Posted: April 29th, 2024

ECON230 230 – ExxonMobil in Chad and Cameroon

ExxonMobil
in Chad and Cameroon

Synopsis
In November 1999, ExxonMobil and its CEO
Lee Raymond had to determine what course of action to take after two major
partners, Royal Dutch/Shell and France’s TotalFinaElf, withdrew from the
Chad-Cameroon Oil and Pipeline Project. The project was enormously complex,
involving billions of dollars in potential revenue, with a wide variety of
stakeholders, an array of critics, and a potentially volatile political and
social environment. The situation was further complicated by the history of oil
extraction in developing countries and the unbridled corruption that had
inevitable ensued. Shell’s and Elf’s pullout threatened to sidelinethe whole operation and
seemed to give credence to those critics who thought that the environmental and
human costs of oil exploration and extraction in the extremely poor countries
of Chad and Cameroon were too great. Raymond and ExxonMobil had to decide
whether to proceed with the project.

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Objectives
While
a greater conscientiousness of the interactions between business and the
environment has grown in recent years, it is important to note that business
and the environment have always impacted each other. How can ExxonMobil balance
the interests of the Chadian and Cameroonian citizens, the two countries'
indigenous people, the environment, and development? What are the ethical
issues and sources of ethical guidance involved in ExxonMobil's decision-making
process?

Class, please consider the interests and
roles of the various stakeholders involved. Stakeholders here can refer to:

1. Direct
Parties: ExxonMobil, the governments of Chad and
Cameroon
2. Indirect
Parties: the indigenous peoples, the citizens of Chad
and Cameroon, rebellious groups, The World Bank, environmental organizations
3. Abstract Concepts and Ideals: the
environment, freedom, prosperity

For the stakeholders, this project can
potentially result in much progress and in much pain. Although on the surface
the case may seem to be asking whether or not ExxonMobil should continue with
the pipeline project or not, the more important question is how the company
should proceed with either decision.

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Additional
Material:
ExxonMobil proceeded with the project. The pipeline created 11,000 new jobs for
Chadians (55 in supervisory positions). ExxonMobil spent $3.7 million to train
those employees and $100 million when into local businesses. In 2004, $84
million was transferred from the London escrow account to Chad, allowing for
many microlending projects. $67 million was spent on poverty reduction,
building roads and schools and $13 million had been placed in a "Fund for
Future Generations."

The influx of transient
workers, however, also resulted in an increase in prostitution and HIV
infections. There were inter-tribal disputes over the allocation of benefits.
In the meanwhile, the Chadian government began restricting political freedoms.
In late 2005 and early 2006, the Chadian government described its accord with
the World Bank and ExxonMobil as a "fool's agreement." It pressured
ExxonMobil to hand over the royalties, citing national security reasons. It
then began to draw money from the Fund for Future Generations and tried to take
more from the oil proceeds that were supposed to go to the escrow account. In
response, the World Bank suspended all loans to Chad and froze the London
account.

Assignment
Questions

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1.
How should managers think about the environment as part of their
decision-making? How much should it matter and how should it be incorporated?

2.
If ExxonMobil is truly committed to the environment, is this the
last place they should be drilling or exactly where they belong? For those who
say they should leave, where else is it OK to drill for oil? For those who say
stay, is there anywhere that ExxonMobil should not drill for oil?

3.
What about this case and its appeal for ExxonMobil? What are the
biggest opportunities and risks for the company?

4.
Strategically, what is at stake for the firm and its future
operations? How important is it for them to earn recognition for being
environmentally responsible?

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5.
How much does it matter that someone else is likely to partner with
the Chad government and develop this oil to your decision here? Especially if
they are likely to do a worse job on the environmental issues, does that impact
your thinking – and if so, how much?

6.
What about the Chad government? Do you “own the ethics” of your
business partners? Will ExxonMobil end up suffering for being associated with
this government and be seen as supporting its activities? Are they the kind of
business partner ExxonMobil wants to do business with?

7.
Make the case: vote to stay and invest or leave and make the best
arguments for your side.

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