China National Petroleum Corporation Begins Work on Oil Pipeline in Chad

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Researched by Industrial Info Resources (Sugar Land, Texas)--State-owned China National Petroleum Corporation (CNPC) (Beijing) has started work on a major oil pipeline in Chad, in Africa's Saharan region, which will be used to transport crude oil from the Koudalwa oilfield in the Chari-Baguirmi region to the Djarmaya refinery, located about 40 kilometers north of the country's capital N'Djamena.

The pipeline will run about 300 kilometers from the oilfield to the refinery, which is still under construction. Although neither the capacity of the pipeline nor the cost of the project has been disclosed, work is scheduled for completion by 2013.

Work on the Djarmaya refinery started in October last year. The project is being executed as a 60:40 joint venture between CNPC and the Chad state oil company Société des Hydrocarbures du Tchad (N'Djamena). When completed in 2011, the refinery is expected to produce 700,000 tons per year of gasoline and diesel, 20,000 tons per year of kerosene and 60,000 tons per year of liquefied petroleum gas (LPG).

CNPC acquired a 100% stake in Chad's H Block in 2007 and in April of this year announced that its Prosopis-1 well had produced 7,558 barrels per day (BBL/d) of crude oil and 46,000 cubic meters per day of natural gas during tests. The Chari-Baguirmi region is expected to eventually produce up to 60,000 BBL/d of crude oil.

Production of oil in Chad commenced in July 2003, when a consortium formed by Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), Petronas International Corporation Limited (PICL)--a subsidiary of state-owned Petroliam Nasional Berhad (Petronas) (Kuala Lumpur, Malaysia), and Chevron Corporation (NYSE:CVX) (San Ramon, California) brought the Miandoum oilfield on line. Exxon Mobil, PICL and Chevron hold stakes of 40%, 35%, and 25%, respectively. The consortium followed this with production from the Kome and Bolobo oilfields in 2004. Currently Chad produces about 170,000 BBL/d of crude oil.

In 2006, Chad severed diplomatic ties with Taiwan and elected to recognize the Chinese government in Beijing, paving the way for Chinese investments in the country. In January 2007, CNPC bought assets in seven sedimentary basin areas in the Block H concessions totaling 54 million acres. Later that year, CNPC began producing oil from the Mimosa and Ronier fields in the Bongor basin, one of the seven assets purchased.

The CNPC pipeline will not be the only oil pipeline in Chad. The Exxon Mobil-led consortium, together with the governments of Chad and Cameroon, developed the Chad-Cameroon pipeline, which was inaugurated June 12, 2003. This 1,070-kilometer pipeline, constructed at a cost of $3.7 billion, carries oil from Chad through Cameroon to an offshore loading platform on the Atlantic coast.

However, the Chad-Cameroon pipeline has been one of the most controversial projects on the African continent. Originally planned to help alleviate poverty in the two countries, the project has been the subject of repeated warnings from non-governmental organizations and major donor governments that the project is having detrimental effects on the local population and environment.

On September 9, 2008, the World Bank announced that it would no longer continue to support the pipeline project, citing the failure of the government of Chad to allocate oil revenues to poverty-reduction programs to be used for health, education, rural development and infrastructure development.

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