Oil Issue behind Diplomatic of Chad and Cameroon

On Thursday, April 20, 2023, the Secretary General of the Presidency of Chad, Dr. Gali Ngothe Gatta signed, a press release announcing the recall of its ambassador to Cameroon.?One of the main reasons, according to the press release, is the announcement made on April 20, 2023 by Savannah Energy company on the sale of 10% of the shares of COTCO to the National Hydrocarbons Company of Cameroon (SNH), for an amount of 44.9 million US dollars (26.8 billion FCFA). The transaction allows SNH to triple its shares in COTCO from 5.17%?to 15.17%.??The shares of Savannah Energy-via its subsidiary Savannah Midstream Investment Limited (SMIL)-in COTCO are reduced to 31.06% (compared to 41.06% before the transaction). The transaction between SNH and Savannah Energy has gone badly in Chad because the government has been in conflict with this company since the acquisition by Savannah Energy of the assets of Esso Exploration and Production Chad (a subsidiary of ExxonMobil) in the Chadian oil fields and in companies operating the pipeline.

Chad argued that Esso did not respect the right of pre-emption (right conferred by law or contract to acquire property in preference to any other purchaser) of the Société des Hidrocarbures du Tchad (SHT) according to the agreement that linked the ExxonMobil subsidiary to its Chadian partner since 2003. Also ensuring that Savannah Energy does not have the financial and technical means to exploit the Chadian oil fields (which provide 75% of the Central African country’s export revenues), the National Transitional Council of Chad adopted, on March 29, 2023, the bill to nationalize Esso’s assets in the south of the country; assets that have however come under the control of Savannah Energy since December 2022 and whose negotiations for the transaction had been announced since the first half of 2021, which augurs well for a legal battle before international commercial courts.

While Chad says No to the agreement signed between Savannah Energy and ExxonMobil, thus blocking the increase in Cameroon’s share in the pipeline, Cameroon refuses to decide on the take over of Petronas assets by the Chadian government. Chadian government opined that Cameroon is the only country for the moment within the CEMAC sub-region not to have reacted in accordance with the regulations to the notices of no objection filed with the competition services of CEMAC on the purchase by Chad of shares in the Malaysian company Petronas in the Chad/Cameroon Development Project. Petronas holds 35% of its shares in this project and has decided, like ExxonMobil, to sell them. Chad accuses Cameroonian officials, in particular senior officials serving in the Presidency of the Republic, of being involved in this scandal. The question on everyone's lips is to know the beneficial owners and what the name of Franck Biya was doing in the various negotiations in Chad on the behalf of Savannah Energy??It should be recalled that as tension exist between the two countries, the name of Franck Biya has come up insistently to be behind the Savannah Energy company raw deal.

? Cameroon Oil Transportation Company (COTCO), is a company specializing in the transportation of crude oil and specifically operating a large linear of the Chad-Cameroon pipeline, infrastructure commissioned in July 2003 and which covers a distance of 1080 km, including about 903 km in Cameroon. The pipeline makes it possible to transport the oil produced in the fields of southern Chad in Doba to the Cameroonian coast (Komé-Kribi 1) maritime terminal for export to international markets. The KK1 terminal is used to supply a floating storage and offloading vessel, 12 kilometers off the coast of Cameroon. The Chad-Cameroon pipeline is therefore operated on the Cameroonian side by COTCO and on the Chadian side by Tchad Oil Transportation Company (TOTCO). The two entities were managed as subsidiaries of the American group ExxonMobil before the sale of its assets in the Chad/Cameroon development projection in December 09, 2022, to the British company Savannah Energy.

The beneficial owners of ExxonMobil Corporation are Americans. Exxon is an American multinational oil and gas corporation headquartered in Spring-Texas, United States. It is the largest direct descendant of John D. Rockleffer’s Standard Oil and was formed on November 30, 1999, by the merger of Exxon and Mobil, both of which are used as retail brands, alongside Esso, for fueling stations and downstream products. ExxonMobil's earliest corporate ancestor was Vacuum Oil Company, though Standard Oil is its largest ancestor prior to its breakup. ExxonMobil since its merger varied from the first to tenth largest publicly traded company by revenue, and has one of the largest marketing capitalizations?out of any company. Its principal products include basic olefins, aromatics and ethylene polyethylene.?When it was officially formed with ExxonMobil's 2022 corporate restructuring, it was headed by the General Motors President, Dan Ammann. The current chairman of the board and CEO of ExxonMobil Corp. is Darren W. Woods. Woods was elected chairman of the board and CEO with effect from January 1, 2017, after the retirement of former chairman and CEO Rex Tillerson. During a 2022 surge in profits among ExxonMobil and other large oil companies, partly due to the war in Ukraine, US President, Joe Biden has criticized ExxonMobil, stating?that ‘Exxon made more money than God this year.’

