Chad Nationalizes Savannah Energy PLC Assets

Chad Nationalizes Savannah Energy PLC Assets

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Chadian President Mahamat Idriss Deby Itno announced via a decree on March 23 that all aspects—prospect rights, operating permits, and oil transport authorizations that Savannah Energy PLC bought from a subsidiary of Exxon Mobil would come under the control of the government. This decree of nationalization comes after the Chadian government contested Savannah’s purchase of Exxon Mobil’s operations. The purchase included all of Exxon Mobil’s assets and interest in the Doba Basin, an oil rich area located in the southern part of the country.

The Chadian government claims that the terms presented to them before the sale of the assets were different when the deal had actually been made. According to France24, the Chadian government stated that their right to first refusal was violated and that their express objections to the deal were overlooked. In response to the sale in December, the dispute in the arbitration was taken to the International Chamber of Commerce in Paris, where the ICC ruled in favor of Savannah Energy’s acquisition.

According to an article from Reuters, Savannah Energy PLC announced on March 24 that it was planning to pursue legal action, adding that they believed Chad to be in breach of the contract, with plans to take the case before the ICC. Chad’s decision to nationalize will likely not bode well, as the ICC has already decided against the move when they tried to block the sale.

Chad’s decision to nationalize does not necessarily come as a surprise. Since 2000, Exxon Mobil’s subsidiary, Esso, along with Chevron and Petronas, have been active in the Doba Basin. In 2006, Chevron and Petronas were ordered to leave Chad because they failed to pay taxes. Ten years after the expulsion of Petronas and Chevron, Exxon Mobil was accused of failing to pay royalties to the Chadian government, so a $74 billion fine was levied against them. Exxon Mobil and Chad settled the matter privately, with Exxon being able to retain its exploration permit until 2050.

As of now, Chad only retains 3% interest in the operations. The 40% of assets that Savannah Energy PLC purchased are comprised of seven oil fields, which produce around 28,000 barrels of oil per day, with Chad currently reported as being in control of them. However, the ICC will determine if they can keep them.

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