China's Addax pays $400 mln to end Gabon oil conflict: sources

Emma Farge and Jean-Rovys Dabany

By Emma Farge and Jean-Rovys Dabany

DAKAR/LIBREVILLE (Reuters) - Addax Petroleum, a subsidiary of China's Sinopec, paid at least $400 million to settle an oil dispute with the government of Gabon this month, sources familiar with the case said.

Gabon accused Addax of breach of contract in its operations at the onshore Obangue oilfield.

It transferred the field to the state oil company more than a year ago, leading to a legal battle at an international tribunal with claims and counter-claims of over $1 billion.

The settlement, seen by industry sources as a staggering amount to spend on a single oilfield, secured the firm's future in the Central African country where the company last week announced a 10-year production-sharing contract.

A source in Gabon's oil sector said the government viewed the $400 million as a "debt" owed due to failure to honour previous commitments.

A second source familiar with the proceedings said that the amount was slightly above the $400 million figure, but less than $500 million.

Addax, which accounts for a third of Sinopec's overseas production, declined to comment on the amount, citing a confidentiality agreement.

"The amicable resolution of all issues has established a foundation for a new partnership with the Republic of Gabon and offers a platform for further growth for Addax Petroleum in Gabon," Addax said in an e-mailed statement.

A spokesman for the oil ministry declined to comment.

The feud has been closely watched by investors as the West African country - a former OPEC member - seeks to attract new companies as part of an effort to double output to 500,000 barrels per day (bpd).

Gabon in October awarded 13 offshore oil and gas blocks to companies including Ophir, Exxon Mobil and Eni as part of a licensing round.

"The authorities knew that the image of the country was suffering because of this affair with Addax," said the source in Gabon's oil sector.

The case also raised questions about China's position in the resources sector in the region, after an iron ore project in Gabon was placed under review and Ghana arrested some 200 Chinese illegal gold miners.

The final settlement between the two parties follows months of on-off negotiations. Addax, based in Geneva, had sent several high-level delegations to Libreville.

At one point last year, Addax tried to reclaim its field by force but was driven out by local police, the government had alleged in court documents.

The asset was small, pumping around 10,000 bpd, but a source close to the company said it was considered strategically important by Beijing as part of its West African portfolio.

Gabon had threatened to end other agreements with Addax over the dispute, such as oil exploration rights.

"The Addax management had to have a 'success' before their Chinese New Year meetings in Beijing," said an industry source familiar with the negotiations.