African Petroleum Corporation has launched arbitration proceedings against Gambia over the government’s decision to strip it of its rights to explore for oil in two offshore areas.
The company said in a statement that two wholly-owned subsidiaries had requested arbitration with the U.S.-based International Center for the Settlement of Investment Disputes “in order to protect its interests in the A1 and A4 licenses”.
The West African nation’s Minister of Energy Fafa Sanyang said the government has been informed about the legal action and the case files are with the Justice Department.
Licence area blocks A1 and A4 are thought to contain up to three billion barrels of oil and lie next to oil blocks in neighboring Senegal, where big discoveries have been made.
Gambia said in August that African Petroleum’s licenses had expired and were now open for relicensing, accusing the company of failing to meet its commitments, charges African Petroleum denies.
“Arbitration is certainly not our preferred route. However, we believe arbitration is necessary to protect our interests in these licenses in which we have made significant investments over the years,” African Petroleum Chief Executive Jens Pace said.
Pace has held talks with President Adama Barrow, who replaced long-ruling dictator Yahya Jammeh in January, but they have yielded no agreement.
Pace said on Wednesday that the company remained open to settling the dispute through dialogue.
Minister Sanyang had said that licenses to African Petroleum will never be renewed and his utterances were reiterated by the country’s Information Minister, Demba Ali Jawo.
Gambia has a special attorney at the Justice Department reviewing contracts. The country has more than $25 million in legal fees to pay over contract cancellation by Jammeh’s regime.
In May, the new government reached an out of court agreement to pay $4.6 million to London-based milling company, Conapro that has sued the West African nation’s former regime for a hostile takeover of its investments.
Sanyang had said in September that The Gambia was ready to face the African Petroleum in court.
“Our position is very clear: they did not fulfill their work obligation as agreed; their license expired in September last year, and they asked for an extension which was not approved,” said Sanyang.
Gambia’s neighbor, Senegal also accused African Petroleum of not fulfilling its commitments.
Gambia’s economy is highly dependent on peanut export, tourism, and remittances from the Diaspora.
Barrow’s government has shown an open door policy in its push to attract investors and create jobs, but it says it will review terms of contracts signed by Jammeh’s regime.
(Reporting and Writing by Mustapha Darboe; Additional Writing and Editing by Sam Phatey)