ExxonMobil fined US$74B for underpaying royalties in Africa

ExxonMobil Corp, the company which is currently intensifying exploration activities in Guyana after striking oil here recently, has been fined a whopping US billion for underpaying royalties in the central African nation of Chad, where the company has been drilling for 15 years.

According to international reports on the mega fine by Chad courts, the amount is about five times more than that country’s Gross Domestic Product, which the World Bank estimates at US$13 billion.

The High Court in the capital, N’Djamena, announced its ruling on October 5 in response to a complaint from the Chad Finance Ministry that a consortium led by ExxonMobil hadn’t met its tax obligations.

The court also demanded the Texas-based oil explorer pay $819 million in overdue royalties, according to the document.

The penalty exceeds the $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 $977.5 million Exxon was ordered to pay fishermen and other victims of the 1989 Valdez oil spill in Alaska.

Exxon, the world’s biggest oil producer by market value, began exploring Chad for crude in 2001 and has been pumping oil there since 2003.

ExxonMobil recently announced a “world-class discovery” equivalent of 800 million to 1.4 billion barrels of oil following the drilling of the Liza-2 well in the Stabroek Bloc offshore Guyana.

The discovery is the company’s second exploration offshore Guyana; the first was made in May 2015.

“We are excited by the results of a production test of the Liza-2 well, which confirms the presence of high-quality oil from the same high-porosity sandstone reservoirs that we saw in the Liza-1 well completed in 2015.”

As it relates to its legal woes on the African continent, a spokesperson for the company has 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,” he said.

The President of the court, Brahim Abbo Abakar, confirmed the ruling to Bloomberg Markets saying, “It’s correct, however, the provisional enforcement is lower than the amount demanded by the tribunal,” he said, referring to the sum of $669 million also cited in the document. He didn’t elaborate.

“Contract sanctity and respect for the rule of law are core principles used to manage our business over the long-term,” Exxon’s Spitler said.

“It is vital for all parties to honour the terms of a contract and abide by applicable law in order to achieve the desired long-term benefits envisioned when projects begin.”