First oil soon despite dispute

24 February 2006

A dispute over contractual terms will not prevent the bringing on stream in late February of the country's first ever hydrocarbons production. Despite government challenges to amendments made in 2005 to the production sharing contract (PSC), a consortium led by Australia's Woodside Petroleum is on schedule by the end of the month to begin to pump 75,000 barrels a day of oil from the Chinguetti field, 100 kilometres west of the capital Nouakchott. All oil will be for export, with the first cargo to be loaded in March.

The country's interim military administration, which took power in a bloodless coup in August 2005, has challenged amendments to the PSC agreed by the previous administration, claiming that it will reduce the state's share of oil revenues, lower tax income, remove banking guarantees and threaten maritime resources. Former energy minister Zeidane Ould Hmeida was detained in mid-January over the amendments, which Nouakchott believes are contrary to the country's essential economic interests and could cost the state up to $200 million.

Woodside announced in early February that it was confident that the amendments, which were approved in parliament before being made law in 2005, are 'proper, valid and binding on all parties' and that the dispute would not disrupt the timetable for production start-up.

The Chinguetti field has estimated reserves of about 120 million barrels and is expected to have a lifespan of eight-10 years. Woodside holds a 47 per cent operating stake in the project consortium and in 2004 committed to invest $600 million in the development of the field. Its partners are Hardman Resources and ROC, both of Australia, BG Group and Premier Oil, both of the UK, and the client, Societe Mauritanienne des Hydrocarbures.

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