World Bank tells Exxon to fix Chad compensation
WASHINGTON (Reuters) - The World Bank has told a consortium led by Exxon-Mobil Corp. to properly compensate farmers in southern Chad for land the U.S. company has acquired as it expands its search for oil in the Doba basin.
The bank's private-sector lender, the International Finance Corp., told Exxon to reassess its compensation plans after a independent report found the expansion of wells is affecting the livelihoods of families who live off the land.
Exxon operates the Chad-Cameroon oil pipeline development project, including Chevron Corp. and Malaysia's state-run Petronas, which the IFC helped to finance on condition that oil revenues would benefit the poor.
In an interview, Rashad Kaldany, the IFC's director for oil, gas and mining projects, said despite cash compensation by an Exxon affiliate, Esso Chad, families would be worse off in the long term if livelihoods were not restored.
"We have had extensive discussions with Esso and really urged them to take this very seriously and we have agreed on the principles," Kaldany told Reuters.
"They are committed to doing things right, but getting to finalizing an action plan and disclosing it is something we are still working with them."
Kaldany said the consortium had agreed to issue a corrective action plan within the next few weeks.
"It will build on what they have done before, including cash compensation, but may include new approaches to either restore their livelihoods, or help them develop new livelihoods with training," he said.
The report, commissioned by Esso at the IFC's request, found the consortium underestimated its land requirements and, through incremental acquisitions, had exceeded original estimates by 65 percent.
It said exploration and drilling had fragmented cultivated land and left some areas unfit for farming, while villagers had abandoned growing cotton, a vital cash crop.
EXXON: AFFECTED PEOPLE BETTER OFF
Of the 1,640 families affected, about 480 lost use of 20 to 50 percent of their land, while 430 lost half to all, the report said.
Cash paid to farmers for land was used to improve homes, pay debts and buy cattle and farm equipment but was also wasted on alcohol, bride purchases and prostitution, the study found.
"Our aim is to ensure long-term positive impacts and this is why we have been urging Esso to reassess compensation, which they are willing to do," Kaldany said.
In an e-mailed response, Exxon-Mobil said it had been "developing and implementing mitigation plans to address issues identified" in the report.
"The project believes that the compensation and resettlement plan has generally worked well," it said, adding the study "shows in clear and quantifiable terms that the people affected are better off."
Ian Gary, a policy advisor for development group Oxfam who has closely followed the Chad-Cameroon pipeline project, praised the IFC for stepping in but said it acted too slowly.
"I don't think the IFC pushed hard enough on Exxon and pushed as early as they should of," said Gary, who was part of aid and environmental groups briefed by the IFC this week.
The pipeline project has long been a thorn in the side of the World Bank, which was criticized from the start for getting involved in oil projects that had done more harm than good in impoverished African countries.
World Bank President Paul Wolfowitz halted loans to Chad in 2005 after the government made a grab for the oil revenues, by changing a law that ensured the petrodollars would go to projects that benefit the poor.
Since then, the bank has renegotiated the agreement with the government, which promised to set aside 70 percent of all budgetary resources in 2007 for pro-poor programs.
