CNPC crude dumping in the Bongor basin: US$1.2 billion fine and US$400 million settlement
- Chad's government reported in May 2014 that several dozen of my sites had been subjected to dumping harmful to the environment, and that polluted sites had been filled without prior treatment. Energy Daily
- CNPC said in August 2014 that the leaked oil was a small amount and that its own analysis showed no penetration into my groundwater. BizNews
- Government and regulators Chad's Oil Minister: "We found flagrant violations of environmental standards by the company"; the company intentionally let the oil spill to cut costs. Stabroek News
- Company or project CNPC: Denied breaking environmental rules and asked for cancellation of the decision. BizNews
- Government and regulators Chad's government: Dumping at several dozen sites. Financial Afrik
- Company or project CNPC: A small amount of leaked oil; its own analysis showed no penetration into groundwater. BizNews
Chad suspended the operations of a CNPC unit in 2013 after crude oil was found dumped in pits at Koudalwa, fined it US$1.2 billion in March 2014 and withdrew five exploration permits. A settlement of US$400 million was signed in October 2014; no court ruled on liability.
The fine was imposed by Chad's Environment Minister and contested by CNPC; the settlement was negotiated. No court ruled on liability.
Status As of the 7 January 2018 MOU recorded by AidData: the October 2014 settlement in force; no court ruled on liability.
- Government of Chad — US$400 million settlement payment and a 10% stake in all producing fields; extraordinary receipts were 25% of oil-sector receipts in 2014 ITIE Tchad
- SHT — 10% of the CNPCI production permit ITIE Tchad
- CNPC — The five cancelled permits returned on new terms and the right to export crude from seven fields through the Chad–Cameroon pipeline Alwihda Info
- CNPC and Cliveden — US$400 million paid under the settlement ITIE Tchad
- Sites at Koudalwa and other locations in the Bongor basin — Crude oil dumped in pits; several dozen sites according to Chad's government Energy Daily
- Local workers — According to Chad's Oil Minister, they removed oil without protective gear Fox News
What happened
In July 2013 crude oil was found dumped in pits at Koudalwa, in the Bongor basin of southern Chad, about 200 km south of N'Djamena, where a unit of China National Petroleum Corporation (CNPC) operated Permit H. On 13 August 2013 Chad suspended all operations of the CNPC unit. Oil Minister Djerassem Le Bemadjiel told AFP: "they intentionally let it spill in order to cut costs", and said the company lacked clean-up equipment and had local workers remove the oil without protective gear. The suspension was lifted in October 2013.
In March 2014 the Environment Minister fined CNPC International Chad (CNPCIC) US$1.2 billion. A May 2014 letter, as reported by AFP, cited "a serious violation of regulations on the protection of the environment" and said several dozen sites "have been subjected to dumping harmful to the environment". On 21 May 2014 all CNPC exploration and drilling was suspended. A decree of early August 2014 withdrew five exploration permits, and on 8 August 2014 a complaint was filed at the N'Djamena Court of First Instance.
CNPC denied breaking environmental rules, asked for cancellation of the decision and said the government had not provided a breakdown of damages. It described the leaked oil as a small amount and said its own analysis showed no penetration into groundwater. On 24 October 2014 a settlement protocol was signed: CNPC paid US$400 million, the state took a 10% stake in all producing fields, the five permits were returned on new terms with Chad as a shareholder, and the ICC Paris proceedings and the N'Djamena complaint were withdrawn. A production sharing contract for Permit H followed on 7 November 2014, and CNPC exports through the Chad–Cameroon pipeline began in January 2015.
The EITI Chad 2014 report records that CNPCI described the US$400 million as a signature bonus of US$350 million plus US$50 million for a social fund, while the Treasury declared it as an environmental penalty. The EITI scoping study states the sum was paid by Cliveden, CNPC's partner in Permit H, and that it, with US$100 million from settling Chevron's tax liabilities, made up 25% of oil-sector receipts in 2014.
- 2013Crude found dumped in pits at Koudalwa (July); operations of CNPC's local unit suspended (13 Aug); suspension lifted (October)
- 2014US$1.2 billion fine (March); exploration and drilling suspended (21 May); five permits withdrawn by decree (early August); complaint filed in N'Djamena (8 Aug); settlement protocol signed (24 Oct); production sharing contract for Permit H (7 Nov)
- 2015CNPC exports through the Chad–Cameroon pipeline begin (January)
- 2018Five-party MOU of 7 January records the government's outstanding debt at US$259.5 million
What was said
“they intentionally let it spill in order to cut costs”
“We found flagrant violations of environmental standards by the company”
“Amicable negotiations are no longer possible.”
“cancellation of this decision and an ongoing effort to resolve this negotiation amicably”
“In addition to the 400 million dollars, the Chadian State will take a 10% stake”
Where accounts differ
Each party's account, side by side, with its source. The record does not settle these points; it shows them.
"We found flagrant violations of environmental standards by the company"; the company intentionally let the oil spill to cut costs.
Stabroek NewsDenied breaking environmental rules and asked for cancellation of the decision.
BizNewsA small amount of leaked oil; its own analysis showed no penetration into groundwater.
BizNewsA signature bonus of US$350 million and US$50 million for a social fund.
ITIE Tchad / Moore StephensA 25% production-sharing share in fields in the exploration phase; AidData describes the 25% as a back-in option.
