Petronas Questions Reason for Expulsion from Chad

Petronas Questions Reason for Expulsion from Chad
Chad News 8/29/2006
PETROLIAM Nasional Bhd (Petronas) www.petronas.com.my has questioned the reason behind Chad's demand that the national oil company and US-based oil firm Chevron leave the African nation immediately for allegedly failing to pay taxes.

"We are still awaiting the actual report on the reason for our possible exit from Chad. At the moment, we are in doubt over the matter," a Petronas official told Business Times.

On Saturday, Chad President Idriss Deby ordered Petronas and Chevron, which have been part of that country's oil production consortium led by ExxonMobil, to leave within 24 hours.

Deby accused Chevron and Petronas of failing to pay US$450 million (RM1.7 billion) in dues to the Government.

"We would really like to know the reason. Being a responsible international oil company, are we really not fulfilling our duty to pay taxes?" the official said.
The official declined to elaborate further, saying the less they talk the better the issue can be resolved.

"We are sorting it out. We are doing our best to sort it out. We don't have anything yet," he said.

Analysts, when contacted, said the possible exit of Petronas from Chad will have a minimal impact on its operation overseas and in financial terms.

"I don't think it has that major an impact. Chad can produce a maximum of 200,000 barrels per day (bpd) of oil, while Malaysia produces more than 700,000 bpd. Petronas has a 35 per cent stake in the consortium in Chad. So the impact cannot be too big," OSK Research Sdn Bhd manager Chris Eng said.

He also said that the possible exit should not be too major an impact on Petronas' African operations which are substantially in Sudan, Egypt and South Africa.

"We believe Petronas will have to live with the risk of such exploration and production in various Third World countries, with a patchy track record such as Sudan and Chad.

"We also believe that this request to leave the country is related to the Chad Government's request to renegotiate the concession terms and that any resolution of the new terms that are more favourable to the Government will likely lead to Petronas being allowed to remain in the country," he said.

RAM Consultancy chief economist Dr Yeah Kim Leng said the impact on Petronas of losing the Chad operations is less of a financial concern than a matter of reputation, since the issue of paying taxes is a seemingly routine, "taken-for-granted" corporate responsibility of every firms, irrespective of size and domicile in local or overseas jurisdiction.

"Unless there are other deeper causes and effects, the issue could be easily resolved by the parties concerned. The parties concerned include Petronas' joint-venture partners, namely Chevron.

"Since Petronas has diversified interests in more than 10 other African countries, a quick and transparent resolution of the issue would enable the company to limit any adverse impact created by the unusual public embarrassment resorted to by a head of state," he said.

Inclusive of the African nations, Petronas has geographically diversified upstream and downstream oil and gas operations in 29 countries worldwide.