Oil industry sources claim that Central Africa's new FX Initiative falls short of its target.

Two oil industry sources said that six Central African nations who were expecting to receive billions in foreign exchange from funds set aside for environmental restoration by oil companies may actually see less than 500 million dollars by the April 30 deadline.

Bank of Central African States, the central bank of Cameroon and Gabon, Equatorial Guinea Central African Republic, Republic of Congo, Chad, Gabon and Chad, introduced rules in 2018 governing these funds that are mostly held by foreign banks.

The funds in the BEAC-controlled accounts will be used to replenish the hard currency reserves of the six countries and to address their economic vulnerability.

The oil companies and the regional central banks remain at odds despite progress made in resolving their differences. A compliance deadline is approaching and there are threats of immediate sanctions from May 1.

Companies affected by the issue say, for example, that the funds allocated to the environment are ring-fenced, and that, according to guidelines of the International Monetary Fund, countries cannot use them either as gross or net reserves.

A third official of the company said that money is paid into environmental escrow account in a staggered manner, with increasing deposits as production moves towards completion.

The official said that some projects in Central Africa, which produces oil, have not made deposits yet because they are still at an early stage. They haven't established restoration funds. This suggests governments have calculated the amount due incorrectly.

The companies operating in Central Africa including Kosmos Energy and TotalEnergies did not respond when asked for comments.

Perenco, a privately held French operator, has said that it is in talks with regional stakeholders and already complies with all regulations.

According to one industry source: "Our estimates suggest that the value could be as low as $500 million at the start of May and rise to $1 billion in the next decade."

The $500 million represents around a tenth of the amount that six Central African Economic and Monetary Community states (CEMAC) are looking to spend in order to boost their fragile economies.

A senior industry source who was briefed about the issue said that the total company numbers could range from $350 to $400 million. The amounts could not be independently verified.

Due to the sensitive nature of the discussions, all sources from the industry and companies did not wish to be named.

Gabon, which held elections this month after a coup attempt in 2023 said in January that the Oil Site Rehabilitation Fund could bring in between 3 and 6 trillion CFA francs or $5 billion to $10 million.

Six CEMAC countries - Cameroon Gabon Chad Equatorial Guinea Central African Republic Republic of Congo and Republic of Congo use a common currency. Their monetary policy is set by BEAC.

They did not immediately respond to comments.

INVESTMENTS SEE A Plunge

The discussions are at a standstill over several key issues, including BEAC refusing to waive its sovereign immunities of execution rights, which means that court orders against it are not enforceable.

According to sources, this is the main sticking point.

Republican legislators in the United States have also taken note of the standoff between foreign investors, and Central African monetary authority.

Two members of Congress presented a bill in March criticizing CEMAC's position and threatening to block IMF assistance for countries in the area.

IMF, as a major regional creditor, confirmed that it was aware of this legislation and was closely monitoring its progress. A spokesperson for the IMF said that it plans to visit this region following its annual Washington spring meeting.

S&P Global Insights stated last month that it expects the region to lose approximately $45 billion by 2050. This would be a 54% drop from the baseline if the new FX rules are implemented. This illustrates CEMAC's fragile position.

Four sources in the industry said their company will not invest unless these issues are resolved. (Reporting and editing by Bate Feild and Hugh Lawson; reporting by Wendell Roelf)

(source: Reuters)