Gabon To Reclaim Its Offshore Oil Assets, Citing Contract Disputes With Big Oil Companies, Including Subsidiary Of China's Sinopec

on June 05 2013 4:25 PM

The small but oil-rich country of Gabon plans to flex its muscle and reassert control of its precious energy assets from three international oil companies, including Addax Petroleum, a subsidiary of China's Sinopec Shanghai Petrochemical Co. (ADR) (NYSE:SHI).

Disputes over foreign investment terms and conditions have already built up tensions between oil industry leaders and Gabon's own oil ministry. The Central African country is set to license access to the deep Gabon Basin waters off its coast, which could rival offshore discoveries in Brazil.

Gabon plans to reclaim the Tsiengui field, Addax Petroleum's main onshore site, once the contract comes up for renewal in 2015, due to alleged contract breaches. The country's energy leaders have also informed two other oil companies that they face similar action, with Gabon joining the ranks of other African governments that are combating transfer pricing and tax evasion by foreign multinationals.

"There will be a partial reclamation of assets," Gabon's oil minister, Etienne Ngoubou, told the Financial Times without naming the other oil companies being targeted. "The companies have realized we have proof of irregularities."

In 2012, Gabon cited alleged breaches of contract, when it retook Obangue field from Addax Petroleum and gave control to the recently created Gabon Oil Company (GOC). Addax launched legal action against the move and has indicated that it doesn't intend to leave Gabon.

Gabon's moves haven't been well received by the oil industry. Oil companies say that Gabon is changing agreements because it wants to reallocate producing assets to GOC and retake fields. Ngoubou denies this as does the country's economy minister, Luc Oyoubi.

"The fact is, there is a dilemma between the necessity of doing objective and thorough controls and the need to provide incentives for new investors," said Oyoubi. "We try to have both things in mind."

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