Exxon Mobile negotiates with Chad to reduce $74 billion fine over oil royalties

Court in Chad imposed record fine on Exxon Mobile Corp. in October

Oil giant Exxon Mobil Corp. is negotiating with Chad’s government about a record fine the oil company was ordered to pay last month by a High Court in the central African nation because of a dispute over royalties.
The Chadian court fined the oil giant US$74 billion, as well as an additional US$819 million in unpaid royalties.

Exxon Mobil Corp. – currently the world’s biggest oil producer (valued at US$360 billion) – has appealed the October 5 ruling. The appeals court hearing has been delayed because of the talks, Thomas Dingamgoto, a lawyer for the company, said in an interview in the capital, N’Djamena.

The fine exceeds the US$61.6 billion financial blow BP Plc incurred after the Deepwater Horizon disaster in 2010 killed 11 rig workers and fouled the Gulf of Mexico with crude for months, and is more than 70 times larger than the US$977.5 million Exxon was ordered to pay fishermen and other victims of the 1989 Valdez oil spill in Alaska.

The Chadian court imposed the fine after the Finance Ministry said a consortium led by Irving, Texas-based Exxon had not met the country’s tax obligations.

The fine, is in line with the customs code of a regional organization of which Chad is a member, the Economic and Monetary Community of Central African States, according to the government’s general director of legal affairs, Fang Langou Operal.

Fraudulent Behavior by Exxon

The code stipulates that “in the event of fraudulent behavior, as is the case, the fine should amount to double the value of the object of the fraud,” Operal said in an interview in N’Djamena late Monday. He declined to elaborate.

Chad says that the consortium should pay 2 percent in royalties on crude exports, even if Exxon argues that it signed a convention with the government in 2009 that set the royalties at 0.2 percent, according to Dingamgoto.
“That convention wasn’t ratified by parliament and never signed by the head of state,” Operal said.

Exxon began exploring Chad for crude in 2001 and has been pumping oil there since 2003. The company also operates a pipeline that hauls Chadian oil to a marine terminal in Cameroon for export. The 2 other companies named in the case are Chevron Corp. and Malaysia’s state-owned Petroliam Nasional Bhd. Chevron sold its stake in Chad in 2014.

Source: Bloomberg