 years ago, due to political instability the fields could not be developed. Sector issues to be addressed by the project. Although the primary responsibility for preventing, avoiding, mitigating, compensating, and monitoring the environmental impacts of the Doba Petroleum Project was with the project's private operators, GoC had an important role in monitoring the private operators, and in preventing and responding to the potential environmental and social impacts of the pipeline project. Specific Chad actions included: · monitoring implementation of the mitigating measures by the private sector operators · enforcing regulations on pollution control, health, and nature protection · mitigating induced impacts in the producing region · monitoring environmental and social impacts · regulating the sector to provide a sound framework for making petroleum development in Chad environmentally sustainable · delivering administrative authorizations on the basis of sound technical analysis performed by TOTCO and the upstream operator and checked by the CTNSC · conducting Information, Education, and Communication (IEC) activities on environmental matters related to the Doba Petroleum Project. Rationale for Bank assistance: The driving factor for this project (PSMCBP) was the Doba Petroleum Project under the Chad/Cameroon Petroleum Development and Pipeline Project. The Bank had recognized that Doba Petroleum Project involved issues such as adverse social and environmental impacts in the producing region, and lack of capacity for social and environmental management. The Bank's strategy was to help the government to strengthen its capacity for addressing these issues through a separate technical assistance (TA) project along with Doba Petroleum Project. The PSMCBP thus aimed to: (i) Strengthen government capacity to monitor and manage the environmental and social impacts of development in the petroleum sector, including the preparation of a Government Oil Spill Response Plan. 1 (ii) Manage induced impacts and provide opportunities to local populations: Rapid intervention social infrastructure activities were planned to address the expected in-migration into the producing region and a pilot development fund was set up to finance complementary development activities (iii) Strengthen GoC's capacity to monitor the activities of private operators in technical, petroleum, and other areas, as well as to strengthen its capacity to audit these companies effectively so as to maximize Chad's revenues. The Project was also consistent with the key objectives of the Chad Country Assistance Strategy1 (CAS) (February 15, 1996) which were to restore public sector capacity by enhancing the efficiency of GoC services, focus public expenditures on poverty reduction, and create an environment favorable to private sector development. The Doba Petroleum Project was expected to generate substantial oil revenue for the GoC, which was crucial to Chad's central development objective of accelerating economic growth and reducing poverty. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The development objectives of the Project were to: (i) strengthen the capacity of Chad to manage the development of its petroleum resources in an environmentally and socially sound manner, beginning with the Doba Petroleum Project in southern Chad; (ii) strengthen the capacity of Chad to minimize and mitigate the potential negative environmental and social impacts of the Doba Petroleum Project on the producing region; (iii) strengthen local capacity in the region, and provide opportunities for the region's residents to improve their living conditions; and (iv) establish an effective framework for further sound private sector investment in the petroleum sector, and engage effectively with such investors. Key Indicators were: (i) Effective Government monitoring of the implementation of the Doba Petroleum Project (including financial and technical aspects). (ii) Effective implementation of the Doba Petroleum Project Environmental Management Plan (EMP), in particular as concerns social impact aspects. (iii) Social infrastructure improvements in the producing region. (iv) Substantially increased Government dealings with potential new private investors. The formulation of the PDO in the DCA is different than the one contained in the PAD. The PAD PDO guided projected implementation. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The objectives were not revised. 1 Document Number: 15287 - CD 2 1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) · Local populations. The Project was expected to mitigate any negative impact of the Doba Petroleum Project on the local environment and populations in the producing region, thus reducing the potential for social conflicts. The net environmental impacts were expected to be positive. To this end, the Project would: (a) finance social infrastructure and set up a Pilot Development Fund to finance additional development activities in the region; and (b) provide training to upgrade the capacity and skills of the Comité Technique National de Suivi et de Controle (CTNSC) and Ministry of Environment and Water (MEWR) to manage the Doba Petroleum Project's environmental and social impacts. · Civil society. The Project aimed to foster a more participatory approach to development, with civil society involved in the preparation and implementation. · The GoC. The Project was designed to strengthen the capacity of the GoC to manage the technical, financial, and fiscal aspects of the Chad-Cameroon Petroleum Development and Pipeline Project, and of other petroleum projects in Chad. · Ministry of Mines, Energy, and Petroleum (MMEP). The Project was also expected to increase the country's ability to develop further its petroleum sector by strengthening the capacity of the MMEP. · New investors. Improvements in sector management were expected to increase investment by the private oil companies operating in Chad and to attract new investors to undertake hydrocarbon exploration under a new environmental legal framework in an environmentally and socially sound manner, so that the sector could be developed on a sustainable basis. 1.5 Original Components (as approved) The Project consisted of two components: Component 1. The Doba Project Management Component (Project Cost: US$18.9 million). (a). Strengthening Government Capacity by: i. Building environmental, social and technical capacity, both in the MEWR and the MMEP. ii. Building government's capacity to deal with legal, financial, and other technical aspects of the Doba Petroleum Project. iii. Providing operational support for project coordination activities. (b). Mitigating Project Impacts on the Producing Region by: 3 i. Implementing a communications campaign to limit migration to the producing region and mitigate its impact on local populations. Support would also be provided for the development of mechanisms to promote sound and stable interactions amongst various stakeholders in the producing area (including the private sector operators, local populations, and immigrants). ii. Mitigating induced impacts on the producing region through the financing of rapid intervention measures, such as increased health facilities and water wells. iii. Supporting development activities in the producing region through the establishment of a pilot development fund to finance complementary rapid intervention measures and mid-term development activities proposed by communities and local NGOs. (c). Additional Information and Communication activities: i. Supporting the development of a monitoring and information system (MIS). ii. Designing and implementing communication and consultation activities to generate accurate information on/related to the PSMCBP and the Doba Petroleum Project, and to foster the dialogue among stakeholders. Component 2. Petroleum Sector Management Component (Project Cost: US$5.3 million) (a). Strengthening the environmental and social regulatory framework applicable to petroleum development activities in Chad, building on the lessons of the Doba Petroleum Project. (b). Strengthening Chad's capacity to manage the technical aspects of the sector by creating an effective petroleum sector information management system. Specific actions included: training, database management, promotion activities and technical assistance to enhance Chad's capacity to attract, negotiate, and otherwise to engage effectively with potential investors in the sector. In hindsight Project design proved to be extremely complex, especially for a country with limited institutional capacity like Chad. Although Government's average skills and capacity levels were known at the time of Project preparation, their importance and impact on project implementation costs and civil servants' absorptive capacity (availability and learning curve) were underestimated in the Project design. The Bank should have avoided including too many activities and trying to address several sector issues in a single TA project. More emphasis should have been put on training and capacity building and ensuring coherence between the project and the institutional goals and responsibilities. Also, limited funding was reserved for training at the concept stage. The Project envisaged to hire a consultant to design a training plan. Instead, funding was used for ad-hoc training that did not respond to medium/long term career planning and/or sector policy objectives. Similarly, some risks were not thoroughly assessed, notably institutional and fiduciary capacities. Further, the project design could have been stronger in the framework and sequencing for building capacity: there could have been greater clarity on what functions and what type of strengthening were needed and their timings (with milestones linked to the construction phase), and also an agreement on areas where "temporary substitution" may have been the way to go just to cope with the accelerated pace of construction while sustainable capacity was being built. The mitigating measures that were envisaged at Project design proved to be weak. Bank's support could supplement, but not substitute for, the GoC's/Project's lack of human and financial resources. In order to preserve the GoC's sense of ownership, Bank's direct intervention should have been time-limited. In 4 retrospect, it has become evident that linking the implementation of a capacity building project to the implementation of a large engineering project such as the Chad-Cameroon Petroleum Development and Pipeline Project was not practicable or realistic in a country with limited human resources and capacity. 1.6 Revised Components The components were not revised. 1.7 Other significant changes There were no changes in the project's design, and scope and scale. However, there were changes in the Project's schedule, implementation arrangements, and funding allocation as detailed below: Project Schedule. The closing date of the Project was revised twice. The first extension of four months - from December 31, 2005 to April 30, 2006 ­ was granted in order to allow sufficient time to finalize the preparation of a Supplemental Grant. The closing date was further extended until December 31, 2006 to allow completion of ongoing activities following the lifting of suspension of the country's portfolio in July 2006. Institutional Arrangements. In September 2004, the GoC informed that Bank that the National Coordination, which previously reported to the Office of the President, would report to the Ministry of Petroleum. Funding allocations. In October 2005, the Minister of Plan requested a reallocation of funds among expenditure categories under the Development Credit Agreement (DCA) to address significant overruns experienced under the consultant services/training/audit expenditure category (approximately 40 percent over the original allocation). The overruns were due in large part to circumstances beyond the GoC's control. The depreciation of the U.S. dollar vis-à-vis the Euro/FCFA had a major impact on project funds, creating a shortfall in financial resources. The consultant services/training/audit expenditure category was particularly affected due to the lack of relevant local expertise and the consequent use of international service providers. The faster than anticipated pace of implementation of the Chad-Cameroon Petroleum Development and Pipeline Project forced increased the level of legal and technical assistance required by the Project Implementing Units to effectively monitor the project. This led to increased costs, especially with regard to monitoring of compliance with the EMP, and communication/dissemination activities. In addition, the negotiation of the Permit H, which occurred in 2004 -one year ahead of schedule, resulted in further unexpected increase in legal and technical assistance to the DPU. Category Amount Revised allocation Change (SDR) allocated (SDR) (SDR) Micro Project, Part A5 2,350,000.00 2,077,000.00 -273,000.00 Works 2,715,000.00 2,650,000.00 -65000.00 Good/Vehicles 1,395,000.00 1,295,000.00 -100000.00 Consultant 5,065,000.00 7,412,000.00 2347,000.00 services/Training/Auditing Operating Cost 2,935 ,000.00 2437,000.00 -497211.00 Project Preparation 1,490,000.00 158211,000.00 38211.00 5 Unallocated 1,450,000.00 0.00 -1450,000.00 TOTAL 17,400,000.00 17,400,000.00 0.00 Supplemental Grant. The credit was virtually committed by mid-2003, as priority was given to setting up the field units in Doba and upgrading the skills of the Doba Project Unit (DPU). In addition, the Project faced a financial shortfall for the reasons mentioned above. The GoC officially requested a Supplemental Grant (US$10 million) in July 2004, in order to: (i) cover outstanding needs; (ii) consolidate the capacity building efforts; and (iii) ensure the sustainability of the environmental and petroleum units created under the Project. During the time the GoC was building consensus on the Supplemental Grant, the management of the sector had been made more challenging as: (i) the GoC's promotional strategy had led to the signing of new exploration contracts; and (ii) Esso had obtained five new development and production permits. The GoC's delay in fulfilling the conditions precedent for the presentation of the Supplemental Grant to the Board (namely counterpart funding, procurement plan and letter of sector strategy 2005-2008) led to the continuous slippage of the date of the supplemental operation. Meanwhile, the GoC decided to unilaterally amend the Petroleum Revenue Management Law (PRML) which was adopted by Parliament on December 29, 2005. This amendment was in noncompliance with the Loan Agreement which stated that "the Petroleum Revenue Management Law shall not be amended or waived so as to materially and adversely affect the implementation of the Program." The amendments to the Law broadened the definition of priority sectors to include, among other areas, security and territorial administration. World Bank management then decided on January 6, 2006, to suspend all disbursements under the active portfolio in Chad, which automatically triggered the freezing of the movement of certain Chadian oil revenues within the escrow account structure in London. As a result of the interim agreement reached between the Bank and the GoC, the suspension of disbursements was lifted on April 26, 2006 on all suspended IDA projects other than this project which remained under suspension. Then, the Escrow Account was partially unfrozen. In July 2006 the GoC and the Bank signed a Memorandum of Understanding (MoU), under which the Government agreed to (i) prepare a revised PRSP by 2008 as a permanent framework for allocating resources to priority sectors; (ii) apply specific allocations rules for 2007 and develop a stabilization mechanism to even out substantial year-on-year variations in projected oil revenue; and (iii) strengthen public finance management as well as the role of the Collège.. Based on the MoU the GoC revised its budget for 2006 to allocate 70 percent of direct oil revenues to poverty reduction priority sectors (excluding security and territorial administration). This led to a decision to fully unfreeze the Escrow Account and to lift the suspension of disbursement on the project. By that time, several important changes had occurred which warranted the re-design of the operation. In particular, the national oil company was created and the debate on its role vis-à-vis other agencies and sector ministries was proving controversial. The PIUs had almost entirely lost their staff due to lack of funding and the GoC's reluctance to maintain the Project's institutional set up. In addition, agreement on a new sector policy letter ­ a condition for obtaining additional funds - had never been reached between the GoC and the Bank. