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Chad Says It May Turn Off Oil Taps

The World Bank froze the country's royalties after it violated an accord. A disruption, however small, would affect global supply.

April 16, 2006|From the Associated Press

N'DJAMENA, Chad -- The oil minister threatened Saturday to shut down Chad's oil pipeline unless the government is compensated for frozen oil revenue, and thousands rallied in the capital to support the president after troops defeated rebel attackers.

Oil Minister Mahmat Nasser Hassan said in an interview that the pipeline would be shut unless the international community ensured that Chad received its oil royalties by midday Tuesday.

Chad's oil exports -- 160,000 barrels a day -- are small by international standards and have a high sulfur content, reducing their value.

But President Idriss Deby appeared to be gambling that any threat to the world oil supply, no matter how small, would free up needed funds to finance his government.

In January, the World Bank froze an escrow account in London with $125 million in oil royalties, Hassan said. It also cut $124 million in financial assistance after Chad changed an oil revenue law that had been passed in 1999 as a condition for the World Bank's support for the pipeline.

Hassan said either the funds must be released or the operators of the pipeline must compensate the Chadian government. Nasser said the pipeline would continue to operate if the consortium that ran it paid the royalties frozen in London and paid future revenue directly to Chad's treasury.

The original law required two-thirds of oil revenue to go toward improving living standards in one of the world's poorest countries. It also required 10% of proceeds to go into a savings fund to be used when Chad's oil reserves are exhausted.

But the National Assembly amended the law in December. It doubled the money going to the government's general budget, freed money in the savings fund and added security -- arms and equipment for the military and other forces -- to the programs that received two-thirds of the royalties.

Hassan said Chadian officials had met twice with World Bank representatives in efforts to unfreeze the funds, but without success. World Bank officials were not available for comment.

An ExxonMobil-led consortium exported 133 million barrels of oil from Chad between October 2003 and December 2005, according to World Bank statistics. Chad, which receives a 12.5% royalty on each barrel exported, earned $307 million, the bank said.

Thursday's rebel attack on the capital has shaken Deby's government.

Deby held a rally in central N'Djamena, the capital, Saturday where thousands of people packed into the Place d'Independence, waving flags and shouting slogans. The president arrived in a civilian Humvee surrounded by hundreds of soldiers whom he thanked for "crushing the rebels."

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