An oil consortium led by ExxonMobil has been fined about $76bn by a court in Chad in a dispute over alleged unpaid royalties, in a sign of a breakdown in the company’s relations with the country.
The court in N’Djamena, Chad’s capital, awarded the country’s finance ministry 480bn CFA francs ($816m) in royalties, and levied a record additional penalty of about $75bn.
The fine is larger than the total cost to BP of the Deepwater Horizon disaster, which has reached about $62bn. It is also almost seven times Chad’s 2015 gross domestic product of $10.9bn.
Exxon said it disagreed with the court’s ruling and was “evaluating next steps”.
It said that the dispute was over “commitments made by the government to the consortium, not the government’s ability to impose taxes”.
Exxon added that it was vital for all sides to “abide by applicable law in order to achieve the desired long-term benefits envisioned when projects begin”.
In Chad there was scepticism that the fine could be collected. The mood in N’Djamena has been tense at a time of increasing financial pressure on the government following the drop in oil prices since 2014.
Civil servants’ salaries and student grants have not been paid since August or earlier, provoking strikes including essential health services and schools. In parts of the capital, youths have been throwing stones at cars this week.
Chad produced 120,000 barrels of oil per day last year, according to the US Energy Information Administration.
Exxon’s Chad/Cameroon project includes wells in Chad and a pipeline to take the oil from the landlocked central African country to a terminal on the Atlantic coast of Cameroon. The company said last year that since it came into production in 2003, it had contributed $12bn in revenues for Chad.
Leading a consortium that included Chevron and Malaysia’s Petronas, Exxon supervised construction of the 650-mile pipeline starting in 2000.
Chevron sold its 25 per cent stake to the government of Chad for $1.3bn in 2014, but Petronas remains an investor.
The World Bank funded the Chadian and Cameroonian governments’ share in the development. Its involvement was condemned by human rights and environmental groups and local communities, which tried to halt the deal.
After construction was finished and oil was flowing, Idriss Déby, Chad’s president, reneged on the terms of the deal, which included a law pledging 80 per cent of oil revenues for social spending.
Despite its oil income, the central African country remains one of the world’s poorest.
Like its neighbour, Nigeria, Chad is in economic crisis because of collapsed oil revenues amid the running costs of waging war against Boko Haram. Students have been striking this year over lost scholarships and other budget cuts.
From 2000 to 2009, Chad boosted its military spending by more than 600 per cent, as the government fought internal battles and in Sudan’s war in the neighbouring Darfur region.
Mr Déby came to power in a coup in 1990 and has weathered several military attempts to oust him. He won a fifth term in multi-party elections earlier this year.
He is currently president of the African Union, and Chad’s army — one of the most capable in Africa — is playing a key role in the regional fight against both the Boko Haram insurgency and al-Qaeda-linked militants.