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 6 The Project became effective on 03/23/2001, nine months after its approval by the Board. The delay was due to disagreements between the GoC and the Bank on the Project's institutional structure, as well as difficulties in staffing the PIUs. The Project design took into account lessons learned from previous Bank-assisted projects in the energy sector in Chad and other countries. Risks were highlighted and mitigating measures were outlined and, wherever possible, adopted. A participatory approach was also adopted by involving the key stakeholders during Project preparation. A. Lessons Learned from previous Bank-assisted projects. (a) Implementing civil service reforms is a key governance condition for technical assistance to succeed and be used effectively; (b) Community and civil society participation should be actively sought in the design of the rapid intervention measures, the regional development plans, and the pilot development funds; (c)In order to build its own capacity, the government should be fully engaged in the preparation of the project; and (d) A technical assistance project attached to an active and promising sector has a good chance to succeed. B. Risks and their mitigation. The project faced the following modest risks and the measures mentioned below were taken to mitigate them: Risk 1: GoC and Private Sponsors are not committed and do not have the capacity to implement a sound Environmental Management Plan (EMP). Mitigating measure: Conditionality agreed to in the context of the Chad-Cameroun Petroleum Development and Pipeline Project. Risk 2: Weak collaboration among stakeholders (Government, NGOs, Private Sponsors). Mitigating measure: Ongoing dialogue and specific consultative activities; FACIL (Fonds d 'Actions Concertées d 'Initiative Locale) to support dialogue and participation. Risk 3: Government does not make best use of trained Chadians. Mitigating measure: Project provided for enhanced working conditions. Risk 4: Weakening in continued Government commitment and capacity (including financial) to strengthen the sector. Mitigating measure: Support provided by the Bank, and linkage to effective implementation of the Chad-Cameroun Petroleum Development and Pipeline Project. C. Adequacy of participatory processes. Key stakeholders, within and without Chad, were consulted during Project preparation. This provided comfort to the GoC's and Bank's task team that their concerns were taken into consideration, and suitable measures were devised to address them. Public consultation has been the hallmark of the implementation of the Chad-Cameroon Petroleum Development and Pipeline Project. People living in the area where the oil wells were planned to be drilled and alongside the pipeline route were consulted during the preparation of the Environmental Assessment, particularly in the context of compensation and relocation. 2.2 Implementation Although the Project was not restructured, its implementation was often at risk for the reasons discussed below. In October 2003 the Bank conducted a Midterm Review (MTR) to assess implementation and determine if corrective actions were needed to ensure the successful completion of the Project. The MTR 7 highlighted the need to strengthen project management and to refocus the Project from infrastructure building to training and capacity building. One of the key conclusions of the MTR was the need to review the Project's institutional set up with the objective to facilitate the mainstreaming of Project's activities and to ensure their sustainability going forward. This was one key component of the then proposed Supplemental Grant. The Project faced the following issues during implementation: Factors outside the control of the government or of the PIU Positive Factor. Technical assistance and other types of support provided by bilateral donors and NGOs contributed to the achievements of the FACIL activities. Negative Factors (i) Depreciation of the US dollar vis-à-vis the Euro and the FCFA resulted in a deficit of about US$3.6 million and reduced the funds available for the Project. (ii) The unexpected increased level of legal and technical assistance to the DPU, estimated at US$1.2 million, which could not have been anticipated at Project preparation. This was needed to: (a) negotiate the renewal of the Consortium's Permit H, which occurred one year ahead of schedule; and (b) provide feed-back on the Doba blend market price and its relation to the global level of oil prices, which was made necessary by the dramatic evolution of the international petroleum market. (iii) Accelerated project implementation. In the six months leading up to the inauguration of the pipeline in October 2003 (completed one year ahead of schedule), the project came under extreme pressure to accelerate the pace of implementation in order to cope with the Consortium's fast tracking of construction. As a consequence, the capacity-constrained PIUs had to significantly accelerate their activities. This in some cases led to the disregard of World Bank procurement procedures (contracts awarded without the Bank's non-objection) and resulted in a substantial increase in Project implementation costs. In addition, ineligible expenditures were financed with IDA resources drawn from the Project's special accounts. In order to remedy these shortcomings, a detailed action plan was drawn up by the Bank's procurement and disbursement specialists during the October 2003 MTR and agreed with the authorities. Ineligible expenditures were settled by the GoC in October 2005 as certified by the World Bank Financial Management Specialist. (iv) Low level of capacity. One of the main challenges facing Chad is the relatively low average skills level compared to other countries in the sub-region. This can be attributed partly to the long series of political crises, and armed conflicts, and partly to the dearth of local training institutions. Although these elements were known at the time of Project preparation, their importance, and impact on Project implementation costs and civil servants' absorptive capacity (availability and learning curve), had been underestimated. (v) High turnover of Task Team Leaders (TTLs) and composition of the Bank team. A year after the Project became effective, the Bank strengthened its supervision team by appointing a new TTL based in Washington, with overall responsibility for all Projects linked to the Chad-Cameroon Petroleum Development and Pipeline Projects. The TTL was supported by a resident country manager. In October 2004 a new TTL, already a member of the Bank's Project supervision team was appointed. His tenure lasted for approximately one year, when another team member succeeded him as Project TTL. Although the effect of frequent changes in TTLs was mitigated by the appointment of team members, these created 8 a certain lack of continuity and different approaches to supervision. Until October 2003 the task team did not include sector specialist. A petroleum specialist and an environmental specialist joined the team during the MTR. As a result, during the first three years, the Project was implemented on an ad-hoc basis, without any particular emphasis on appropriate technical guidelines and expertise. By the time the specialists joined the task team, the majority of the funds had been spent on infrastructure projects, and little was left for capacity building activities in these two sectors. Factors subject to Government's or PIU's control (i) Fluctuating government commitment. As mentioned in Section 5.2, there were many instances during implementation which demonstrated government's fluctuating commitment. For instance, although there was a strong government buy-in at the design stage, the Project faced opposition in the initial stages of implementation, which hampered its progress. It took about a year for the Bank to convince the authorities on the importance of improving GoC capacity in the petroleum and environment sectors. In the final stages of Project implementation, the GoC's unilateral decision to change of the PRML affected the dialogue with the Bank and other donors. As a result the parties focused their efforts on solving the crises, to the detriment of Project implementation activities. (ii) High turn-over in project's staff. There was a high turnover of staff in the PIUs. This was attributable partly to the frequent re-assignment of staff trained under the Project to other ministries/departments, and partly to the higher level of salaries paid by the private sector that attracted Project staff. This could have been partially corrected by the GoC by designing and implementing targeted career plans. (iii) Liquidity crisis. Chad faced a severe liquidity crisis beginning in late 2003, resulting in large arrears in the payment of salaries and accounts payable, which in turn led to significant social and political pressures, particularly since the public could not be convinced that such a situation would occur at a time when Chad had just become an oil-exporting country. There were also arrears in servicing debt to international institutions, including the World Bank and International Monetary Fund (IMF). The liquidity crisis was precipitated by the IMF's decision not to conclude its review of the Poverty Reduction and Growth Facility (PRGF) in January 2004. This forfeited disbursement of SDR5.2 million from the IMF, and created delays in mobilizing donors' budgetary support, and in counterpart funding. (iv) Emphasis on building physical infrastructure. Physical infrastructure construction and detailed design studies completed before first oil in October 2003 diverted some resources from the overall focus on training. This was mainly in response to strong political pressure and a solid rationale to finance physical infrastructure in order to show the impact of the Project to communities and the citizenry at large. (v) Lack of coordination between the CTNSC and DPU. Despite the presence of National Coordination, there was a lack of coordination between the CTNSC and DPU. Tension occurred between the two agencies while conducting environmental and operational monitoring in the field, exacerbating preexisting differences. The lack of enthusiasm of some of the Project personnel, particularly within DPU, to interact with their counterpart in the CTNSC for Project activities where coordination was critical, affected the Project's implementation start-up. (vi) FACIL's slow start up. FACIL had a slow start due to the lengthy recruitment of qualified personnel in 2001-2002 and poor cash flow management by the CTNSC, which delayed the provision of necessary funding. Some difficulties were also encountered in the collection of beneficiary contributions, largely because of the decline of cotton revenues. In addition, the high salaries offered by the Consortium during the construction phase of the pipeline resulted in a shortage of competent masons and local contractors. 9 (vii) National Coordination. The transfer of the National Coordination from the Office of the President to the Ministry of Petroleum ­ decided by the GoC in September 2004 - undermined its ability to act as an effective entry point to address all matters related to the Chad-Cameroun Petroleum Development and Pipeline Project, particularly during the construction period. While the coordination was still in place, staff was reporting both to their respective ministries (Petroleum and Environment) and to the National Coordinator, creating confusion and leading to delays and deficient information flows. (ix) Problems related to Supplemental Grant. The delay in approving supplemental financing (initially expected to be approved by September 2004) and therefore in making resources available, led to a complete cessation of most activities during the period, with some critical exceptions, such as the monitoring of environment impacts, the monitoring of crude volumes sold by the Consortium and the design of an integrated reporting system for exploration and production. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: (a) M&E Design. (i) The Consortium was expected to publish semi-annual progress reports on the status of implementation of the Chad-Cameroon Petroleum Development and Pipeline Project; (ii) representatives of the various ministries benefiting from the project (including MMEP, MEWR, Finance, Planning, and Health, among others) and the Bank would meet once or twice each year to review progress on the implementation of the project; and (iii) MTR was planned to take place approximately two years after credit effectiveness, (iv) the International Advisory Group was meant to publish a report on the status of implementation of all projects linked to the Chad-Cameroon Petroleum Development and Pipeline Project; and (v) the Bank team was meant to prepare a semi-annual report to the Board on the country situation and status of implementation of the Chad-Cameroon Petroleum Development and Pipeline Project and related capacity building and technical assistance projects. The CTNSC was expected to monitor the state of the environment in the Doba oil field area and along the pipeline. Measurements of the quality of air and water, as well as of the health status of non-workers within the project area, were to be made. These measurements would be based on analyses conducted on an ad hoc basis by specialized laboratories and consultants employed by the CTNSC. The CTNSC would also conduct and publish the results of surveys to monitor the economic status of persons having been resettled and on the status of financial compensation. In addition, the CTNSC would report periodically on progress made on environmental management in the Doba region and along the pipeline by publishing the results of pre-selected performance criteria. The MIS was the instrument chosen to collect social and environmental data in areas affected by exploration and production activities. The CTNSC was responsible for its set up and maintenance. The two main purposes of the MIS were: (i) to monitor the existing social infrastructure and the correlated socio-economic indicators to allow, along with the defined eligibility criteria, sound planning of the activities to be undertaken, and (ii) to set mutually agreed, realistic, and clear indicators for each activity, and to measure gaps between actual and targeted objectives. An operating manual dedicated to monitoring would describe responsibilities, the contents of the semi-annual reports, the procedures to feed the system, and the software package. (b) M&E implementation. The task team held meetings regularly with the Ministries of Petroleum and Environment, National Coordination, the CTNSC, and DPU to review the Project's implementation progress. Quarterly reports were prepared on the Project's implementation status until 2004. In addition, the Bank conducted an MTR in October 2003. In addition, the TTL and the country manager held regular 10 meetings with the Prime Minister, the office of the President, the Minister of Plan and the Minister of Finance. Environmental monitoring. In the early stages of implementation, the CTNSC's monitoring and evaluation function lacked the capacity to perform environmental monitoring at a level that met the desired purpose of the Doba petroleum project monitoring system. Prominent problems included the lack of:: (i) a sufficiently trained team of monitors; (ii) an Environmental Management Information System (Système de Gestion de l'Information Environnementale, SGIE); (iii) scientific rigor in monitoring; (iv) systematic organization to select and conduct monitoring events; and (v) ability to make independent measurements. However, the CTNSC's monitoring capacity increased during implementation but this was not sustained. In addition, the CTNSC greatly benefited from the reports produced by the External Compliance Monitoring Group (ECMG) which were the basis for their on-the-job training. Petroleum monitoring. The DPU was expected to prepare quarterly reports on the status of Project implementation with respect to activities under the DPU's responsibility. Even though there was no formal reporting system, monitoring was done on a regular basis, and the report was prepared and submitted to the TTL quarterly to 2005. DPU had a large team of site supervisors for monitoring drilling and exploration activities, and a daily and weekly monitoring and information system had been developed for the Ministry of Petroleum's internal use. In addition, ten inspectors were deployed in the field to monitor produced and shipped quantities. Four inspectors were permanently on board the FSO and the offloading vessel to monitor ­ together with Cameroonian custom's officials - the measurement of exported quantities. Their tasks were to compare manual gauging with automated measurements, and to ensure that the automated system on board the FSO was not tampered with. The GoC had also commissioned an audit to verify the calibration of the meters. In addition, the DPU carried out regular analysis of royalties and other economic variables, and ensured the launch and supervision of performance of external auditors. Audit of the Consortium's cost were conducted on an annual basis until 2005 (when the project exhausted its funding). (c) M&E utilization. Because the MIS was not properly developed, implemented or maintained, the CTNSC experienced difficulties in collecting social and environmental data, analyzing and utilizing them for decision making and resource allocation. The DPU was reasonably effective in collecting exploration and production data and monitoring the compliance of the Consortium with the Convention. Software was developed by a consultant to assist the DPU in assessing the price of the Doba blend vis-à-vis its marker crude, the Brent Blend, and transport tariff was regularly monitored using an excel program developed by TOTCO/COTCO which compliance with the transportation contracts had been verified by a consultant hired by the DPU. Finally, annual audits allowed the Ministry of Petroleum/DPU to seek adjustments to the Consortium's costs. Both the CTNSC and the DPU introduced an incentive structure to motivate the inspectors and site supervisors to improve their performance. 