The beneficial owners of Savannah Energy PLC are the Britons. The Company is engaged in developing energy projects in Nigeria and Niger. Its principal activities are the exploration, development and extraction of oil and gas. The company is active in Cameroon, Chad, Niger and Nigeria. In Chad, Savannah owns a 40% participating interest in the Doba Oil Project which has seven producing fields, including surface facilities in southern Chad. In Cameroon Savannah Energy PLC recently announced the signing of a Memorandum of Agreement (MOA) by Savannah Energy RCM Limited, a wholly owned subsidiary of Savannah, with the Government of the Republic of Cameroon for the development of the Bini a Warak Hydroelectric Project located in the northern Adamawa Region of Cameroon. The 75 megawatts (MW) Bini Project is expected to provide clean, stable and affordable power to Cameroon's northern region. This is anticipated to support both existing local electricity demand and enable a number of energy-intensive industrial projects, principally in the cement and metallurgy industries, within the region. In Nigeria, Savannah has a significant controlling interest in a large scale integrated gas production and distribution business, which is currently supplying gas to enable over approximately 24% of Nigeria’s thermal power generation. In Niger, Savannah has license interests covering approximately 50% of the country’s main petroleum basin. Savannah also aims to deliver utility-scale renewable energy projects across Africa, and generate clean, competitively priced electricity for millions of households.

The war of words between Chad’s government and UK-based Savannah Energy started when in late 2021, Savannah struck a $626 million deal to buy stakes held by Malaysia’s Petronas, and US super-major ExxonMobil in Chad’s Doba basin oilfields and in the Chad-Cameroon oil export pipeline. However, a year later, the Petronas element of the transaction collapsed and Savannah and Ndjamena have since been locked in dispute over the $407 million ExxonMobil part of the deal. On 23 March, Chadian?President, Mahamat Idriss Deby signed a decree nationalizing ExxonMobil's assets in the country, including the Chad sector of the export pipeline, a move that saw Savannah lodge an arbitration claim with the International Chamber of Commerce in Paris. In a statement, the government said Savannah has no right to the Chad assets, claiming that legal and contractual requirements governing the transfer of the Doba upstream assets and rights held by ExxonMobil unit Esso Tchad as well as of the related interests in the TOTCO (Chad Oil Transportation Company) and COTCO (Cameroon Oil Transportation Company) operating the Chad-Cameroon pipeline ‘were grossly breached.’ ?‘Savannah would be hard-pressed to prove any financial or technical contribution to the operations of the Doba fields between December 2022 and March 2023,’ it added.

The government said it respects the rule of law to create the right environment for investors, but to protect public interest it had no alternative than ‘enacting a nationalisation law.’ Ndjamena added that it ‘stands ready to treat indemnification claims in a fair manner, taking account of all relevant considerations,’ but warned it ‘will assert its right to ensure that its sovereign prerogatives enshrined in contracts and laws are respected.’ Savannah said?that the Chad government’s actions ‘are in direct breach of the upstream conventions to which Savannah Chad Inc and the Republic of Chad are, amongst others, party, together with a direct breach of the convention between TOTCO and the government of Chad’.?Ndjamena alleged that the deal ‘is little more than an attempt to force the?government’s hand by presenting it with a fait accompli and seizing the country’s key strategic assets against its will.’

The government said it only resorted to nationalisation because it failed to resolve the dispute amicably. Ndjamena said the decision was aimed to ‘quickly put an end to Savannah’s interference in Chad, thereby preventing this junior oil company, which has never satisfactorily demonstrated its technical and financial capabilities, from disrupting the entirety of Chad’s oil sector.’ ExxonMobil declined to comment on these allegations, referring Upstream to a Savannah statement issued on 24 March 2023 in which it said it ‘intends to pursue all of its legal rights.’?After having already lost one round in international arbitration court, Chad has nationalized its Doba upstream oil assets formerly held by ExxonMobil The nationalization covers all assets, production rights, operating permits, and oil-transport authorizations previously held by Esso. Arbiters in Paris had already ruled in favor of Savannah on 7 January 2023 after Chad contested the $407-million sale arguing that Exxon and SCI had ignored the government’s objections, including its right to first refusal in the event of an ownership transfer, according to AFP.

?In December, ExxonMobil closed the sale of its operations in Chad and Cameroon to Africa-focussed oil and gas producer Savannah Energy in a $407 million deal, but the Chadian government challenged the agreement. ExxonMobil has been widely criticized, mostly for environmental incidents and its history of climate change denial against the scientific consensus that fossil fuels significantly contribute to global warming. The company is responsible for many oil spills, the largest and most notable of which was the?Exxon Valdez oil spill in Alaska, considered to be one of the world's worst oil spills in terms of damage to the environment. The company has also been the target of accusations of human rights violations, excessive influence on America’s foreign policy, and its impact on various societies across the world. The deterioration of diplomatic relations between Cameroon and Chad raises concerns about the future of regional cooperation. Both countries are key players in the region and share common interests in security, trade and economic development. The severance of diplomatic relations could harm the stability of the region and hamper cooperation between the two countries. The diplomatic crisis is viewed in many cycles as an imperialists fight with colonialists standing behind the screen and pulling vicious wires to make Chad and Cameroon cut each other’s throat. In other to ease tension between the two countries, the President of the Republic of Cameroon, Paul Biya dispatched the Cameroon’s Minister of State and Secretary General at the Presidency of the Republic Ferdinand Ngoh Ngoh on April 26, 2023 to N’Djamena, the capital of Chad, to meet President of Chad’s Transitional Military Council Mahamat Idriss Deby Itno. According to statement from Cameroon presidency Ngoh Ngoh?was a ‘special envoy’ of President Paul Biya. The visit came six days after Chad recalled its ambassador to neighboring Cameroon. According to local media, Ngoh and Mahamat Idriss Deby Itno discussed how to resolve the dispute ‘amicably.’ By LNE