Plenty of oil to export, but no electricity

Chad has begun to export oil to the United States, but this desperately poor African country remains incapable of producing electricity to meet its own power needs.

Just two percent of the landlocked country's eight million people have access to the electricity produced irregularly by an ancient rundown power station in the capital, N'Djamena.

Elsewhere in this vast and mainly desert country, a public power supply is non-existent.

Economists complain that without a proper electricity supply, Chad will be unable to channel its new-found oil revenues into fast-track economic development.

"It's a paradox" said Jerome Chevallier from the World Bank in N'djamena, "you have a very poor country with the highest electricity tariff in the world and a power company which has to be subsidised by the government. It is absurd."

The full extent of Chad's power system is housed in one building behind the head office of the Societe Tchadienne d'Eau et d'Electricite (STEE) in the capital. A row of four old generators are tended by a group of oil-coated engineers who provide the intensive care that prevents a total power outage.

Even so, the oil-fired power station seldom produces at more than a third of its potential capacity of 22 MW. Power cuts are a constant headache for the city's one million population.

Chevallier remarked that his house had enjoyed only 19 hours of electricity in the last 15 days. "You have to start anew" he says "with a new power plant which can really provide electricity, but that is not the case today."

Residents of Doba, the capital of the southern oil producing region, know all too well that virtually no electricity is available to ordinary Chadians outside the capital.

The town of 20,000 people used to have its own generator, but it broke down years ago.

ExxonMobil, the US oil giant leading an international consortium that is working up to production of 225,000 barrels of oil per day from wells in the surrounding area, has its own brand new power station at Kome, 50 km from Doba.

That can generate up to 120 megawatts of electricity - more than five times Chad's entire national capacity. But the oil company, known locally as Esso, points out that its role of this power station is to pump crude out of the ground and down a pipeline to the coast of Cameroon, 1,070 km away, not provide electricity to the local population.

A handful of businesses have private generators, but most homes exist without so much as a light bulb.

Even if the lights did always work at the flick of a switch, the high cost of electricity - 250 CFA francs (40 US cents) per kilowatt - puts it way beyond the means of most people.

STEE, the state-run water and power company, has to import fuel for its sole power plant by road from neighbouring Nigeria and Cameroon. The price of fuel makes up 90 percent of its costs. The company runs at a perpetual deficit - the more electricity it sells, the more money it loses.

The government has been looking to privatise the STEE for the last three years, but the economic situation makes that impossible. A French company Veolia, formerly part of the Vivendi conglomerate, has been brought in on a management contract. Georges Cublier, Veolia's local director, says the only way out of the crisis is to find cheaper fuel.

"There's an oil field north of Lake Chad, called Sedigyi," he explained "which is too small to interest Esso, but which is very good quality, light oil. We have to bring this oil down through a pipeline, but that is two years away. In the meantime, we are hoping to buy oil from the south which is not such good quality, but has the advantage of being immediately available."

According to some estimates, the oil from Sedigyi could cut the cost of producing electricity in N'Djamena by more than half to around 100 CFA (17 US cents) per kilowatt.

Plans to develop it have been "dear to the heart of the government for some years" according to Chevallier at the World Bank. "Their priority was to develop this field" he says "but they took some initiatives which were ill-conceived and this has set us back".

Specifically, the government commissioned the construction of an oil pipeline that was so badly built it was completely unusable.

A Sudanese company was contracted to build a 350-km pipeline from Sedigyi to N'djamena. But the pipeline was so poorly constructed that oil was unable to flow along it. "We can maybe salvage some of the pipes which were good quality" Chevallier said, "but basically it has to be completely rebuilt".

The World Bank has identified the electricity crisis as one of the major development issues facing Chad and authorised a US $55 million loan for renovating equipment.

But so long as the power shortage lasts, Chad's economy, which depended on cotton and cattle ranching before oil production started in July, will continue to suffer.

"Who is going to invest here?" asked Tawfik Ramtoolah, an economist who advises the US Treasury Department on Chadian issues. "The only way to ease poverty is to create jobs, and the only way to create jobs is to attract investors to the country. I don't see how you can reduce poverty in this country unless you tackle the problem of electricity".

However, although a number of priority sectors have been identified for investment using Chad's new oil revenues, electricity is not one of them. By law, education, health and rural development will all receive the investment when the first oil money arrives. Infrastructure is on the list of spending priorities, but that is generally taken to mean road building.

"It was amazing that electricity was not included" says Mahamat Mustapha, the president of the oversight committee, charged with authorising the spending of government oil income. "In 2004 we cannot include power as a priority sector, but with the loans we are getting we can start tackling the problem in N'djamena and look to change the law later to include electricity".