2.4 Safeguard and Fiduciary Compliance Safeguard issues. Being a Technical Assistance (TA) project, there were no deviations or waivers from the Bank safeguards policies and procedures during the implementation of the Project. Fiduciary issues. The project had the following fiduciary issues: (i) Ineligible expenditures. The CTNSC and DPU withdrew ineligible expenditures (FCFA 126 million) from their Special Accounts, mainly because of the delay on the part of the GoC in making prepayments from the national counterpart funds. Ineligible expenditures were, however, repaid by the GoC in October 2005, and supporting documentation for eligible 11 expenditures paid by the country's treasury was used to offset the required counterpart funding, in compliance with OP 12.00, Disbursement. (ii) Outstanding balance in two Special Accounts. The outstanding amounts of 106.67 million FCFA in the Special Account of DPU and 230.89 million FCFA in the Special Account of the CTNSC (a total of US$700,000) have not been refunded by the GoC at the time of the preparation of this report. (iii) Expenditure exceeding the Credit. The GoC had spent about $2 million more than the Credit resources. The over commitment was caused mainly because of the lack of monitoring of commitments. In line with Bank procedures, it is the GoC's responsibility to settle outstanding unpaid invoices. (iv) Refunded amount from NGOs under FACIL. An amount of 20 million FCFA (US$40,000) was refunded by the NGOs to the CTNSC. This amount which should have been reimbursed by the CTNSC to the project by December 31, 2004, is still outstanding. This issue will be addressed in the 2006 Audit Report. (v) Violation of Credit Agreement in Procurement. During the implementation, there were many instances when both the CTNSC and DPU did not comply with the terms of the Credit Agreement in procurement activities. Main issues included: (a) non-observance of procedures; (b) fragmenting the bidding (Fractionnement des marchés); (c) excessive use of single-source contracting; (d) exceeding the ceiling amount for the restricted consultation; (e) abusive use of the method of restricted consultation; and (f) absence or non-observance of the procurement plan. 2.5 Post-completion Operation/Next Phase (a) Transition arrangements: National Coordination: The bureau was created to facilitate the coordination of oversight and implementation activities related to the Chad-Cameroon Petroleum Development and Pipeline Project. Since then, the relevant sector ministries ­ Ministry of Environment, Ministry of Petroleum, and Ministry of Finance ­ have been strengthened and are able to play a more active role. The role of the National Coordination has become less crucial and its future is currently under consideration. Ministry of Environment: Being a priority sector, environment related activities receive additional funding from oil revenue under the state budget. This allows the Ministry of Environment to ensure the continuity of those M&E activities previously funded by the Project. In particular, the Ministry of Environment ­ through the CTNSC ­ will continue to ensure the monitoring of exploration and production activities and the evaluation of their physical, socio-economic, and health impacts. To mainstream the work of the CTNSC and ensure its long term sustainability the Ministry of Environment has envisaged the creation of an agency that will specialize in reviewing and monitoring the implementation of EMPs with a focus on oil and gas activities. The proposed institutional improvement is currently awaiting presidential approval. In addition to state funding, the Ministry of Environment has sought the contribution of the EU with regard to the funding of training programs. The implementation of a suitable Environmental Management Information System (EMIS) is also under consideration, although no detailed action and/or funding mechanism has been finalized by the authorities. 12 Ministry of Petroleum: M&E activities that were previously carried out by the DPU have been gradually integrated into the relevant ministerial departments. In particular, revenue forecast, and price, discount and transport tariff monitoring have been entrusted to the Department of Economics and Petroleum Legislation. The monitoring of exploration and production activities is carried out by the Department of Exploration and Production. The majority of the project personnel, including the petroleum inspectors have been integrated into the relevant ministerial departments. The Ministry of Petroleum has found it difficult to mobilize sufficient funding to carry out its day-to- day activities and strategic functions. Although petroleum is considered a priority sector, the portion of expenditure financed with oil revenue remains low compared to other priority ministries. The per- capita salary of the Ministry is at the low end of the scale compared to other ministries, suggesting that the current profile of its human resources may not be suited to manage the increasing complexity of the sector, and the important reforms recently announced by the Government (national oil company, introduction of petroleum sharing contracts, construction of a medium size refinery, etc). The salary and incentive structure currently applicable to civil service makes it difficult for the Ministry to attract the right caliber personnel. The lack of financial and human resources has hindered the Ministry's capacity to continue the training program and recruit the technical expertise that is required to design and implement urgent institutional and legal reforms. (b) Performance indicator: Ministry of Environment: The Ministry is currently preparing appropriate performance indicators on geo-physical, forest resources, health, and other relevant areas, by which the sector can be monitored and evaluated in the future. Ministry of Petroleum: The development of an integrated monitoring and evaluation system for all petroleum assets is one of the activities envisaged under the petroleum sector capacity building and technical assistance follow on operation. Economic and technical indicators have been developed with respect to producing concessions, and are currently used by the Ministry. These will need to be further developed and regular monitoring and updating procedures will need to be strengthened. (c) Lessons incorporated in the arrangements for post-completion operation. Based on the lessons learned from the project, the Bank has advised the GoC to adopt the following measures: · Ensure that audits of petroleum and transportation companies are regularly carried out; · Improve the cooperation between the Ministry of Petroleum and the Ministry of Environment for both exploration and production activities; · Establish a stricter cooperation between the Ministry of Petroleum and the Ministry of Finance to improve the quality of the revenue forecast and to ensure that payments due to the state by oil companies are promptly and correctly received and accounted for; · Improve sector governance through the establishment of institutions and a legal framework that favor a clear separation between policy, implementation and monitoring responsibilities; · Define training activities and career plans that respond to short term needs as well as medium term policy and institutional goals. · Ensure adequate funding and access to technical expertise is available before undertaking crucial sector reforms. (d) Follow-on project. The GoC has recently requested IDA support to prepare a new operation to address the outstanding issues. The new operation is expected to be financed in the form of a grant of US$8 million, complemented by GoC funds for up to US$8 million. The new project could help the GoC to design and implement the most urgent institutional and governance reforms, some of which 13 were already identified during the preparation of the Supplemental Grant. These would include the restructuring of the institutions entrusted with the oversight of the petroleum sector ­ Ministry of Environment, Ministry of Petroleum, National Coordination, the CTNSC, and DPU, the setting up of the national oil company ­ role, objectives, funding, corporate governance, and the upgrading of the legal and regulatory framework for the management of petroleum operations and their impact on the environment. (e) Suggested impact evaluation. In order to properly assess the results of this Project and their sustainability over time, it is suggested that an impact evaluation be carried out three years from its closing. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The objective of the Project is still important to the country's social and economic development. It is also timely and appropriate to the needs of Chad. The Project is also consistent with the Bank's current CAS for Chad, the over-arching objective of which is to help Chad make the best possible developmental use of its new oil revenues (and public resources more broadly) as it strives to attain the Millennium Development Goals (MDGs). One of the two pillars of this CAS is strengthening governance, including institutional arrangements for public resource management and service delivery, the rule of law, and environmental and social safeguards for oil exploitation. 3.2 Achievement of Project Development Objectives Moderately Satisfactory. Overall, the Project is rated moderately satisfactory in terms of its development objective (DO). Although most of the project activities were completed, the institutional and legal frameworks necessary to ensure the sustainable and competitive development of the sector could not, however, be fully developed. Capacity constraints of the administration and lack of political support for key governance measures remained the main weakness, which the follow on project aims to address. The project's major outcomes and achievements are as follows: (i) Managing the development of Chad petroleum resources in an environmentally and socially sound manner: · The CTNSC was successful in monitoring the operations of the Chad/Cameroon Petroleum Development and Pipeline Project during the construction phase and to a lesser extent during the operation phase; · The CTNSC's socio-environmental field-supervision team steadily improved its capacity during project implementation. Twenty four field staff members, including the CTNSC site supervisor, an international environment expert, and six technical experts (in biophysics, socioeconomics, and health) supervised the Consortium's socio-environmental activities. However the CTNSC was unable to retain its staff due to lack of funding. · The CTNSC had gained credibility in its dialogue with the Consortium through its technical reviews of the successive environmental packages submitted by the Consortium for new fields. 14 · Supervision conducted by the CTNSC allowed it to form the basis of operational criteria of EMP principles, which were later formalized into environmental guidelines applicable to all oil fields developed in Chad. By developing a template and standardizing the guidelines for environmental assessments of exploration and production activities, the CTNSC was able to streamline the approval procedure and also to reduce the cost of compliance, both for the CTNSC and the consortium/operator. · In addition to its core mission of monitoring the Consortium's implementation of the EMP for the Doba Fields, the main focus of the CTNSC's work was the review of the EIA package submitted by the Consortium in respect of two satellites fields in the Doba basin (Moundouli, Nya, and Maikeri), and the exploration drilling in the Bongor and Lake Chad basins. The dialogue between Exxon and the CTNSC as well as the relevance of the memos reviewing successive EIA packages demonstrated that the CTNSC had truly gained credibility and developed sufficient technical capacity to review EIAs and to propose amendments where necessary. In particular, better mitigation measures and site specific EMPs where devised and implemented by the Consortium on the request of the CTNSC. · The expertise acquired by the DPU's petroleum inspectors trained by the Project was very useful in ensuring that appropriate quality and quantity control procedures were applied to all exports of crude oil from Chad. The DPU's site supervisors trained by the Project to oversee the construction activities related to the implementation of the Chad-Cameroon Petroleum Development and Pipeline Project have substantially improved their operational knowledge and their ability to oversee the development of other petroleum projects in Chad. · Knowledge gained from the Project's training programs and the hands-on experience from the Project have considerably improved the Ministries of Petroleum and Environment's ability to oversee the day-to-day and strategic aspects of the management of the petroleum sector. · Even though many of those who had been trained under the Project had either joined the private sector, or were reassigned to other departments, the spill-over effect has benefited the country as a whole. Local consulting firms and local businesses that hired or were created by Project staff benefit from the transfer of knowledge. In addition, the higher working standards imposed by the Consortium have increased the quality of local goods and services and their potential competitiveness for future export. · Civil society and Non-Governmental Organizations (NGOs) too have acquired expertise in the supervision of environmental and social aspects of big projects. For example, the NGO consortium Coordination Permanente Pétrole Locale (CPPL) included development NGOs, human rights associations, trade unions, and women's groups in the producing area. This group played an important role in monitoring the Consortium's activities on the ground. It collaborated with and informed the Bank, the GoC, and the ECMG of concerns about some Consortium activities. Achievement of this objective is Moderately Satisfactory. (ii) Minimizing and mitigating potential negative environmental and social impacts on the producing region: · The GoC's capacity was strengthened and co-ordination with the Consortium was improved to manage land use issues to the benefit of local people and newcomers alike. At Komé Atan, the 15 CTNSC worked on a development plan with the local communities to assure that locally sustainable water supply and sanitation measures were put in place. In areas where villages neighbor large project footprints, the Consortium took a more holistic community approach, rather than a narrow household-by-household perspective. The ECMG archaeological specialist has noted major improvements