Hardman, which owns 19% of the Chinguetti field, told the ASX yesterday that it could lose US$20 million (A$26.8 million) to the government, due to a disagreement over amendments to four production sharing contracts that were agreed to by the previous regime.
A Woodside spokesperson would not comment to the Dow Jones Newswire about the total estimated cost to the joint venture.
The disputed amendments include points related to the partners recovering some Chinguetti exploration costs in PSC Area B, abandonment costs, environmental costs and tax rates, Hardman said.
The joint venture partners and the Mauritanian government have previously said the dispute would not affect production from Chinguetti.
The areas under dispute involve production permits outside the Chinguetti development, but cover oil and gas discoveries at Tevet, Banda and Tiof, about 90km offshore from Nouakchott, Mauritania’s capital.
A decision on developing Tiof, which Woodside has said may contain 287 million barrels of recoverable oil, has been delayed until the second quarter of 2006 after the geology was found to be more complex than first thought.
The Banda gas discovery overlies an oil reservoir, while Tevet is an oil and gas discovery with tieback to Chinguetti.
If the dispute is not settled in the next three months, it could be referred to arbitration in Paris under International Chamber of Commerce rules, Hardman said.
But the two sides recently failed to reach an agreement over the amendments following a month of negotiations, according to Mauritanian Prime Minister Sidi Mohamed Ould Boubacar.
Boubacar said the amendments reduced the state’s share in the oil revenue, lowered taxes and removed bank guarantees that were in the initial contracts.
During a national address Sunday night, Military Council for Justice and Democracy (CMJD) chairman Colonel Ely Ould Mohamed Vall condemned the contracts signed under the previous regime, saying they were "concluded in a deep opacity and in the sole interest of Woodside to the detriment of the Mauritanian state."
Both Woodside and the Mauritanian government have declared their support for the Extractive Industries Transparency Initiative (EITI) – a mechanism for improving transparency and accountability in the use of natural resources.
But Oxfam America policy advisor for extractive industries Ian Gary told Reuters that for this to be meaningful, Mauritania's new government would have to fulfil its pledge to bring democracy to the country.
"The transparency aims of the EITI are useful only in a democratic environment," Gary said.
On 17 February, oil is to be pumped for the first time from the Chinguetti offshore oil field in the Atlantic Ocean, about 70 kilometres from the capital, Nouakchott. The field is expected to produce 75,000 barrels per day over about 10 years with an estimated value of US $750 million, according to Woodside.
Project partners in Chinguetti are: Woodside (47.83%); Roc Oil (3.25%); Hardman Resources (19.01%); UK's BG Group plc (10.23%); and Premier Oil Plc, also of the UK (8.12%) and the Mauritanian government (12%).
