Chad orders oil companies out of the country

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Sunday, August 27, 2006

Location of Chad

The President of Chad, Idriss Déby has ordered the US oil company ChevronTexaco and the Malaysian Petronas to leave the country in 24 hours for non-payment of taxes. Associated Press quotes a government official saying that three ministers, including the Oil minister who was involved in negotiations with the consortium have been suspended.

Spokesmen for both the companies said that they have not received any official intimation of the expulsion orders, and a Chevron spokesperson said that the company was fully compliant with its tax obligations.

Oil fields near Doba in southern Chad began operations in 2003

The two companies account for 60% of the 160-170 thousand barrels of oil currently produced per day in Chad. Déby announced that the government has asked the companies earlier this month to honour their corporate tax obligations, but the companies had not responded. The Associated Press reports that the government has asked the company to pay $450 million in taxes owed.

"From tomorrow, representatives of Chevron and Petronas must leave Chad and close their offices for not respecting their commitment in accordance with clauses relating to the payment of taxes on the companies," said Deby on Saturday.

ChevronTexaco, Petronas and ExxonMobil formed a consortium in 1988 to exploit oilfields in the Saharan region. On Wednesday, Déby had asked his government to renegotiate the 1988 contract signed with the consortium, under which Chad would get 12.5% of the wellhead-value of the oil produced, minus transportation costs and a "quality discount". Déby has also said that three ministers involved in making the deal would be removed and will appear before courts.

Déby said that after 3 years of production, the consortium had earned a $5 billion return on a $3 billion investment, while the government of Chad has received $588-million as oil revenues.

A source in the oil ministry said that the state owned Chad Hydrocarbons Company would be brought into the consortium. There is also speculation in the media that Chinese oil companies may enter the field, with Chad recently resuming diplomatic ties with China.

Chad was involved in a dispute over oil revenues earlier in the year. Last December, the Chad government relaxed laws it had earlier passed, which mandated that 80% of oil revenues must be spent on developmental works. The spending restrictions were demanded by the World Bank when it helped finance an oil pipeline linking oil fields in Chad to Atlantic ports. The World Bank responded to the change in laws by withholding payment of revenues. In June, an agreement was reached to spend 70% on developmental works.

The restrictions were meant to combat corruption and mismanagement in government spending - Chad was labeled the world's most corrupt state by a Transparency International survey last year.