UPDATE 4-World Bank pulls plug on Chad oil pipeline agreement

(Recasts lead, adds Oxfam comment in paragraphs 16 and 17)

By Lesley Wroughton

WASHINGTON, Sept 9 (Reuters) - The World Bank on Tuesday pulled the plug on an oil pipeline agreement with Chad after long-standing tensions with the government over failed promises to spend the oil profits on programs for the poor.

In a statement, the World Bank said Chad prepaid the outstanding balance of $65.7 million under the $140 million loan deal on Sept. 5 following talks with the government of President Idriss Deby.

The impoverished central African country is expected to earn about $1.4 billion in oil revenues this year.

The pipeline was one of the World Bank's biggest investments in Africa and billed as a test case for how Africa's oil wealth could benefit the poor if spent properly.

The bank said Chad had failed to comply with agreements, in which the government agreed to set aside a chunk of its oil revenues for local communities, health and education.

After two agreements since 2001 with Chad over the pipeline and no progress, World Bank President Robert Zoellick wrote to Deby in August saying the bank could no longer support the project and urged him to prepay the balance of the loan and end the arrangement.

"Regrettably, it became evident that the arrangements that had underpinned the bank's involvement in the Chad/Cameroon pipeline project were not working," the bank statement said.