with the management of archaeological material in Chad. The Chad/Cameroon Petroleum Development and Pipeline Project was implemented in accordance with the environmental and social guidelines initially established for this project. Regarding the oilfield facilities, all three of the project's oilfields were brought online without any major non compliance events. · CTNSC's reviews of successive environmental and social packages forced the Consortium to develop better mitigation measures. · Prevention campaigns financed by the Project have helped in raising awareness on Sexually Transmitted Diseases (STD)/HIV/AIDS among truckers and other high-risk categories of the population. The Project also contributed to the development of a strategic approach on a regional scale and carried out successful training programs to: (i) political and administrative authorities, including Prefects, Under Prefects, Chiefs of Canton, Chiefs of villages; (ii) doctors and nurses on dispensation of various services; (iii) obstetricians and marriage counselors; and (iv) organizers of AFRlCARE, liaison officers of Esso, village health officials of ACODE. · Infrastructure works carried out under the Project helped improving health care, sanitation services, and access to clean water in the producing region, thus mitigating the social and environmental impact of in-migration of workers from neighboring areas. · In order to mitigate the effect of accidental discharges of hydrocarbon, an oil spill response plan remains to be approved and implementing regulation to be developed. · The Project was instrumental in raising awareness of the public on health and social impacts of the Chad-Cameroon Petroleum Development and Pipeline Project. This was achieved through radio and television campaigns carried out regularly to provide updates to the general public on the progress made in the construction of the pipeline and related facilities. Public consultations and information campaigns regularly conducted in the producing region and in N'Djaména helped to improve the dialogue with civil society. · The project financed the development and introduction of sustainable forest management practices in six pilot villages. The results became a reference for wider implementation. · The Regional Development Plan (RDP) was prepared as a framework for analyzing the economic structure of the oil-producing region, identifying opportunities and investment options in infrastructure, human development and public facilities. The Plan is currently being submitted to the Council of Ministries for approval. It will serve as a guiding framework to select projects to be financed by the 5 percent oil royalty allocation set forth in the Constitution and in the project agreement. Both local and national stakeholders were involved in the initial consultations and their views were integrated into a final plan, building on previous studies. Adoption of the plan has however been slow. · The Regional Space Applications Program for Sustainable Development was launched among the communities of the Moyen Chari region. The Program facilitated the involvement of local NGOs during the implementation phase by creating a network of local communities. The network's purpose was to raise awareness among local communities of issues related to the potential socio- economic and footprint of the Chad-Cameroon Petroleum Development and Pipeline Project. The network was particularly effective in disseminating information related to the status of 16 implementation of the Chad-Cameroon Petroleum Development and Pipeline Project and related environmental protection/mitigation measures. Achievement of this objective is Satisfactory. (iii) Strengthening local capacity in the region and providing opportunities for the region's residents to improve their living conditions: · FACIL micro-credit projects contributed to the social development of the region. For example, loans given to 8000 people in 10 cantons and three communes, for carrying out various activities (such as marketing of cereals; purchasing agricultural equipment, transforming the agricultural products, and cattle breeding) contributed to generate new employments, increase household incomes, and improve the standard of living in these communities. · Activities financed by the FACIL such as the construction of 29 buildings in 11 school establishments, and 58 additional class rooms made it possible to substantially increase the number of enrollments. Similarly, construction and/or the rehabilitation of seven bridges, and rehabilitation drinking water supply system helped to provide opportunities for the region's residents to improve their living conditions: · Training courses on different topics (such as poultry breeding, and masonry) were instrumental to enhancing the professional competence and skills of about 500 people, improving the commercial value of their products, and increasing their incomes. · The creation and management of credit and savings banks in nine cantons in the producing region led to mobilization of local savings and fostering development activities. Achievement of this objective is Satisfactory. (iv) Establishing an effective framework for further sound private investment in the petroleum sector, and engaging effectively with such investors: · Training and Capacity-building: Since the start of the project, considerable efforts were made in training the DPU's staff, as well as key staff of the Ministry of Petroleum and Ministry of Finance (MOF). Due to the complexities of the agreements governing the exploration and production of the Doba fields, as well as the sale and transportation of the crude, three technical assistance agreements with international consultancy firms were signed by the MP/DPU. All contracts included substantial training components. Workshops were held for the benefit of the DPU and of the MP's Economic Department on topics ranging from crude oil price forecast, crude oil trading and determination of discounts and premia, petroleum economics, petroleum contracts, petroleum accounting and fiscal terms. Technical training was provided to the GoC's petroleum inspectors responsible for the monitoring of production from the oil field and its delivery to the Floating Storage and Offloading vessel in Kribi. Geologist, petroleum engineers, geophysicists, and drilling engineers attended specialized courses. 17 · Determination of the price differential: The Project provided assistance to the GoC in understanding the determinants of the price differential between the Doba Blend and its reference crude ­ the Brent Blend. The market price of the hydrocarbons sold by the Consortium is an important variable for the purpose of calculating both the royalties and the income tax due to the GoC. The procedure for determining the market price is clearly defined in the Convention Agreement between the GoC and the Consortium. In accordance with the Convention, GoC's approval is required to determine the net- back for royalty calculation. The Doba blend is a dense, high acid crude. Mainly due to its poor characteristics the Doba sells at a discount to Brent. To assess the price of the Doba blend, the GoC developed a model based on the determination of the refinery margin Linear Planning (LP) Model. The model, which is an adaptation of the well- known Petroleum Argus, was developed by technical advisers financed by the project, and requires daily input of crude oil prices and freight costs. To double-check the results of the model, the Bank was asked to provide its assistance in the determination of the price differential. The Bank developed a model based on the observation of monthly crude price variations over a period of four years and their relationship with quality differentials. The results of the Bank's model confirmed the average size and trend of the observed price differentials, and were generally in line with the results of the LP Model. By introducing the LP Model, the project provided the possibility for the GoC to verify the market price of the Doba blend obtained by the Consortium, and supported negotiations for a higher market price in those cases where the discount proposed by the Consortium was higher than the `floor discount' obtained by applying the LP Model. · Permit H negotiations: A specialized consulting firm was engaged since January 2003, together with a legal firm, to advise the Ministry of Petroleum in their negotiations with the Consortium for the renewal of their concession. A new Convention (concession agreement) was signed in 2004 with considerable improvement in the fiscal terms compared to the 1988 Convention. In addition, the GoC received a total US$30 million bonus payment from the Consortium, which contributed to alleviate the country's difficult financial situation. For details see Section 3.5 (c) · Dealings with potential new investors. The GoC has been actively promoting the sector, and three new concessions were signed in 2004. In addition, Chad continues to prominently feature in trade conferences on crude quality and new geological basins. Geological, geophysical and petrophysical data are currently stored by the operators on behalf of the GoC, as the lack of funding under the project has prevented the GoC from investing in the data information system which would enhance the quality of its promotional activity. Achievement of this objective is Moderately Satisfactory. 3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) Not Applicable - being a TA project. 18 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Moderately Satisfactory 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Gender Aspects. The Project contributed to raising the awareness of women's potential, and provided a platform for increasing their contribution to community activities. Under FACIL, women were included in committees, and they played active roles in decision-making processes. FACIL facilitated the creation of employment opportunities and income generating activities for women. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) See Section 3.2 (i) (c) Other Unintended Outcomes and Impacts (positive or negative) Positive: Permit H negotiations. The legal and technical assistance requested by the GoC with respect to its negotiations with the Consortium for the renewal of the petroleum exploration and production convention (Permit H) had not been foreseen in the original Project description. The Consortium's decision to seek the early renewal of its permit H concession agreement, caused negotiations to start in January 2003. The support provided by the legal and technical consultants funded by the Project was instrumental in improving the licensing terms compared to those applicable to the existing concession. Workshops and Information Sessions. Although not explicitly provided for in the Project, the technical staff of the Bank designed and organized of a number of learning events on sector specific issues on the request/to the benefit of parliament, civil society, and sector ministries. This was instrumental to raising public awareness and fostering multi-stakeholders dialogue on a wide range of policy and sector specific issues. The most relevant topics included: exploration and production activities, the dynamics of oil price, the determinants of discount and premia, revenue forecasting and modeling techniques, the role, organization, and funding of national oil companies, hedging and other risk management techniques, key element for the success of petroleum laws and contracts, and oil revenue funds and their functioning. Negative: There was no unexpected negative impact of the project. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) Not Applicable 4. Assessment of Risk to Development Outcome 19 Rating: Significant Sustainability of many of the achievements of the project is not ensured due to: Environment: (i) Inability of the Project to develop a suitable institutional and legal framework necessary to support the environment protection and mitigation activities. Capacity constraints of the sector ministry could only partially be addressed by the Project. The Supplemental Grant aimed at mitigating these shortcomings. At the time of Project closing (December 31, 2006), these shortcomings could not be addressed. (ii) Lack of financial resources. As a temporary measure, some allocation has been made in the 2007 national budget for the CTNSC to carry out its activities. But beyond the one year period, there is no assurance of GoC commitment for sustaining them. Petroleum: (i) At the time of writing this report most of the staff of the DPU had been integrated into the Ministry of Petroleum. Therefore no provision was made in the 2007 national budget to continue supporting it. (ii) Part of the DPU staff had been transferred to the Directorate of Studies and Petroleum Legislation (DEELP), thus ensuring the sustainability of the petroleum price monitoring system. (iii) The site supervisors and inspectors trained under the project have become regular staff of the Ministry, and they will continue working in the field. However, it is not certain whether the Ministry will have sufficient financial resources/budget to conduct training programs for constantly updating their knowledge of the industry. (iv) The financial and capacity constraints of the Ministry of Petroleum may be exacerbated by the creation of the national oil company. (iv) In the absence of resources expected from a follow-up Chad-Cameroon Petroleum Development and Pipeline Project and other sector developments, the Ministry may not be able to secure sufficient funding to acquire essential equipment and create the petroleum database/information system. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Moderately Unsatisfactory. The identification process focused on critical gaps and opportunities for interventions in Chad's petroleum sector. The project was consistent with the GoC's development priorities and with the Bank's CAS. The Bank also considered various project alternatives before finalizing the design of the Project. In addition, lessons learned from other earlier projects in the energy sector were considered and incorporated into the Project design. 20 On the other hand, as mentioned in Section 1.5, the project design had shortcomings. In light of these drawbacks, the overall Bank performance in ensuring Quality at Entry is rated moderately unsatisfactory. