Professional Documents
Culture Documents
Group C
Dennies Sebastian
Franceseca Sala
Indrajith S
Jaison John
Rahul Gopal
Project history
Conoco, cheveron, exxon and shell discovered oil in
chad
Civil war- Conoco withdrew and cheveron sold its stake
MOU was signed in 1996 between government and the
companies.
In 1999 exxon was the market leader of 40% of market
share followed by Petronas & Chevron
$2.2billi
on
Field system
1.Construction of 300 oil
wells
2.Corporate financing
Export system
1.Construction of pipe
lines(1070km)
2.Implementing monitoring
system to detect leakages
Benefits
CHAD & CAMEROON
1. Reduce poverty
2. Generate employment
3. Infrastructure development
.COMPANIES
1. Availability of resources
2. Improves social and environmental realtionships
QUESTION 1
How are the sponsors financing this deal?
How is the financing of the field system
different from the financing of the export
system?
CONSORTIUM
ExxonMobil
40
%
Petroleum Nasional
Berhad
35
%
Chevron
Field System
25
%.
$1.5 billion
Export System
$2.2 billion
Upstream Consortium
unincorporated joint
venture
100 % owned by the
consortium
NO DEBT
ONLY EQUITY
Corporate
finance
Project finance
Cameroon Pipeline Co. (COTCO) incorporated
joint venture
85% Consortium
5% Government of Chad
10 Government of Cameroon
QUESTION 2
What is the world bank/IFC's role in
this deal? Are they likely to be
successful?
In general, their role will be to guarantee to sponsors and banks
protection against political risk, as Chad is an high risk country.
3 main directions:
environment protection
indigenous people
long term sustainability
Question 3
Analyze the risk and returns to Chad, Cameroon and the
PrivateSponsors? How were the returns calculated? Are
the risks and returns fair from each party's perspective?
Beta = 0.5
Risk Premium = 6%
Risk free rate = 6.20% (Average)
Beta (equity) = Beta (asset) * Total Capital/Equity
=
0.5*1/0.624 = 0.801
Question 4
Will the Revenue Management Plan work? Are there
aspects of the plan that you think should be
changed?
Based on the RMP :
$1.8 bn of cash flow income tax, royalty and dividends
Revenue - $14 bn in revenue and $8 bn in total
distribution
Royalties and dividends would be deposited into a
Special Petroleum Revenue account and distributed in
the foll. way:
10% would be deposited in foreign financial institutions and used
to finance poverty reduction programs for future generations
Of the remaining 90%, 85% would be deposited in the Chadian
commercial banks and used to finance development programs in
5 high priority sectors education, health & social services, rural
development, infrastructure, environment and water resources
15% would go to the government budget and programs in the
Doba region.
CONCLUSION
The project could bring higher returns to the otherwise
underdeveloped chad.
The money if effectively used will create a win-win
situation for all the stakeholders.
Private sponsors bear most oil reserve risk in terms of
its NPV , while private sponsors get the largest portion
of projected return and NPV.
The return and risk distribution to Cameroon seems
appropriate, but most environmental risk should be
borne by them.