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The High Court of Chad has ruled that an Exxon-led consortium must pay a fine of US$75 billion for failing to meet its tax obligations and withholding royalties worth US$819 million.
The sum is a lot higher than Chad’s GDP, which was US$10.8 billion last year and is estimated to reach US$13 billion this year. The chance of the country collecting what it believes are its dues is beyond remote.
According to one professor of international law, no court outside Chad will agree to uphold the original ruling, and the worst that could happen to Exxon would be that it would have to drop its Chad operations and leave. Another lawyer, who spoke to Bloomberg, said that it is unlikely that the Chadian government expects to collect the sum. Rather, Robert Amsterdam said, the court’s ruling signals that the contract between N’Djamena and the oil companies is about to be revised.
The company entered the central African country in 2001, and two years later struck oil. The current daily production rate is about 120,000 barrels, much of which is being exported via a pipeline through neighboring Cameroon to the West African coast. Initially, Chevron was also a partner in the consortium, but it sold its 25-percent interest for US$1.3 billion in 2014, shortly before the huge price slide in oil prices began in July.
Earlier this year, Exxon and its partners in the consortium, including Malaysian Petronas, filed a case at the International Court of Arbitration in Paris against the Chadian government, claiming their contract for oilfield development included an exemption from export taxes. N’Djamena, however, seems to be of a different opinion, hence the home court’s ruling.
An Exxon spokesman said, “We disagree with the Chadian court’s ruling and are evaluating next steps. This dispute relates to disagreement over commitments made by the government to the consortium, not the government’s ability to impose taxes.”
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.