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Moderately Satisfactory In the initial stages, the Bank's performance was constrained owing to several factors such as: (i) rapidly prepared project design and the resulting shortcomings; (ii) missed opportunities because of the slow start of the Project; and (iii) exhaustion of the Credit resources within the first two years of implementation. Consequently, the following drawbacks were glaring: · As mentioned in Section 2.2, during the first three years of the Project, the task team did not have a petroleum specialist and an environmental specialist. Consequently, the Project could not develop any sector policy or strategy in petroleum and environmental sectors during this period, and the Project was implemented on an ad-hoc basis. By the time these specialists were added to the team, most of the Credit amount was exhausted, and they were performing technical works themselves, instead of supervising the work of technical consultants. · Until 2002, the supervision was done by TTLs based in Washington D. C. Given the complexity and magnitude of the Project, this arrangement was not sufficient for effective supervision of the project. Given the unsatisfactory progress in the execution of the three capacity-building projects, the Bank decided to change its supervision arrangements in Chad. Accordingly, in early 2002, a former World Bank manager was posted in Chad to coordinate supervision efforts and help the GoC implement the capacity-building projects. In August 2004 further progress was made with the appointment of a senior program manager based in N'Djamena for half of her time, and entrusted with the coordination of the activities across the portfolio of projects linked to the Chad-Cameroon Petroleum Development and Pipeline Project. The support team was also strengthened with the appointment of a procurement specialist, an infrastructure specialist, and a senior country officer. The dialogue with the authorities was greatly improved. · TTLs turnover during the initial three years of the Project led to lack of continuity and different approaches to Project supervision. · Following the change in Project implementing structure, the project implementation manual was never updated. Yet the Project continued disbursing. On the other hand, the Bank's performance was commendable on the following aspects, especially in the later part of the Project, which overweighed the above shortcomings. For example: · The Project was the main Bank vehicle to support the development of the GoC's environmental management capacity. The Bank prepared draft guidelines to ensure compliance with the EMP principles, and discussed them with Exxon and the GoC. These guidelines are being used on an ad-hoc basis for environmental management in the petroleum sector, and will form the basis for future regulations. In addition, support was provided to the GoC to negotiate EMPs with oil developers and to monitor their implementation, to determine if they were in compliance with agreed commitments. The Project helped the Chadian authorities develop interim environmental assessment procedures for the short-term, which were applied to the development of new fields by Exxon, as well as to exploration activities by EnCana in the Lake Chad area. · To help bolster GoC accountability and mitigate potential misuse of oil revenues, a comprehensive communications program was implemented. It targeted two main audiences: (i) 21 the local population in Chad, in consultation with the Chadian authorities, to help mitigate unrealistic expectations, while increasing transparency in the way the resources were managed; and (ii) the international community. · The task team assisted the Ministry of Petroleum in designing a medium and long term petroleum sector strategy, and developing the necessary institutional and legal framework. The task team provided detailed technical and strategic comments on the revision of the petroleum code as well as on the legal statutes of the planned National Oil Company. · The task team provided technical advice and training in petroleum sector related issues. In particular on the request of the Ministry of Petroleum the team developed a model for forecasting the discount of the Doba blend versus the Brent blend which was used by the Ministry to cross check the result of the LP model. Assistance was also provided in evaluating the opportunity of reducing revenue volatility through hedging, and various technical and economic aspects of sector management. · An integrated financial model of the upstream and transportation sector was developed by the Bank which is still used by the Ministry of Petroleum, the IMF, and the Bank for forecasting oil revenue for budgetary and fiscal sustainability purposes. Field performance indicators were also developed as part of the model. · The task team also worked closely with the Chadian authorities to prepare the Supplemental Grant. · The Bank team reached out to various stakeholders including Parliament and various NGOs in Chad. · The task team provided intensive hands-on support to the Chadian authorities to put in place the modalities for oil revenue management. The team also conducted an in-depth review of the IDA portfolio, notably the two capacity-building projects associated with the Pipeline project, in an effort to accelerate their implementation and prepare for follow-up support. · The World Bank Group appointed a consultant (the External Compliance Monitoring Group) to monitor the implementation by the Consortium of the EMP, and to assess work of the GoC's implementing agencies in Chad. It visited Chad on a quarterly basis. Its reports were favorably judged by all parties involved. In addition, five distinguished individuals--the International Advisory Group (IAG)--were appointed to provide an independent overview of the Pipeline Project, and to advise the World Bank's President on progress in achieving the broad objectives of the pipeline project and the related capacity-building projects. The IAG visited Chad twice a year. It was instrumental in helping all stakeholders, including civil society; reach a common understanding on the challenges and achievements of the projects and its contribution was highly appreciated. · The Bank engaged the authorities at the highest level through regular visits to Chad of Bank senior management to reinforce political commitment to capacity building at the highest level. Repeated visits of Bank senior management to Chad helped reinforce commitment of President Deby to speed-up efforts in capacity-building. 22 (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory Overall Bank Performance is rated Moderately Unsatisfactory because of the unsatisfactory aspects of Project design, the limited readiness of the Project for implementation, and the shortcomings in the supervision of the procurement and financial aspects of Project implementation. 5.2 Borrower Performance (NOTE: When the GoC and implementing agency are indistinguishable, provide rating and justification only for Overall Borrower Performance.) (a) Government Performance Rating: Unsatisfactory Preparation. The Project was intricately linked with the Chad-Cameroon Petroleum Development and Pipeline Project, which was the result of long and difficult negotiations that the Chadians conducted on their own. The negotiations were carried out by the GoC's Petroleum Negotiating Team which included representatives of all the major ministries. During preparation, the project had the full commitment of two executing agencies, the MMEP and the MEWR, and was designed after in-depth discussions with the Petroleum Negotiating Team over several months, as well as with the full and active participation of representatives of several ministries (including MMEP, MEWR, the ministries responsible for planning, health, education, rural development, transport, and social affairs), civil society, and NGOs. Thus government performance during preparation was Satisfactory. Implementation. The GoC commitment fluctuated during implementation. The project faced opposition in the initial stages of implementation, which hampered its progress. It was a challenge for the authorities to appreciate the need for and importance of improving the GoC capacity in the petroleum and environment sectors, which they eventually acknowledged. Later, despite the difficult operating conditions, the GoC showed its commitment to the project, most specifically by: (i) improving communication with local stakeholders; (ii) stepping up its efforts with regard to environment and social monitoring and mitigation activities; (iii) undertaking to review the current institutional and legal framework; and (iv) shifting its attention from infrastructure building to human capacity building. But soon thereafter, the GoC commitment started to wane. In November 2005 the GoC presented a new revenue management law to the Parliament. The law provided for the elimination of the Future Generations Fund (FGF), the inclusion of Justice, Territorial Administration and Security among the priority sectors; and increased the percentage of direct oil revenues that can be used in non-priority sectors from 13.5 percent to 30 percent. On the other hand the new law covered all fields. The decision to unilaterally amend the revenue management law constituted a breach of the project development agreement, which allowed the Bank to exercise its rights to trigger the suspension of the portfolio of projects. 23 Although the tasks of the various GoC agencies had been clearly defined, the inter-agency coordination, ownership of and responsibility for the results and personnel motivation had proven difficult to attain. In particular, the Ministry of Environment and the Ministry of Petroleum failed to coordinate their activities. The relationship between the Ministry of Petroleum and the Ministry of Finance was equally difficult. Despite a long-standing preparation process with active involvement of the Minister of Petroleum, the Minister of Environment, and the National Coordination for the Doba project, it became clear during the negotiations of the Supplemental Grant that there was a lack of consensus among the Chadians on this Project. Because of the weak capacity of the GoC and internal differences, timely resolution of issues was a problem. There were also fiduciary issues such as irregularities in counterpart funding, and ineligible expenditures under the Project. The relationship between the GoC and the Consortium came under strain in early October 2004 when the GoC issued a controversial press release citing several points of dispute with the Consortium based on their interpretation of the 1988 convention. Points of disagreement included the point of measurement of production for the purpose of royalty calculation, the determination of the discount for the Doba Blend compared to its marker crude (Brent Blend), and issues related to the use of off-shore insurance backing agreements. With the assistance of the Bank, almost all the issues raised by the GoC were settled. In brief, the GoC did not use the Project (and the Bank more broadly) in the most effective manner for a variety of reasons, which included: (a) political considerations; (b) lack of real ownership of the package of TA; and (c) the overwhelming magnitude of tasks resulting from the rapidity of the construction schedule, and the absorption of all the human resources available on the Chad side for the Chad- Cameroon Petroleum Development and Pipeline Project. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory National Coordination National Coordination, with the assistance of a team of 30 persons, ensured the overall coordination of the Project. The team was totally supported by GoC funding. In September 2004, the National Coordination was shifted from the Office of the President to the Ministry of Petroleum. The institutional change that was made by the authorities without consulting the Bank negatively affected the role and effectiveness of the National Coordination. In addition, the National Coordination appeared to be unable to effectively contribute to the discussion on the appropriate legal and institutional set up. Financial Management Review. The financial management system including accounting, controls, auditing and reporting was adequate and satisfied the Bank's financial management requirements. The financial audit reports were all received on time and the opinions in the Management Letters were moderately satisfactory. CTNSC Given that petroleum was a new sector for Chad, the level of sector specific technical and financial skills available within the CTNSC was extremely low in the initial stages of the Project. Thus, Chad had to rely very heavily on external technical advisers. ECMG assisted the CTNSC in monitoring the Consortium compliance with the EMP. 24 With the assistance of the Bank's technical team, the CTNSC's socio-environmental field-supervision team steadily improved its capacity during implementation. Twenty four field staff members, including the CTNSC site supervisor, an international environment expert, and six technical experts (in biophysics, socioeconomics, and health) supervised the Consortium's socio-environmental activities. This could not be sustained due to lack of funding. The CTNSC had gained credibility in its dialogue with the Consortium through excellent technical reviews of the successive environmental packages submitted by the Consortium for new fields. It also played a significant role in: (a) resolving conflicts, and maintaining social contact in affected villages. The conflict resolution role was viewed by the Consortium as especially helpful; (b) awareness-raising campaigns; and (c) in the verification of the compensation for individual and communities affected by the Project. On the other hand, the lack of coordination between the CTNSC and DPU while carrying out field environmental monitoring and operations monitoring led to tension and different positions between the two sides. The lack of clarity of roles between the National Coordination and the Ministry of Environment exacerbated these difficulties. Procurement Arrangements. During the implementation, there were many instances when the CTNSC did not comply with the terms of the Credit Agreement in procurement activities. Main issues included: non-observance of the procedures; launching bidding documents without obtaining No Objection from the Bank; weakness of procurement activities such as not updating procurement plan, and delays in processing. Financial Management. As mentioned in Section 2.4, the CTNSC had several issues related to fiduciary compliance including ineligible expenditures and outstanding balance in the Special Account. DPU The DPU was set up to monitor the financial and technical aspects of implementation of the Project. It was composed of 36 persons and had a functional reporting line to the Directorate of Petroleum (in 2002 this latter became the Ministry of Petroleum). Given that petroleum was a new sector for Chad, and that the level of sector specific technical and financial skills available within the DPU was extremely low, the achievements of the technical and economic staff were remarkable. These included: (i) the establishment of a methodology and related procedures for the determination of the discount of the Doba blend to the Brent blend; (ii) the establishment of a methodology and related procedures for the verification of the volumes of crude oil production and export; (iii) the establishment of a methodology and related procedures for the control of transportation tariffs; and (iv) the regular conduct of external audits of the petroleum costs, that in many instances lead to the obtaining of adjustments to the Consortium accounts. Procurement Arrangements. Like the CTNSC, DPU had also many issues related to procurement activities. For details, see the CTNSC's performance in procurement above. Financial Management. As in the case of the CTNSC, DPU also had several issues related to fiduciary compliance including ineligible expenditures and outstanding balance in the Special Account. (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory 25 In light of the GoC and implementing agencies' performance as discussed in Section 10.2, the overall performance of the Borrower was Unsatisfactory. 