Sinopec's Addax loses court ruling on Gabon oil licence-document

Fri Sep 13, 2013 11:39am EDT

* Court rejects list of Addax demands

* Some Chinese investments in West Africa at risk

* Gabon says Addax had tried to reoccupy field

* Proceedings, negotiations continue in $1 bln dispute

By Emma Farge

LONDON, Sept 13 (Reuters) - Addax Petroleum, owned by top Chinese refiner Sinopec , has lost a ruling at an international tribunal as part of a $1 billion legal battle over an oilfield in Gabon, a confidential document showed.

The International Chamber of Commerce's arbitration court, in its first decision in the dispute, rejected a request by Addax to resume operations at the field and prevent Gabon from selling the licence to a third party.

But the Paris court's decision does not necessarily mean that Addax, which accounts for around a third of Sinopec's overseas oil production, will lose its claim for $330 million as part of the ongoing proceedings. The company said it could win other important claims, but did not elaborate.

Addax, in a statement to Reuters, confirmed the court had denied its request for provisional measures to maintain a "certain status quo" while the arbitration continued.

"This decision however has no bearing on the main claims of the parties and does not constitute a decision on the disputes that triggered the arbitration," said Addax, which started the arbitration last December.

Sinopec did not respond to requests for comment on Friday.

Gabon took over the Obangue field in January, after alleging a breach of contract, in a case closely watched by investors ahead of a planned licensing round in the Central African producer before the year-end.

The dispute has also raised broader questions about the future of Chinese interests in the region, after some projects owned by other Chinese firms were placed under review.

The latest ruling, dated Sept. 10 and seen by Reuters, showed that the court found there were no grounds to approve a list of "emergency interim measures" submitted by Addax in April as the contract between Gabon and Addax had expired.

An ICC official declined to comment on the case.

"We hope that this very positive result will put an end to the press campaign wrongly suggesting that the legal position of the Republic of Gabon is weak," said Jean-Georges Betto, partner of lawyer Betto Seraglini, acting for Gabon's government.

NEGOTIATIONS

According to allegations made by Gabon in the court document, Addax in June tried to reoccupy the disputed field, surrounded by dense inland forest, and Gabon responded by sending in a police unit.

Shortly afterwards, Addax sent a team of senior officials including Chief Executive Yi Zhang to negotiate with the government, according to sources familiar with the talks.

A source close to the government in Libreville said negotiations on the future of Addax in Gabon, where the company also has exploration activities, would resume in September.

He added that the last set of negotiations had stumbled over Addax's refusal to withdraw its legal complaint before the court.

"The Addax Petroleum group always prefers dialogue over litigation and we are pleased to confirm that discussions with the government are ongoing to ensure that the parties' common objective to find an amicable resolution of all disputes between them will be achieved shortly," the company said.

The court document showed that Gabon in November asked oil firms Total Gabon and Shell Gabon, which have contracts to buy oil from the field, to stop making payments to the Chinese firm and to send the money instead to a Libreville bank account.

Addax informed Gabon's oil minister in the same month that, because of the lack of cash flow, it would have to shut down operations at the field.

Addax had sought to lift the ban on payments but this was also rejected by the court.

Shell declined to comment and Total did not respond to a request for comment. They are two of the biggest oil producers in Gabon.

Gabon conducted audits in 2011 and 2012 of the hydrocarbons sector, which pumps around 240,000 barrels per day and accounts for 80 percent of the country's export earnings.

Its newly formed Gabon Oil Co has sought a greater role in the industry and is seeking a stake of up to 15 percent in oil blocs owned by foreign firms.

Separately, other Chinese firms have also faced challenges in Africa in recent months.

Gabon put China Machinery Engineering Corp's Belinga iron ore project on hold in 2012 and introduced a year-long audit, a U.S. State Department report on Gabon's investment climate in 2013 showed.

Gabon is negotiating with CMEC but will likely bring in other miners and could break up the vast concession, according to Gabon's deputy minister for the economy.

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