David Cameron steps into Tullow Oil’s row with Gabon government
David Cameron has intervened in an escalating row between UK oil companies and the government of Gabon after the petroleum ministry expropriated assets from the explorer Tullow Oil and threatened Royal Dutch Shell with a fine for non-payment of back taxes.
The prime minister has written to the president of the African country, Ali Bongo Ondimba, after interventions from the Foreign and Commonwealth Office over the past year failed to resolve the dispute.
In a letter promising aid for the Gabonese president’s battle against the poachers decimating the country’s unrivalled population of forest elephants — a campaign supported by Prince William — Mr Cameron stresses the importance of Britain’s relationship with the resource-rich country. The prime minister says he hopes the “companies concerned and the Gabonese government can come to an agreement” soon.
The UK government has encouraged investment in Gabon since President Bongo was elected to succeed his father, Omar Bongo, in 2009. Though his election was disputed and sparked protests, Mr Bongo initially won international praise for promising to eradicate the corruption that had become a way of life under his father; Omar Bongo was one of Africa’s richest men and his hold on power lasted 42 years. Gabon, with just 1.7m people, was ranked the UK’s 94th largest import partner in 2013, up from 143rd in 2012. Foreign direct investment in 2013 was $856m.
But recent actions by the oil ministry have raised concerns in London over the climate for business in Gabon, in particular as the country seeks investment to develop offshore reserves.
Early last year the oil minister, Etienne Ngoubou, locked Tullow Oil out of negotiations on the renewal of a licence on the onshore Onal field, in effect expropriating the UK company’s 7.5 per cent stake. In an attempt to get its stake back, the oil company has twice offered better terms, even reaching an agreement in principle with the oil minister. However, ministers are yet to give their final approval.
“We have been assured by the government that our contract will be honoured,” Tullow told the Financial Times. “However, we are very concerned by the delay. Sanctity of contract is always vital but it is even more important at this critical and difficult time for the oil and gas sector to ensure future investment.”
Aidan Heavey, Tullow’s chief executive, has in the past made donations to the Conservative party. But the company said it had not asked Mr Cameron to write to Mr Bongo.
Mr Ngoubou revealed this month that he was considering levying penalties of tens of millions of dollars against Royal Dutch Shell for back taxes. Shell declined to comment. Gabon’s oil ministry failed to respond to requests for a comment.
The dispute comes as President Bongo faces a difficult election next year, with protests and strikes paralysing the economy in recent months. Revenues from Gabon’s maturing onshore oilfields were declining even before the recent fall in the oil price, and its budget deficit is widening.
An FCO official said the UK would support British businesses and hinted that the oil ministry’s actions could damage the country’s investment potential. “Foreign investment in sectors such as hydrocarbons and the extractive industries can play a vital role in boosting the development of countries such as Gabon, lifting people out of poverty. We seek to encourage governments to improve the ease of doing business, to promote greater transparency and to boost the attractiveness of markets to investment by UK businesses.”