6. Lessons Learned (both project-specific and of wide general application) The lessons learned from the implementation of the Petroleum Sector Management and Capacity Building Project confirm the experience under Bank operations in Chad as well the broader international experience with the design and management of hydrocarbon sector reforms in countries that are new to the sector. Capacity Building Lessons · Need for a proper policy environment and a strong commitment by the highest authorities. Effective implementation of capacity building projects requires a clear alignment with medium and long term sector policy objectives, and a strong political commitment to carry them through. Unless such commitment exists, the Government's interest in supporting investment in capacity building activities may diminish over time as the impact of these activities is less visible. · Creating realistic expectations. Developing national expertise in the different facets of the oil industry (geology, geophysics, engineering, commercial, finance and economics, environment, etc.) is a daunting task. Building realistic expectations as to the results that can be achieved with this type of projects, and the time frame for achieving them is a key element for securing the continued support of the stakeholders. If expectations are too optimistic and results fail to materialize, the political interest in supporting the project is likely to diminish. · Capacity constraints could have been anticipated earlier in order to enable the more effective sequencing of capacity building activities. It is important to carry out a solid pre-assessment of existing national capacities and initiate capacity building programs as soon as possible in order to have at least some capacity in place when the project is implemented. One aspect that could have been stronger in the project design was the framework and sequencing for building capacity: there could have been a greater clarity on the type of functions and type of strengthening needed and their timing (with milestones linked to the construction phase), and an agreement on areas where "temporary substitution" may have been the way to go just to cope with the accelerated pace of construction while sustainable capacity was being built. · Flexibility should be sought in the implementation of training programs designed to respond to immediate needs, and to develop a wider knowledge base for the creation of the human capital needed to develop the sector. Especially in countries that are new to the oil sector, training should aim at improving the basic knowledge of the sector at all level of government. A larger number of staff members from support ministries as the Ministry of Finance and the Ministry of Plan should be offered training in petroleum economics and accounting. · Continuity of the team working on the project is very important both for the Bank and the Borrower. The Project was adversely affected by the frequent change in government, ministries, and institutional set up, as well as the change of TTLs on the part of the Bank. 26 · Linking the implementation of a capacity building project to the implementation of a large engineering project such as the Chad-Cameroon Petroleum Development and Pipeline Project was not practicable or realistic in a country with limited human resources and capacity. · It is important to avoid including too many activities and addressing several sector issues in a single TA project in a country such as Chad which has limited capacity. Sector-related Lessons · An adequate legal, institutional, and regulatory framework needs to be in place before production start-up. The development of a strategic approach to the design of sector policies and of the regulatory framework is a key variable to ensure that the petroleum sector is managed in an efficient and effective way. Experience in many producing countries shows that structural reforms are much more difficult to promote and implement when oil production has already commenced. The institutional arrangement designed to implement the project should aim to strengthen existing institutions. This is particularly important when the activities carried out under the project are expected to last beyond its closing. Cells and special project or program implementation units (supported by donors) by nature are not responsible for delivering on permanent operational functions and therefore are not in a position to mainstream policy and institutional reforms through changes in day-to-day business processes. Chad may not have had many other options beside the use of PIUs when it embarked on the creation of the oil sector on the back of a complex project implemented by international oil companies. Because Chad will have to manager the petroleum sector for many years to come, steps should have been taken to make use of existing institutions and/or devise measures to mainstream project's activities early on. · Better indicators should be designed to measure progress on capacity building. There should be clear and measurable outcome indicators and objective output indicators that can be observed by the Government, the Bank, and by civil society groups. Although the project may be part of a portfolio of related projects, its objectives and outcome indicators should be linked to the activities carried out under the project. · It is important to have a clear and coherent strategic vision of the sector at the beginning of the project itself. This should be complemented with clear milestones linked to the implementation of that vision. The majority of the funds and of the actions envisaged under the project were directed to managing and mitigating the effects of implementing the Chad-Cameroon Petroleum Development and Pipeline Project (ad hoc training, recruiting of technical advisers to assist the CoC on punctual matters arising from the implementation of the pipeline project, information campaigns on the status of implementation of the pipeline project, building of infrastructure in the producing region, and mitigation of environmental and social aspects in general). Little was envisaged for creating the backbone of the sector by developing a sustainable institutional and policy environment. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies See Annex 7 (b) Cofinanciers 27 Not Applicable (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not Applicable 28 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual /Latest Percentage of Components Estimate Estimate Appraisal (US$ million) (US$ million) A. Doba Project Management Government Capacity 1. Environment (technical and institutional support) 6.7 9.36 140% 2. Technical Experts and Training 2.1 2.1 100% 3. Project Coordination Support 0.3 0.3 100% Producing Region 4. Induced Impacts in oil producing region 9 5.6 62% Additional Information Activities Monitoring, Information Gathering, Dissemination, and 0.8 0.8 100% Communication Activities B. Petroleum Sector Management 1. Petroleum Sector Environmental/Social Regulatory 0.7 0.9 129% Framework 2. Petroleum Sector Information Management System 4.6 4.6 100% C. Refinancing of PPF Advances 2 2 100% Total Project Costs 26.2 25.7 98% Project Preparation Facility (PPF) Front-end fee (IBRD only) Total Financing Required 26.2 25.7 98% (b) Financing Appraisal Actual/Latest Source of Funds Type of Financing Estimate Estimate Percentage of (US$ million) (US$ million) Appraisal [GoC] 2.5 2.0 [IBRD/IDA] 23.7 23.7 [Donor A] [WB-administered TF] [Donor B] [Parallel financing] (c) Disbursement Profile (system generated graph) 29 Annex 2. Outputs by Component Component 1. The Doba Project Management Component Output included: (a). Strengthening the capacity for environmental management: · Installation of the personnel of the CTNSC, with national experts assigned to the Executive Secretariat and international experts assigned for supervision on site. In addition, a panel of experts was recruited for advising CTNSC. · Staff training through sessions organized by the engineering and design department of SOFRECO, ESSO-Chad and the French Petroleum Institutes. The topics included: (i) Monitoring the quality of air; (ii) Environmental management Plan; (iii) Methods for developing environmental impact studies; (iv) Environmental Policy and social safeguards; and (v) Auditing of companies · Development of the Framework of Regional Development (CDR) of the oil zone · Study on the reintegration of the Chadian workers of the Chadian Project of Export after the phase of construction. (b). Mitigating Project Impacts on the Producing Region: · International Advisory Panel was installed for the development of a national plan of response in the event of accidental hydrocarbon discharge. An oil spill response plan was prepared but implementing regulation is still to be established. · Regional Development Plan and Environmental Assessment. The Regional Development Plan (RDP) was prepared as a framework for analyzing the economic structure of the oil-producing region, identifying opportunities and in vestment options in infrastructure, human development and public facilities, thus serving as a guiding framework to select projects to be financed by the 5 percent oil royalty allocation set forth in the Constitution and in the project agreement. Both local and national stakeholders were involved in the initial consultations and their views were integrated into a final plan, building on previous studies. · A number of infrastructure works were carried out to reduce the negative impacts of the Chad- Cameroon Petroleum Development and Pipeline Project which included: (i) Construction of new health center in Doba; (ii) Rehabilitation of health center in Bébédjia; (iii) Rehabilitation of Doba hospital; (iv) Rehabilitation and extension of drainage facilities in Doba; (v) Construction of water supply system in Bébédjia; (vi) Drilling of water-supply bore-holes in Doba and Bebedjia; (vii) Delivery of health equipment and medications in Doba and Bébédjia; (viii) Construction of Townhalls in Doba and Bebedjia. 30 · Prevention campaign against Sexually Transmitted Diseases (STD)/HIV/AIDS. Awareness- raising campaigns among truckers and other high-risk categories of the population were successfully implemented, with cross-support from the IDA-financed AIDS Project and in cooperation with specialized NGOs. The Project also contributed to the development of a strategic approach on a regional scale and carried out training programs to: (i) about 500 political and administrative authorities, including Prefects, Under Prefects, Chiefs of Canton, Chiefs of villages; (ii) more than 30 doctors and nurses on dispensation of various services; (iii) approximately 400 obstetricians and marriage counselors. In addition, approximately 40 organizers of AFRlCARE, liaison officers of Esso, village health officials of ACODE were given training and used for sensitizing community members. The Project benefited from direct contribution of the National HIV-AIDS Committee supported by another IDA operation. · Sustainable management of forest resources. The Project provided technical and financial support for the establishment of plans for sustainable management of forest resources in six pilot villages. · Study of socio-demographic aspects of the population of the oil zone. This study made it possible to have the demographic situation of the zone at the beginning of the project and was meant to be used as a reference for the future. · Micro credit. The FACIL carried out six micro credit projects at a cost of 354.7 million FCFA. Loans were given to 8000 people in 10 cantons and three communes, for carrying out various activities such as marketing of cereals; purchasing agricultural equipment, transforming the agricultural products, and cattle breeding. · With regard to socio-economic infrastructure, the FACIL provided the means for (i) the construction of 29 buildings in 11 school establishments, adding up 58 rooms of class and seven office-stores; (ii) the construction and/or the rehabilitation of seven bridges; and (iii) the rehabilitation drinking water supply system. · In the field of capacity building and local development, the FACIL conducted 16 training courses on nine different topics, such as poultry breeding, and masonry, which benefited about 500 people by enhancing their professional competence and skills, improving the commercial value their products, and increasing their incomes. · Credit and savings banks. In collaboration with the Association for the Development of Savings and Credit (ASDEC), the project also ensured the institutional support for the creation and management of credit and savings banks in nine cantons in the producing region. The creation of these credit and savings banks provided opportunities to mobilize local savings and foster development activities. (c). Additional Information and Communication activities: · Dissemination campaigns. Radio and television campaigns were carried out regularly to provide updates to the general public on the progress made in the construction of the pipeline and related facilities. Public consultations and information campaigns were regularly conducted in the producing region and in N'Djaména. These were crucial to raising the awareness on health and social impacts of the Chad-Cameroon Petroleum Development and Pipeline Project, and improving the dialogue with civil society. (d) Monitoring System. 31 · The Environmental Information Management System (SGIE) was finalized by the consultant. Achievement of this component is Moderately Satisfactory. Component 2. Petroleum Sector Management Component · Training and Capacity-building. Since the start of the project, considerable efforts were made in training the DPU's staff, as well as key staff of the Ministry of Petroleum and Ministry of Finance (MOF). Due to the complexities of the agreements governing the exploration and production of the Doba fields, as well as the sale and transportation of the crude, three technical assistance agreements with international consultancy firms were signed by the MP/DPU. All contracts included substantial training components. Workshops were held for the benefit of the DPU and of the MP's Economic Department on topics ranging from: (a) the fundamentals of petroleum markets, industry key performance indicators, petroleum economics, crude oil trading and determination of Doba crude prices. (b) the structure and content of the various agreements related to governing the Doba Petroleum Project. (c) various commercial aspects of the Doba Development Project including royalties, cost recovery and tax calculations. Courses were held to train the DPU/MP's Economic Department's staff in the use of the Linear Program Refining Model and related models for the forecast of crude oil prices and the calculation of the net-back. In addition, ten petroleum inspectors responsible for the monitoring of production from the oil field and its delivery to the Floating Storage and Offloading vessel in Kribi attended a specialized technical training course. DPU recruited two geologists, three petroleum engineers, a geo-physician, two drilling technicians, two pipeline technicians, 10 petroleum inspectors, a procurement specialist, an accountant, a documentation specialist, and an IT specialist. · Determination of the price differential. The Project provided assistance to the GoC in understanding the determinants of the price differential between the Doba Blend and its reference crude ­ the Brent Blend. The market price of the hydrocarbons sold by the Consortium is an important variable for the purpose of calculating both the royalties and the income tax due to the GoC. The procedure for determining the market price is clearly defined in the Convention Agreement between the GoC and the Consortium. In accordance with the Convention, GoC's approval is required to determine the net-back for royalty calculation. The Doba blend is a dense, high acid crude. Mainly due to its poor characteristics the Doba sells at a discount to Brent. To assess the price of the Doba blend, the GoC developed a model based on the determination of the refinery margin Linear Planning (LP) Model. The model, which is an adaptation of the well- known Petroleum Argus, was developed by technical advisers financed by the Project, and requires daily input of crude oil prices and freight costs. To double-check the results of the model, the Bank was asked to provide its assistance in the determination of the price differential. 32 The Bank developed a model based on the observation of monthly crude price variations over a period of four years and their relationship with quality differentials. The results of the Bank's model confirmed the average size and trend of the observed price differentials, and were generally in line with the results of the LP Model. · Permit H negotiations. A specialized consulting firm was engaged since January 2003, together with a legal firm, to advise the Ministry of Petroleum in their negotiations with the Consortium for the renewal of their concession. A new Convention (concession agreement) was signed in 2004 with considerable improvement in the fiscal terms compared to the 1988 Convention. · Equipment. Data-processing and other office equipment were procured by the DPU. · Construction of the offices of the CTNSC and the repair of the offices of the CNPP in Djaména were completed. Achievement of this component is Moderately Satisfactory. 