Oil giant Exxon Mobil is trying to win a reduction on a massive $74bn fine it has been hit with by a Chad court in a row over oil royalties.

Don’t think so, really.

What I can’t work out though is who is making the mistake here.

Chad’s oil exports are some $2.5 billion a year. Sure, the price was double a couple of year’s back, but they’ve only been pumping since 2003. and that $2.5 is all oil, not just Exxon.

The argument appears to be about a 2% or 0.2% royalty.

And yes, fines there are twice whatever the sum in dispute is.

But $74 billion still looks more like the total value of all oil ever pumped than any sum that could possibly be in dispute.

So, who has fucked up here? Bloomberg, the original source of the report? Or Chad?

17 thoughts on “Oil giant Exxon Mobil is trying to win a reduction on a massive $74bn fine it has been hit with by a Chad court in a row over oil royalties.”

  1. Looks like it’s Chad. Multiple sources reporting now and the Bloomberg story itself has been through an update.

    Of course I’m sure they are just cleverly exploiting the behavioural bias towards anchoring…

  2. Quite frankly, given the attitude of the US courts, juries and judicial authorities, I would applaud any country which seeks to impose an outrageously excessive and unjustified fine on a US company. It’s exactly what the protectionist US does all the time to “foreign” companies.

  3. Exxon will spend a few million on bribes and most – if not all – of it will go away.

    It’s the African way.

    (Actually, I’d bet this all happened in the first place because Exxon didn’t bribe the right people.)

  4. US law and EU law – a bit risky to bribe a state official and not risk 10% of your turnover fine / your CEO doing the perp walk.

  5. DtP

    It would appear that the problem is the Chadian economy itself. Basically it’s in recession and the President needs a unifying enemy, which is why the courts are allowing this crazed claim. Since it will go to international arbitration, the yanks will not be liable. At which point nationalisation beckons and a claim for damages goes the other way. I assume mucho bribes will also flow, but on the millions scale rather than the billions.

  6. If I had any faith that TPTB in Chad would use the money productively I’d say let them have it. Seven+ times the GDP could allow for much needed improvements and I pulled most of my fossil fuel investments when Obama won. With Republicans in control again I expect gasoline prices to climb drastically. If Exxon’s stock price takes a huge tumble thanks to the fine it will become a perfect investment opportunity.

  7. Bloke in Costa Rica

    “With Republicans in control again I expect gasoline prices to climb drastically.”

    Care to elucidate? There doesn’t seem to be much of a correlation. Oil rose under Carter, peaked just as Reagan was taking office, then trended down hard for his two terms and Bush 41’s, bottomed out under Clinton, then rose for the last two years of his term and under Bush 43’s admin, cratered just as Obama came in, rose for his first term, plateaued a bit and then fell off a cliff in the last two years. Now it’s trending up a bit, to match what it was last in 2009 and before that in 2004. This is inflation-adjusted, natch.

  8. BiCR, it’s obviously because the Trump economy will be so amazing and full of #winning that demand for gasoline will skyrocket, raising the price.

  9. BiCR,

    I have a lot of speculation. The big key is which Middle Eastern nations we ‘liberate’ and how much that disrupts the supply chain.

  10. Bloke in Costa Rica

    I think there’s going to be a lot less of that sort of thing than if Clinton had won. Anyway, if oil gets to $60/bbl then the US frackers come on line big time and buffer any further price rises. They’ve just discovered a 20 billion bbl field in Texas. Who’s more likely to approve extracting it, Trump or Clinton? There is no shortage of oil in the world, not near term, not medium term and not long term.

  11. BiCR,

    My specific concern is Iran. I find it far more likely that Trump will trash the deal. Clinton appeared to be ready for greater confrontation with Russia instead but, as a nuclear power, I find a war less likely.

    The new field is not a conventional play. It requires fracking which has been viewed as a good thing by Democrats. We have to frack for solar and wind to not be obvious failures. While I don’t think extraction will be restricted under either if Trump seriously wants to bring back coal jobs fracking restrictions are one of the only options I am aware of. Nationalizing the energy industries could work as well but, based on history, I expect price increases here as well.

    I could go on but this is all based on speculation. My guess is that President Trump will be far different from candidate Trump. I stand by my statement that if the fine stands and Exxon’s stock takes a short term hit it is a good time to buy.

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