Gabon makes rare challenge to China over oil practices

Gabon has taken the exceptional step of withdrawing the right of Addax Petroleum, a subsidiary of Chinese oil giant Sinopec, to exploit an oilfield, raising concerns over possible repercussions on the business climate.

Production at the southwestern Obangue oilfield, totalling 9,000 barrels per day, has been transferred since the end of last year from Addax to the new state-run Gabon Oil Company (GOC), set up in 2011.

Officially, the Chinese firm is being sanctioned for failing to meet "contractual obligations".

The state's complaints against Addax include "bad management", "instances of corruption," "shortfalls in the respect of the environment" and dodging taxes on oil exports.

"After several months of fruitless negotiations ... we decided definitively to withdraw the Obangue field from Addax Petroleum," Oil Minister Etienne Ngoubou recently told AFP.

The incident is the first of its kind in Gabon and such measures against well-established firms such as Addax, which has operated in the central African country since 1996 and is the fourth oil producer there, are rare worldwide.

Since it was bought by Sinopec in 2009, Addax has been exploiting five oil deposits on a basis of shared production with the Gabonese state, amounting to 23,000 barrels per day.

Ngoubou also accused Addax of "unilaterally shutting down" the Obangue field after its rights were withdrawn, forcing the state to get facilities working again. The GOC has been pumping oil since January 1.

The Sinopec subsidiary has responded by accusing Gabon of undue harassment and has taken the dispute to the International Chamber of Commerce in Paris. No date has been set for the court ruling.

"We challenge the requisition and reject all the accusations levelled against us," said Hugues-Gastien Matsahanga, communications director of Addax Gabon.

"Addax Petroleum has never been the object of a conviction for the slightest failing in its fiscal, technical and environmental obligations."

Addax states that it wants to go on working in Gabon, which accounts for between 15 and 20 percent of its global production, although the oil minister has threatened to withdraw a second permit for the Tsiengui oilfield, also in the southwest, "if they (the firm) don't make any efforts" within 15 months.

Gabon's inflexible position has raised concerns among oil sector experts that the climate may become more hostile for a country where production has declined by 30 percent since a peak in 1997 and now oscillates between 220,000 and 240,000 barrels a day.

"We should never have reached this point, above all with an operator like China, which invests so much here, which builds roads," an oil industry analyst told AFP. "What message does this send to investors?"

The dispute over the Obangue oilfield coincides with a reform of the petroleum sector aimed particularly at giving the new national company more direct control of resources and reinforcing the role played by Gabonese sub-contractors.

President Ali Bongo Ondimba has himself announced that the GOC should enable the state "to have mastery over the whole chain in the oil industry, from prospection to production, even to marketing."

"Via the GOC, the state means to become more involved in the oil sector," one oil company executive said.

"And it is certain that it plans to issue a certain number of messages that break with the past," he added, referring to the days when the authorities turned a blind eye to unorthodox fiscal and environmental measures.

"We're not saying that contracts are too favourable to oil companies, but that unfortunately the benefit to the Gabonese economy is too slim and that (the rules) have rarely been applied," minister Ngoubou said.

With no major oil discoveries in recent years, the Gabonese state plans to issue this month a series of licences for deep and very deep offshore exploration, counting on major finds in the Atlantic Ocean.