33 Annex 3. Economic and Financial Analysis (including assumptions in the analysis) Not Applicable 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending (from Task Team in PAD Data Sheet) Michel Layec Lead Energy Economist AFTEG Team Leader Ignatius A. Menezes Economist AFTEG Economist Philippe Benoit Lead Specialist AFTEG Pipeline/Country Support Jean Roger Mercier Environment Specialist Environment, Biophysical aspects Tom O'Connor Senior Geologist Senior Geologist Francois Rantrua Rural Development Specialist AFT Rural Development Dimitri Kanounnikoff Information Analyst MIS Specialist Pushpa Schwartz Information Analyst Information Analysis Charles Donang Sr Procurement Specialist AFTPC Procurement Luc Lapointe Procurement Specialist AFTS2 Operations Support David Freese Sr. Finance Officer LOAG2 Disbursements Isabella Micali Drossos Sr. Counsel LEGLA Lawyer Betrand de Chazal Financial Management Specialist AFTFM Financial Management 35 Names Title Unit Responsibility/ Specialty Supervision (from Task Team Members in all archived ISRs) Marie-Francoise Marie-Nelly Sr Program Manager AFRVP Cluster Coordinator Yves André Prevost Sr. Environmental Specialist AFTS4 Supervision of Environment Component Betrand Loiseau Consultant AFTEG TTL, until October 2005 Charles Donang Sr. Procurement Specialist AFTPC Procurement supervision Silvana Tordo Sr. Energy Economist COCPO TTL from October 2005, and thematic leader for petroleum sector Isabelle Paris Sr. Environmental Specialist AFTS4 Supervision of Environment Component Jerome Chevallier Consultant AFTH3 Local Representative until June 2004 Michel Pommier Consultant AFTVP TTL and cluster coordinator until August 2004 Etienne Nkoa Sr. Financial Mgmt Specialist AFTFM Financial Management Specialist 36 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No. of staff weeks USD Thousands (including travel and consultant costs) Lending FY97 26.37 FY98 116.27 FY99 160.92 FY00 48 294.42 FY01 1 5.49 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 Total: 49 603.47 Supervision/ICR FY97 0.00 FY98 0.00 FY99 0.00 FY00 6.08 FY01 34 307.32 FY02 36 858.02 FY03 54 573.84 FY04 44 918.70 FY05 126 676.24 FY06 44 200.05 FY07 8 49.73 Total: 346 3589.98 37 Annex 5. Beneficiary Survey Results (if any) Not Applicable 38 Annex 6. Stakeholder Workshop Report and Results (if any) Not Applicable 39 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR REPUBLIQUE DU TCHAD PRESIDENCE DE LA REPUBLIQUE ------------------- PRIMATURE -------------------- MINISTERE DU PETROLE -------------------- COORDINATION NATIONALE DU PROJET D'EXPORTATION TCHADIEN -PROJET DOBA- ---------------------- RAPPORT D'EVALUATION D'ACHEVEMENT DU PROJET DE RENFORCEMENT DES CAPACITES DE GESTION DU SECTEUR PETROLIER CREDIT 3373 - CD - TCHAD ­ MAI 2007 - 1. Information de base Nom du Projet : Projet de Renforcement de Capacité de Gestion du Secteur Pétrolier. Coût total du Projet : 26.2 Millions US. dollars dont : - 18.9 Millions US. dollars pour la composante Gestion du Projet de Doba - 5.3 Millions US. dollars pour la composante Gestion pour le Secteur Pétrolier. Montant de la contrepartie : 2, 5 Millions US. dollars Crédit IDA N° : 3373 - CD Montant du crédit IDA : 23.7 Millions US. Dollars = 17.000.000 DTS Organisme de tutelle : Ministère de l'Environnement et de la Pêche et Ministère du Pétrole Agences de mise en oeuvre : · Secrétariat Exécutif du Comite Technique National de Suivi et de Contrôle des Aspects Environnementaux des Projets Pétroliers au Tchad (CTNSC). · Composante Technique Pétrole (Unité Pétrole de Doba). 2. Dates principales Date d'approbation : 07 juillet 2000 Date de mise en vigueur : 23 mars 2001 Date de revue à mis- parcours : 14 octobre 2003 Date de Clôture : 31 décembre 2005 prorogée au 30 avril 2006 ensuite au 31 décembre 2006 3. Tableau récapitulatif de l'évaluation de la performance du Projet 40 3.1 ­ Performance Résultats Modérement satisfaisants Résultats de développement Les objectifs de développement du Projet sont en voie d'être atteints et leur exécution est satisfaisante. Mais, la viabilité des institutions mises en place dans le cadre du Projet n'a pas été garantie pleinement. Il y a eu beaucoup de risques liés à la politique et à la gouvernance. Un don supplémentaire a été proposé depuis la revue à mi parcours (Oct 03), mais il n'a pas été mis en place jusqu'à ce jour afin de consolider davantage les activités de renforcement des capacités. Performance de la Banque: Satisfaisante Performance de Modérement satisfaisante l'Emprunteur 3.2 ­ Indicateurs d'exécution et d'évaluation Le Projet a été conçu et mis en oeuvre dans une situation d'urgence et conflictuelle avec la Société Civile. Les indicateurs qui ont été pris en compte dans les différents documents de référence du Projet (PGE, PAD, Manuel d'Exécution) n'ont pas été mis en concordance, ce qui a posé un problème d'adaptabilité pendant les phases d'évaluation à mi parcours et à l'achèvement. 4. Personnel national responsable au niveau du Projet Positions Au démarrage des activités du À l'Achèvement du Projet Projet Coordinateur National Nassour Guelendouksia Ouaidou Ahmat Khazali Acyl Coordinateur National Paul Mbainadoum Paul Mbainadoum Adjoint Secrétaire Exécutif du Sandjima Dounia Ismaël Mahamat Moctar CTNSC Superviseur sur Site Ismaël Mahamat Moctar - du CTNSC Chef Unité Pétrole Mahamat Nasser Hassane Danebaye Djonyanuba Doba Superviseur sur Site Mahamat Bourdjo Khalil - UPD Directeur du FACIL All Yom Djerabmbete All Yom Djerambete 5. Le contexte, les objectifs et les résultats obtenus 5.1 ­ Contexte à l'évaluation Pour exploiter le pétrole découvert dans le sud du pays à Doba, le Gouvernement de la République du Tchad a négocié un accord de production pétrolière avec un Consortium de compagnies pétrolières reconstitué à deux reprises, en 1992 et en 2000 avec la structure actuelle composée de ESSO, PETRONAS et CHEVRON. Dans le cadre du projet de mise en valeur des ressources pétrolières de Doba et d'Oléoduc Tchad/Cameroun (Projet d'Exportation Tchadien), le Consortium de compagnies pétrolières composée de ESSO, PETRONAS et CHEVRON, en 41 association avec l'État tchadien, ont décidé vers la fin des années 90, d'assurer la production, le transport et la vente sur le marché mondial de près d'un milliard de barils de pétrole provenant de trois gisements dans le bassin de Doba (Komé, Bolobo et Miandoum). Ce projet devrait rapporter entre 1,5 et 2 milliards de dollars au Tchad pendant les 30 ans d'exploitation des gisements (sur la base d'un prix pétrolier Brent d'environ 15,25 dollars le baril, en dollars de 1999). Le projet présente cependant certains risques, en particulier le risque que les effets environnementaux et sociaux ne puissent être évités, minimisés ou atténués, et le risque que les revenus pétroliers ne soient mal gérés par l'État tchadien. Conscient des lourds défis à relever dans le secteur pétroliers, le Gouvernement de la République du Tchad a demandé l'assistance de la Banque Mondiale pour renforcer les moyens dont il dispose pour suivre et contrôler les aspects environnementaux, sociaux et techniques des projets pétroliers, à commencer par le projet de Doba. L'appui à la maîtrise des effets induits du projet pétrolier de Doba est un domaine qui présente un intérêt particulier. Le projet de renforcement des capacités de gestion du secteur pétrolier a pour but de fournir cette assistance. Dans le but de renforcer les capacités du Tchad à contrôler et suivre les aspects environnementaux, sociaux et techniques du Projet de Doba, ainsi que sa capacité de gérer le secteur pétrolier dans sa totalité, la Banque Mondiale a accordé au Tchad un crédit pour une période de 5 ans d'un montant de 23,7 millions de dollars dont la mise en vigueur est intervenue le 23 Mars 2001. Le Gouvernement Tchadien s'est engagé dans le cadre de l'Accord de ce crédit à apporter une contribution en monnaie nationale équivalente à 2,5 M$ pour la même période. Ce qui fut fait. Les activités du Projet ont démarré en Mai 2001 et pris fin le 31 Décembre 2006. Durant cette période, les activités de terrain ont atteint leur vitesse de croisière jusqu'au moment de la revue à mi-parcours qui a intervenue en Octobre 2003 à l'issue de laquelle, les besoins en ressources additionnelles ont été évalués et des négociations techniques ont été engagées et finalisées en avril 2004. Malheureusement, depuis cette date, les difficultés de fonctionnement consécutives au tarissement prématuré du crédit initial et à la non mise en place immédiate du financement supplémentaire n'ont pas permis aux équipes du Projet d'atteindre globalement les objectifs de renforcement de capacité retenus. Au 31 août 2004, environ 100 % du Crédit n° 3373 ­ CD avait été engagé et 93 % décaissé. L'exécution des diverses composantes du Projet a progressé de manière satisfaisante malgré le retard accusé dans le recrutement du personnel et dans la fourniture de la formation. Suite à l'organisation des campagnes d'information, de sensibilisation et d'explication, la communication avec la population locale s'est améliorée. De gros travaux d'infrastructures ont été achevés à Bébédjia et à Doba. Le FACIL a été opérationnel. Il a réalisé des infrastructures socio-économiques, de formation et signé des conventions avec des intermédiaires financiers dans le cadre des activités de micros crédits. Il est important de souligner que de 2004 à 2006, les structures du Projet qui sont déjà fortement handicapées par l'absence de ressources financières n'assurent qu'un service minimum avec un personnel réduit dont la mobilité est liée au soutient logistique du Consortium. Ce qui prouve la grande difficulté de ces structures de s'assurer valablement que les intérêts du Tchad et de la population intéressée sont respectés, face aux activités pétrolières qui ne cessent de s'élargir. Tout cela a influé négativement sur les bons résultats obtenus pendant les trois premières années d'activités intenses du Projet. Les activités qui devraient être réalisées dans le cadre de la pérennisation des structures du Projet n'ont pas pu être conduites, ce qui porte aujourd'hui préjudice aux structures du Projet. Face aux problèmes que rencontrent les structures du Projet, et afin de consolider les acquis du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier et de mettre en oeuvre les activités qui n'ont pas pu l'être du fait de l'épuisement prématuré des fonds initiaux (Crédit IDA n° 3373 ­ CD), le Gouvernement de la République du Tchad et le Groupe de la Banque Mondiale ont convenu dès le début de l'année 2004 du principe d'un financement supplémentaire dont la mise en place aurait dû intervenir bien avant la fin de l'année 2006. Lors de l'Atelier de Réflexion tenue en Avril 2005 qui a impliqué les ministres concernés, un grand nombre de cadres tchadiens et l'équipe de la Banque Mondiale, il a aussi été confirmé le principe de la mise en place d'un financement sous la forme d'un crédit supplémentaire. Depuis cette date, les travaux de préparation ont été accélérés en vue des négociations du nouveau crédit. Cependant, ces négociations n'ont pas pu avoir lieu, d'une part, du fait que certains préalables relatifs à la présentation du Projet 42 au Conseil d'Administration de la Banque Mondiale n'ont pu être remplies (lettre de politique sectorielle acceptable à la Banque) et d'autre part, du fait du malentendu intervenu entre la Banque Mondiale et le Gouvernement du Tchad au sujet de la gestion des revenus pétroliers. Cependant, et malgré cette situation, la Banque Mondiale a confirmé en Octobre 2006, sa disponibilité à assister le Gouvernement du Tchad pour le développement de son secteur pétrolier par l'octroi d'un don d'un montant de Dix (10) Millions de Dollars Américains, sur l'enveloppe IDA pour le Tchad 2007-2008. En réponse à cette assistance, le Gouvernement à travers le Ministre de l'Economie et du Plan a confirmé par écrit le 20 Mars 2007 à la Banque Mondiale, son accord pour que ce don de Dix (10) Millions de Dollars Américains, soit mis à la disposition du Tchad aussi rapidement que possible, car ce financement constitue un apport essentiel pour soutenir les efforts du Gouvernement dans sa politique de renforcement institutionnel des capacités et plus particulièrement dans le domaine de la protection de l'environnement d'une part et de consolider, en temps opportun, les acquis du Projet Pétrole d'autre part. Selon les dispositions de l'Accord de crédit 3373 ­ CD, qui a été clôturé le 31 Décembre 2006, un rapport d'achèvement d'exécution doit être rédigé par la Banque Mondiale pour être finalisé et soumis au Conseil d'Administration de la Banque Mondiale au plus tard le 30 Juin 2007. Selon les mêmes dispositions de l'Accord de Crédit 3373 ­ CD, le Gouvernement du Tchad doit présenter son propre rapport d'évaluation d'achèvement selon le modèle utilisé habituellement pour la préparation du rapport pays, pour accompagner le RAE de la Banque mondiale. A cet effet, le Coordinateur National a commis par décision n°409/CN/2006 du 14 novembre 2006, un groupe de travail présidé par l'Expert Juriste de la Coordination Nationale et regroupant le Secrétaire Exécutif du CTNSC PI (1er Rapporteur), le Chef de l'Unité Pétrole Doba, le Directeur du FACIL et les comptables du projet (membres) pour la rédaction de son rapport qui ne doit pas dépasser 10 pages. Il doit contenir en outre les éléments suivants : I. Introduction Cette introduction fera le rappel du contexte ayant justifié le Projet par l'IDA II. Evaluation des objectifs et contenu du programme Cette partie devra contenir l'évaluation, en détail des objectifs et le contenu des activités ainsi que les mesures et les actions soutenues par le PRCGSP III. Evaluation des résultats obtenus par chaque composante du PRCGSP Il sera évoqué dans cette partie, la mise en oeuvre des mesures et actions prévues par le PRCGSP, les problèmes rencontrés ainsi que les résultats obtenus au niveau de chaque composante. Il sera ressorti dans cette partie l'appréciation du Gouvernement sur la performance globale du PRCGSP ainsi que l'évaluation des impacts et la durabilité des réalisations. IV. Evaluation de la performance de la banque Enfin, il sera évoqué dans cette partie, la description de la collaboration du Gouvernement avec la Banque Mondiale et l'évaluation de la qualité de la supervision faite par la Banque Mondiale au cours de la mise en oeuvre du PRCGSP. V. Leçons tirées du PRGCSP Faire ressortir dans cette partie, les leçons tirées par le Gouvernement, à l'occasion de l'exécution du PRCGSP. Ces leçons permettront d'améliorer la conception d'éventuels projets futurs dont l'objectif ultime est de contribuer à créer les conditions propices pour un développement transparent et soutenable du secteur pétrolier. 43 5.2 ­ Les objectifs originaux de développement du Projet et contenu du programme Les principaux objectifs au titre desquels le projet de renforcement des capacités de gestion du secteur pétrolier est proposé visent à renforcer les capacités du Tchad à : · gérer le développement de ses ressources pétrolières d'une manière appropriée tant du point de vue de l'environnement que du point de vue social, en commençant par l'exploitation des champs pétrolifères de Doba, dans la partie sud du Tchad, · minimiser et pallier les impacts négatifs du Projet Doba et renforcer les capacités au niveau régional, et · établir un cadre pour favoriser la croissance des investissements privés dans le secteur pétrolier au Tchad. Malgré les retards enregistrés lors du démarrage des activités, grâce au soutien continu de la Banque et d'autres organisations et en dépit des capacités limitées de l'administration locale, l'exécution de ces objectifs a été satisfaisante. Le renforcement des capacités du gouvernement du Tchad a été indispensable pour l'amélioration des politiques générales, des compétences et des institutions. Les Composantes du Projet et l'Evaluation des résultats obtenus par chaque composante du Projet de renforcement des capacités de gestion du secteur pétrolier Dès son origine, le Projet a été a décomposé en deux composantes principales : · La Composante Gestion du Projet Doba (18,9 millions de $US), dite `'composante A'', est destinée à soutenir la réalisation du projet de Doba en améliorant la capacité du Gouvernement à suivre et gérer les impacts environnementaux et sociaux du projet, et en atténuant les impacts négatifs du projet sur la région productrice; et · La Composante de Gestion du Secteur Pétrolier (5,3 millions de $US), dite composante B, est destinée à renforcer la capacité du Gouvernement à soutenir et gérer le développement du secteur pétrolier au Tchad. Dans le cadre de la composante «A» qui vise à renforcer les capacités gouvernementales et à minimiser l'effet du projet sur la zone de production, des progrès importants ont eu lieu à travers la mise en place des équipes du CTNSC et l'acquisition des équipements qui ont permis aux experts et agents du CTNSC d'effectuer le suivi environnemental et social des opérations de construction et des installations du Projet d'Exportation Tchadien, conformément aux dispositions du Plan de Gestion de l'Environnement (PGE). Face au rythme, à l'étendue géographique et aux nombreux secteurs d'activités (construction, transport, terrassement, forage, pipeline, etc.), les experts et agents du CTNSC ont pu s'imposer et se forger une légitimité auprès de leurs partenaires parmi lesquels figurent Esso Exploration & Production Chad Inc (EEPCI) et le Groupe de la Banque Mondiale, qui demande aujourd'hui à être soutenue par les hautes autorités nationales pour le suivi des trois phases de l'industrie pétrolière au Tchad à savoir l'exploration, le développement et les opérations. Les efforts de formations entrepris dans le cadre du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier ont permis au personnel du CTNSC d'assumer correctement leurs responsabilités et consolider leur savoir faire. Mais quelque soit les capacités des experts et agents disponibles du CTNSC, l'acquisition de l'expertise nécessaire exige que ce personnel