US-based oil company Cobalt filed for arbitration for a $2-billion suit against Angola’s state-run Sonangol oil giant last week, according to court documents found by Reuters.
The two parties were due to reach an agreement on license extensions for two deepwater blocks, but negotiations broke down last year. Now Cobalt claims a $2 billion award, plus interest and other costs, as compensation for its troubles, Oil Price reported. The firm says finding a 40% stake partner in offshore Blocks 20 and 21 became impossible due to the uncertain future of the extensions.
Another arbitration request from Cobalt against the Angolan state-run company puts the latter on the hook for $174 million plus costs and interest. The additional sum compensates Cobalt for joint interest receivable for operations on offshore Block 21.
“Sonangol appears to be leveraging those roles to control the ownership and development of Cobalt’s key pre-salt oil and gas discoveries fully, despite the implications for contract sanctity,” IHS analyst Robert Bruce told Reuters.
“The case will likely increase investor wariness over partnership risks in Angola, already elevated by the uncertainties generated by Sonangol’s restructuring and financial difficulties.”
Cobalt had been under investigation by the US Department of Justice until February of this year due to the nature of its dealings in Angola. The investigation, which had previously been under the purview of the DOJ and the Securities and Exchange Commission, explored connections between senior Angolan officials and Angola-based Nazaki Oil and Gas Co.
Nazaki held business interests with Cobalt regarding offshore blocks 9 and 21, according to Cobalt’s website. The SEC ended its probe in 2014, and so did the DOJ earlier this year, without any findings of regulatory wrongdoing by the Texas-based company.