ExxonMobil Fine Highlights Chadian Budget Woes and Challenges for Upstream Operators

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In October 2016 a Chadian court ordered a consortium led by ExxonMobil to pay a fine of US$74 billion for allegedly underpaying royalties on their operation in the country and the parties have entered into negotiations over the issue. The fine relates to the statistical royalty on exports on production from two licenses, held under concession agreements issued in 1988 and 2004, which currently account for over 40% of production in the country. Production operations have been ongoing since 2003 from seven fields from which the court alleges the consortium has underpaid US$800 million in royalties. The disagreement stems from a past arrangement, which the government claims is invalid, to pay a reduced rate of export royalty instead of the usual 2% rate.

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