Exxon Mobil fined $74 billion by Chad court over royalties

By Daniel N'doh Nadjitan, Paul Burkhardt, Joe Carroll on 10/6/2016

IRVING, Texas (Bloomberg) -- A court in Chad told Exxon Mobil Corp. to pay a record fine of $74 billion, as well as $819 million in royalties it said the oil company owed to the state, according to a court document.

“We disagree with the Chadian court’s ruling and are evaluating next steps,” spokesman Todd Spitler said by email Thursday. “This dispute relates to disagreement over commitments made by the government to the consortium, not the government’s ability to impose taxes,” he said in a later email, declining to comment on the $74-billion figure.

The fine is about five times the size of the central African nation’s gross domestic product, which the World Bank estimates at $13 billion. The High Court in the capital, N’Djamena, announced its ruling Oct. 5 in response to a complaint from the Finance Ministry that a consortium led by Exxon hadn’t met its tax obligations.

The president of the court, Brahim Abbo Abakar, confirmed the ruling by phone on Thursday. “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.

Exxon operates a pipeline carrying crude from Chad to a marine terminal in Cameroon for export. The two 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 and declined to comment, spokeswoman Isabel Ordonez said by email.

Budget Cuts

Chad’s Finance Minister Ngabo Seli Mbogo said the court ruling was clear and he didn’t want to comment further.

President Idriss Deby in 2006 gave Chevron and Petronas 24 hours to leave the country, accusing them of not having paid taxes. They denied the allegations and the case was later settled.

The government of the central African nation is struggling with an economic crisis due to a drop in oil revenue and the spillover of violence from the Nigerian Islamist militant group Boko Haram, which has hindered trade with Nigeria and Cameroon. Budget cuts have prompted several strikes and student protests this year.

“Contract sanctity and respect for the rule of law are core principles used to manage our business over the long term,” Spitler said. “It is vital for all parties to honor the terms of a contract and abide by applicable law in order to achieve the desired long-term benefits envisioned when projects begin.”

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