The committee, so named because it was allocated 5% of Chad's annual oil revenues for local communities, was a structure the World Bank had insisted on when it backed a $4 billion, 170,000 barrels per day Chad-Cameroon oil pipeline that started pumping crude in 2003.

Nadingar told Reuters in an interview earlier this week that the committee's accounts had been frozen and its offices in Doba, southern Chad, had been shut down.

President Idriss Deby had dissolved the committee, meant to ensure oil money helped the population in the oil-producing Logone Orientale region, after visiting the area last month.

"The head of state noted there has certainly been a squandering of resources, and decided to take conservative precautions to prevent further mismanagement," Nadingar told the news agency.

"The committee has been suspended and a new committee will be put in place."

Chad, facing rebellion and ethnic violence in its east and rated among the world's most corrupt countries by Transparency International, has had problems handling its oil income before.

Early last year, the then World Bank President Paul Wolfowitz halted loans to Chad after the government made a grab for oil revenues kept in a savings fund backed by the bank.

Relations were restored after the government promised to allocate 70% of this year's budget spending to programmes to help the poor.

A World Bank official told Reuters the bank was awaiting details from the government, but indicated that disbanding the committee should not to affect its agreement with Chad, provided the new committee was representative of all communities and set up in a transparent way.

Nadingar said the "Five Percent Committee" had been allocated 18 billion CFA ($36 million) from January 2005 to May 2007 but "there was fundamentally a significant lack of ... appreciation for spending resources in the correct manner".

However, the government is already coming under fire over plans to replace the nine board members with just five, including an "adviser" linked to the presidency, Reuters reported.

"This means projects will be carried out not to respond to the needs of the local population, but to carry out the president's political programmes," Gilbert Maoundonodji, head of GRAMP-TC, an independent watchdog which monitors Chad's oil project, told Reuters.

"There is no proof it was the committee which was embezzling money," he added, saying responsibility for past mismanagement also lay with the government. "The committee had little choice in how to spend its money. It was given orders by N'Djamena."

Chad has altered various parts of the initial pipeline deal, and is forming a new state oil company, SHT, to hold a stake in the project run by ExxonMobil and part owned by Chevron Corp. and Malaysia's state-run Petronas .

Nadingar said he expected SHT to open by the end of the year.

"The company will participate in all operations: exploration, production, export, distribution ... We will negotiate with the current consortium to become a fourth member - why not?" he told Reuters.

"The consortium is aware we will start negotiations soon. And I think they will not refuse because they know it's in the interests of Chad and I think we share the same concerns."

The existing foreign partners have said they expect the agreements which set up the consortium to be respected.

Published: 20 July 2007 11:17 GMT  | Last updated: 20 July 2007 11:17 GMT