ITIE TchadHow it looked
Shown
- Chad's Oil Minister (August 2013): the company intentionally let the oil spill to cut costs and its behaviour was unacceptable.
- Chad's government (May 2014 letter, as reported by AFP): several dozen sites subjected to dumping harmful to the environment; polluted sites filled without prior treatment.
- CNPC (August 2014): a small amount of oil leaked, its own analysis showed no penetration into groundwater, and it had not broken environmental rules.
- Chad's Oil Minister (October 2014): the state would take a 10% stake in addition to the US$400 million.
Recorded
- Chad's government fined CNPC International Chad US$1.2 billion in March 2014; CNPC contested it.
- A settlement of US$400 million was signed on 24 October 2014; the N'Djamena complaint was withdrawn and the ICC Paris proceedings ended without an award.
- The company recorded the US$400 million as a US$350 million signature bonus and US$50 million for a social fund; the Treasury recorded it as an environmental penalty.
- Extraordinary receipts, the US$400 million and US$100 million from settling Chevron's tax liabilities, were 25% of oil-sector receipts in 2014.
- No court ruled on liability.
Who gained
Reached nature or the ground
Gained elsewhere
Responses on record
- cnpc (August 2014): Denied breaking environmental rules, called the leaked oil a small amount with no penetration into groundwater, asked for cancellation of the decision and an amicable resolution, and said the government had not provided a breakdown of damages. · BizNews
- chad-government (August 2013 and August 2014): Oil Minister: the company intentionally let the oil spill to cut costs; its behaviour was unacceptable. The permit withdrawal was to avoid further environmental degradation, not to make place for other companies. · Al Jazeera
In court and with insurers
Lawsuits and rulings
- 2013–2014Settled$1.2bn fine imposed, March 2014Administrative sanctions against CNPC International ChadMinistry of Petroleum; Ministry of Environment, Chad · Administrative · Government of Chad → CNPC International Chad (CNPCIC)
Suspension of all operations, August to October 2013; fine of US$1.2 billion, March 2014; suspension of exploration and drilling, 21 May 2014; withdrawal of five permits by decree, August 2014. The sanctions were resolved by the October 2014 settlement protocol. BusinessDay (Nigeria)
- 2014–SettledComplaint at the N'Djamena Court of First InstanceN'Djamena Court of First Instance · Civil · Chad's petroleum ministry → CNPC International Chad
Complaint filed on 8 August 2014 for "dégradation de l'environnement et mise en danger de la vie d'autrui" (environmental degradation and endangering the lives of others); withdrawn under the October 2014 settlement. No judgment. Financial Afrik
- 2014SettledICC arbitration over the unpaid fineICC International Court of Arbitration, Paris · Arbitration · Government of Chad → CNPC
Chad's claim over the unpaid fine ended with the October 2014 settlement. No award. Alwihda Info
Insurers
What nature saw
Nature's report opens this page. Below: further outcomes measured on the ground.
What we don't know
Money
- None on record Spending on remediation of the dumping sites — None on record; the EITI 2014 report records the payment without a remediation allocation.
Record
- Disputed Disputed: the scale of the dumping. Chad's government reported dumping at several dozen sites; CNPC described a small amount of leaked oil with no penetration into groundwater.
- Disputed Figures differ: AFP gives the March 2014 fine as US$1.2 billion (EUR 880 million); Financial Afrik gives it as EUR 800 million.
- Disputed Disputed: CNPC stated that the government had not provided a breakdown of damages to justify the claim.
- None on record None on record: a court ruling on liability. The N'Djamena complaint was withdrawn and the ICC Paris proceedings ended in the settlement without an award.
- None on record None on record: independent measurement of the volume spilled, the area affected, soil or groundwater contamination, or the clean-up result.
- Unclear None on record: spending of any part of the US$400 million on remediation; the EITI 2014 report records the discrepancy in how the payment was classified and does not say any of it went to remediation.
- None on record None on record: insurance covering the dumping.
Did the harm stop?
The operations of CNPC's local unit were suspended from 13 August to October 2013, and exploration and drilling from 21 May 2014. CNPC exports through the Chad–Cameroon pipeline began in January 2015.
Who paid?
Cliveden, CNPC's partner in Permit H, paid the US$400 million settlement according to the EITI scoping study; the Treasury recorded it as an environmental penalty. How much, if any, went to the affected sites is not on record.
Sources
Government and regulators
- Rapport ITIE Tchad – Année 2014 (EITI Chad Report – Year 2014)ITIE Tchad / Moore Stephens · 2016-12
Press and investigations
- Chad suspends Chinese oil company for environmental violations (AFP)Fox News · 2013-08-13
- Chad suspends China's CNPC for environmental violations (Reuters)Stabroek News · 2013-08-17
- Chad suspends CNPC exploration and drillingBusinessDay (Nigeria) · 2014-05-23
- Chad suspends work by Chinese oil company CNPC (AFP)Energy Daily · 2014-05-23
- CNPC asks Chad to drop $1.2 bln claim over oil dumping (Reuters)BizNews · 2014-08-14
- Chad withdraws Chinese exploration permitsAl Jazeera · 2014-08-10
- Tchad: le bras de fer avec la chinoise CNPC se durcit (Chad: the standoff with China's CNPC hardens)Financial Afrik · 2014-08-10
Researchers
- Project 104629: CNPC cash advances to Government of Chad (compiles EITI Chad and contract documents)AidData (William & Mary) · 2018
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