puisse bénéficier d'un perfectionnement soutenu avec des programmes de formation qualifiés nécessaires qui font appel à des experts confirmés. Dans le cadre de l'Assistance Technique qui fait partie intégrante du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier, le CTNSC a disposé du soutien d'un certain nombre d'experts nationaux et internationaux « à la demande», qui après sélection et mise en place, ont produits entre autres les documents suivants : Etude sur la démobilisation, PDR/EER, PNIDAH, etc. Ces études qui ont coûté cher et qui ont été élaborées dans un processus participatif, n'ont pas encore reçu l'approbation formelle du Gouvernement. C'est ce qui retarde leur utilisation par les services techniques compétents. Dans le cadre de la mitigation des impacts indirects du Projet, le programme de construction et de réhabilitation 44 d'infrastructures publiques a été largement engagé pour un montant d'environ trois (03) milliards de Francs CFA. Il concerne les mesures d'urgence qui visent à atténuer l'impact d'une immigration en masse pendant la période de construction et porte essentiellement sur le renforcement des infrastructures socio-économiques, sanitaires et d'approvisionnement en eau potable de la région ; le renforcement des services de santé (hôpitaux dispensaires et campagne d'information) ; la mise en place d'actions permettant une utilisation durable des ressources naturelles dans la zone du Projet ; les actions préventives contre les Infections Sexuellement Transmissibles (IST) et en particulier le SIDA. La mise en oeuvre de ces mesures d'urgence est assurée en grande partie par les opérateurs privés et les ONG. Les dépenses engagées pour les travaux de génie civil du CTNSC représentent environ deux (02) milliards de Francs CFA. Le montant total des coûts engagés pour la Maîtrise d'oeuvre des travaux du CTNSC est d'environ 400 millions FCFA. Dans le cadre de la prévention contre le SIDA, le projet a contribué au développement d'une approche stratégique pertinente à l'échelle nationale (boite à images et livrets familiaux) et porte a son actif : · plus de 490 autorités politiques, administratives et traditionnelles ont été formés (Préfets, Sous Préfets, chefs de Canton, chef de villages) ; · plus de 30 médecins, infirmiers formés à la dispensation des différentes prestations retenues dans le cadre du Projet ; · environ 400 accoucheuses traditionnelles, tradi - praticiens et pairs éducateurs formés ; · environ 40 animateurs d'AFRICARE, Agents de liaison Esso, Agent de santé villageoise d'ACODE ont été formés et servent de relais communautaire de sensibilisation. Par ailleurs, le volet SIDA bénéficie de campagnes permanentes multi médias sur les axes routiers par 2 UVM animées par 2 équipes : une équipe AMASOT (promotion du marketing social du préservatif) et une équipe du Projet lui-même (les animateurs sociologue du BELACD). Plus de 20.000 posters et affiches avec images parlantes ont été distribuées et 28 panneaux routiers sont installés dans la région productrice. Dans le cadre des mesures économiques d'accompagnement, le FACIL a obtenu un crédit d'environ 2,2 milliards de Francs CFA dont environ 1,8 milliards ont été consommés avant le 31 Décembre 2004. Depuis le démarrage de ses activités sur le terrain en juillet 2002, le FACIL a enregistré plus de 400 requêtes sur lesquelles 70 micros projets d'infrastructures ont été approuvés par le Comité de Pilotage (CdP). Le total des projets d'infrastructures réalisés par le FACIL, sur la base des contrats signés, s'élève à 22 pour un coût total de 605 millions de Francs CFA. Le mode de réalisation choisi pour ces ouvrages (tâcheronnat) a permis d'assurer d'une part, la bonne contribution des bénéficiaires qui tourne pour l'essentiel autour de 10% et d'autre part, de donner du travail à des artisans locaux mais aussi d'assurer leur formation. Sur chaque chantier réalisé par le FACIL, en moyenne 4 à 5 jeunes villageois sont formés aux métiers du bâtiment. Ainsi donc, plus d'une quarantaine de jeunes ont été formés et équipés de petits matériels pouvant leur permettre de réaliser des travaux d'entretien des bâtiments construits dans leurs villages et également d'exercer le métier de travaux du bâtiment dans leur zone. Du côté des APE, des comités de suivi des chantiers ont été constitués et formés pour réceptionner et cogérer les matériels et matériaux de construction en collaboration avec le contrôleur et le tâcheron recrutés par le FACIL. Dans le domaine du Renforcement des Capacités et Développement Local, le FACIL a réalisé depuis le démarrage de ses activités, seize (16) sessions de formation sur neuf (09) thèmes différents. Il a aussi assuré un appui institutionnel concernant la création et la gestion de caisses d'épargne et de crédit dans neuf (09) cantons de la zone pétrolière. Cet appui est réalisé en collaboration avec l'Association pour le Développement de l'Epargne et Crédit (ASDEC). Il a permis la création de 9 caisses d'épargne et de crédit dans la zone et leur encadrement technique pendant 12 mois. Les dépenses engagées pour ce volet s'élèvent à environ 130 millions de Francs CFA. Dans le domaine des activités génératrices de revenues, le Comité de pilotage du FACIL a approuvé 7 programmes de micros crédit parmi lesquels 6 sont mis en oeuvre. Le montant total des prêts aux intermédiaires financiers est de 480 millions de Francs CFA. Ce prêt leur a permis de placer un millier de crédits pour environ 8.000 bénéficiaires dans 10 cantons et 3 communes de la zone d'intervention du FACIL Les crédits octroyés couvrent plusieurs domaines d'activités : la commercialisation des céréales ; 45 les équipements agricoles, la transformation des produits agricoles, l'élevage, etc. Le intermédiaires financiers ont dans le même temps bénéficié des subventions pour un montant total d'environ 100 millions de Francs CFA pour faciliter les activités de formation des bénéficiaires de crédits et de suivi du remboursement des crédits. La difficulté que le FACIL a connue par rapport à ce volet d'activités génératrices de revenues, est relative aux difficultés de remboursement des crédits qu'il avait accordé aux intermédiaires financiers qui sont déclarés défaillants les uns après les autres. Le FACIL intensifiera ses actions de recours auprès des juridictions de la place, afin de récupérer les crédits consentis sur les deniers publics. Il est important de relever que le Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier doit à l'ensemble des fournisseurs, prestataires de services et entrepreneurs, la somme d'environ 1,3 milliards de Francs CFA. Cette somme représente les soldes des divers contrats ainsi que les retenues de garantie pour les ouvrages réalisés. Les partenaires du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier sont interpellés pour la recherche des moyens nécessaires afin de désintéresser les ayant droit dont certains ont engagé des actions en justice pour entrer dans leurs droits. Le Compte Spécial du CTNSC est sous double saisie conservatoire depuis le mois de Mars 2005. Dans le cadre de la composante « B » qui vise d'une part à renforcer le cadre de réglementation des aspects environnementaux et sociaux applicable aux activités de développement pétrolier au Tchad, en s'appuyant sur les leçons du projet pétrolier de Doba et d'autre part, à améliorer les capacités du Tchad à gérer les aspects techniques du secteur, avec la création d'un système efficace d'information sur le secteur pétrolier, plusieurs activités ont été réalisées on peut citer : la formation, la gestion de bases de données, les activités de promotion et assistance technique pour améliorer les moyens dont dispose le Tchad pour attirer, négocier et, plus généralement, traiter avec les investisseurs potentiels dans le secteur. Afin de permettre au Ministère du Pétrole de définir, piloter et maîtriser une stratégie de développement du secteur pétrolier, des Consultants Internationaux ont été recrutés pour d'une part, évaluer le prix du brut, faire l'audit des comptes du Consortium, de s'entourer d'experts juristes et financiers aux fins des négociations du permis H avec le Consortium Pétrolier. Il convient de noter que l'activité de négociation du permis H n'était pas prévue initialement dans le cadre du Crédit. Toutefois, avec l'appui des experts conseils, le Gouvernement de la République du Tchad a pu signer une nouvelle Convention Pétrolière en Mai 2004 dont les termes sont plus avantageux que ceux de la Convention de 1988. Dans le domaine de la formation, 10 Inspecteurs pétroliers ont été formés à l'IPEDEX qui travaillent actuellement sur le site du Projet à Komé et sur le FSO à Kribi. Il a été également formé des économistes (3) sur le modèle économique, ainsi que des cadres (300) des Ministères du Pétrole, de l'Environnement et d'eau, des Finances, du Plan, de la Coordination Nationale, du Collège de Contrôle et de Surveillance, de la Cour Suprême et des cadres du Projet. La composante B a financé la participation de beaucoup de cadres tchadiens à des colloques et voyages d'études à l'étranger. Le projet a construit le bâtiment qui abrite actuellement le Ministère du Pétrole avec tout le personnel. Mais, avant cette construction, le Projet a réfectionné un bâtiment pour abriter l'Unité du Projet Doba. Ce bâtiment sert maintenant à abriter les services du Ministère des Mines et de l'Energie. Il est important de souligner que certaines activités prévues dans le cadre du crédit initial n'ont pas été réalisées. Il s'agit entre autres de : · La Campagne de Promotion de la Prospection Pétrolière n'est pas réalisée ; · La base de données pétrolières n'est pas encore créée ; · La formation de Géophysiciens, Foreurs, Agents dans le domaine d'Archivage et de Gestion des Données Pétrolières, Agents dans les Contrats Pétroliers et Fiscalités n'a pas été réalisée. Au nombre de ces activités prévues mais non réalisées s'ajoutent des activités nouvelles portant sur l'élaboration d'un modèle 46 économique du secteur pétrolier et formation (gestion des ressources humaines, bourses d'études universitaires, formation techniques, détermination du prix du brut et des tarifs interprétation et gestion des contrats pétroliers, procédures internes et management, calibrage des compteurs, allocation des coûts de production et fiscalité pétrolière, la décote), l'étude d'établissement de l'Institut du Pétrole à Doba, l'étude pour la vision à long terme (analyse et mise en place des structures), l'audit des Comptes du Consortium et des sociétés Own, les experts juridiques et financiers. Dans le cadre réglementaire, le Code Pétrolier qui était en préparation au niveau du Ministère du Pétrole, vient de voir le jour en date du 2 mai 2007. Il est important de souligner que la Supervision sur Site de l'Unité Doba a cessé d'exister depuis le 31 Décembre 2005 et aucune disposition n'a été prise pour pérenniser les acquis du Projet. La plupart des principaux cadres (y compris les inspecteurs pétroliers) ayant assuré la lourde tâche de suivi et de contrôle qualité/quantité des opérations d'exportation du brut tchadien sont reversés à la Fonction Publique. Ces cadres sont démotivés et n'assurent plus le suivi des activités pétrolières. 6. Evaluation de la performance de la Banque Mondiale La gestion environnementale du Projet s'est bien passée grâce au financement IDA qui a permis d'avoir les moyens humains et matériels nécessaires pour suivre et contrôler le Projet. Le parrainage de la Banque Mondiale a facilité la prise en compte dans le cadre de la réalisation du Projet, des précautions sociales et environnementales consignées dans le Plan de gestion de l'Environnement (PGE). Ces précautions ont été inspirées par les politiques de sauvegarde de la Banque Mondiale. L'implication de la Banque Mondiale dans la mise en valeur d'un gisement pétrolier, comme le projet d'exportation tchadien est une première pour l'instant. Le partenariat entre un consortium pétrolier, deux gouvernements et la Banque Mondiale est unique au monde. Ce partenariat a permis de réaliser un projet sensible dans des conditions qui respectent les normes exigeantes de l'institution en matière de protection de l'environnement et de développement local. Ce partenariat a permis aussi de mettre en place un certain nombre de mécanismes pour assurer que la gestion des revenus pétroliers se fasse dans la transparence pour la réduction de la pauvreté au Tchad. Des dispositions législatives et institutionnelles prises avant même la production des premiers barils du brut. Toutes ces mesures sont initiées sous l'oeil bien veillant de la Banque Mondiale pour garantir l'utilisation rationnelle, juste et transparente des revenus pétroliers afin de permettre au Tchad l'un des pays les plus pauvres de la planète de rattraper son grand retard dans son développement économique et social. Les missions de supervision régulièrement réalisées par le groupe de la Banque Mondiale, le Groupe International Consultatif (GIC) et le Groupe de Suivi de la Conformité environnementale (ECMG), ont permis d'une part, de corriger durant la phase de construction, tous les cas de non-conformité, conformément aux prescriptions du plan de gestion environnementale (PGE) et d'autre part, de transformer durant la phase d'exploitation, les revenus pétroliers en programmes d'action pour la réduction de la pauvreté. 7. Les leçons tirées du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier Le Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier a été un instrument indispensable au Gouvernement du Tchad pour assurer ses responsabilités aux côtés des partenaires privés dans la construction du Projet d'Exportation Tchadien (ECMG, GIC/BM). A travers les moyens techniques de gestion, qui ont pu instaurer un système de suivi pour mesurer l'impact des actions gouvernementales dans les secteurs prioritaires, grâce aux précautions sociales et environnementales prises dans le cadre du projet et consignées dans le Plan de Gestion Environnementale (PGE). Les nouveaux projets (projets satellites d'EEPCI et les autres projets d'exploration d'EnCana remplacée aujourd'hui par CNPC) sont développés selon les principes et objectifs du PGE du PET. Le Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier a aussi permis au Gouvernement de la République du 47 Tchad d'encaisser les recettes prévues dans les Accords de Crédits qui à ce jour sont plus que suffisantes pour satisfaire les besoins pressants du pays et garantir le financement des programmes en faveur des pauvres. Le Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier semble répondre aux besoins du Tchad. Mais, la réduction du temps d'intervention et des ressources financières, le Projet n'a répondu que très partiellement aux besoins qui ont fait l'objet à maintes reprises d'analyse, d'évaluation lors des différentes missions de supervision de la Banque Mondiale. Les autorités tchadiennes ont à coeur le souci de consolider davantage les capacités du pays pour une gestion effective du secteur pétrolier et ses aspects écologiques et sociaux au cours des années à venir. C'est pourquoi un nouveau Coordinateur National a été nommé en date du 6 Avril 2007. Il est important de souligner que la situation d'incertitude que connaît le Projet depuis plus de deux ans a favorisé d'une part, la multiplication des spéculations sur le devenir des structures du Projet (CNPP, CTNSC, UPD et FACIL) et d'autre part, les récriminations des fournisseurs et des entrepreneurs à qui le Projet doit de l'argent. Le non paiement des soldes des contrats du Projet a occasionné des actions en justice contre certains entrepreneurs. La nomination du nouveau Coordinateur National exprime clairement la position du Gouvernement sur la poursuite de la mission et des activités des structures mises en place dans le cadre du Projet de Renforcement des Capacités de Gestion du Secteur Pétrolier, contrairement à l'idée répandue qui liait la durée de vie de ces structures à l'achèvement de la période de construction des infrastructures nécessaires à la mise en oeuvre du Projet et du Crédit 3373 ­ CD. 48 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not Applicable 49 Annex 9. List of Supporting Documents (In the Portal, each document can be linked to a file in IRIS or attach a new document) · Project Implementation Plan · Project Appraisal Document for Republic of Chad Petroleum Sector Management Capacity Building Project, dated March 30, 2000 (Report No: 19342 CD) · Aide Memoires, Back-to-Office Reports, and Implementation Status Reports. · Project Progress Reports. · Borrower's Evaluation Report dated May 2007 50