Central Africa's new FX initiative falls short of target, oil industry sources say

Reuters

22-04-2025

Summary
Companies
CEMAC region targets $5 bln-$10 bln to boost reserves
Oil companies seen paying significantly less
Investment into oil-producing region set to decline
April 22 (Reuters) - Six Central African nations expecting a foreign exchange windfall of billions of dollars from environmental restoration funds set aside by oil firms may in fact see less than $500 million by an April 30 deadline, two oil industry sources close to the talks told Reuters.
Rules governing these restoration funds, mostly held in foreign banks, were introduced in 2018 by the Bank of Central African States (BEAC), the central bank for Cameroon, Gabon, Chad, Equatorial Guinea, Central African Republic and Republic of Congo.
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The aim is to have the funds held in accounts controlled by BEAC to help buttress the six countries' depleted hard-currency reserves and help address their economic fragility.
Despite progress in overcoming their differences, however, the oil companies and regional central bank authorities remain at odds ahead of a looming compliance cut-off date and threats of immediate penalties from May 1.
The companies affected say for example that the environmental funds are ring-fenced and, based on International Monetary Fund (IMF) guidelines, the countries cannot count them as either gross or net reserves.
Currently, the money paid into environmental escrow accounts are staggered, with deposits increasing as projects move towards ending production, a third company official said.
Some projects in the oil-producing Central African region have made no deposits because they are at an early stage and haven't yet established restoration funds, the official added, suggesting governments may have miscalculated the amounts due from these projects.
Companies operating across Central Africa, which include Kosmos Energy (KOS.N), opens new tab, Chevron (CVX.N), opens new tab, Vaalco Energy (EGY.N), opens new tab, TotalEnergies (TTEF.PA), opens new tab, did not respond to requests for comment.
Privately held French operator Perenco, however, said this month that it was in negotiations with regional stakeholders to reach an agreement before the deadline and was already complying with all regulations.
One industry source said: "According to our estimates the value might be less than $500 million at the beginning of May, maybe rising to $1 billion over the next decade."
That $500 million is around one-tenth of what the six Central African Economic and Monetary Community (CEMAC) states are seeking to strengthen their fragile economies.
Another senior industry source briefed on the matter said the aggregated company figures may range between $350 million to $400 million. Reuters was unable to independently verify the amounts.
All company and industry sources did not want to be identified due to the sensitivity of the ongoing discussions.
Gabon, which went to the polls this month following a coup in 2023, said in January that funds from the region's Oil Site Rehabilitation Fund (RES) could rake in from 3 to 6 trillion CFA francs, or about $5 billion to $10 billion.
The six CEMAC states - Cameroon, Gabon, Chad, Equatorial Guinea, Central African Republic and Republic of Congo - use a shared currency and have BEAC setting their monetary policy.
Neither they nor BEAC immediately replied to requests for comments.
INVESTMENT SEEN PLUNGING
Discussions are deadlocked over several core issues, including BEAC's refusal to waive its sovereign immunity of execution right, meaning court decisions against it are unenforceable.
That is a major sticking point, according to the sources.
The standoff between foreign investors and Central African monetary authorities has also caught the eye of Republican lawmakers in the United States.
In March two members of Congress introduced a bill critical of CEMAC's stance and threatened to block IMF support for countries in the region.
The IMF, a top regional creditor, said it was aware of the legislation and was monitoring developments. It plans to visit the region after its annual Washington spring meetings, a spokesperson said.
Last month, S&P Global Insights said it expected the region to lose an estimated $45 billion in investment by 2050, marking a 54% decline from the baseline, if the new FX rule is implemented, illustrating CEMAC's precarious position.
A fourth industry source told Reuters their company would not be going ahead with investments unless there is a positive outcome to these issues.