What happened in oil, gas and electricity sectors since the beginning of this month? Analysis by Madalina Vicari and Wojciech Jakóbik.
Oil: A new tax regime for Arctic oil, critically needed to preserve Russia’s oil output
On January 30, the Russian government approved a package of draft laws on development of Arctic zone, which gives incentives for creation of the Northern Sea Route, and for investments in Arctic oil development. Granting energy companies significant tax incentives to boost oil and gas production has been the result of a long pressure exerted primarily by Russian energy industry, and, to some extent, of influence of foreign investors. For instance, Indian investors who had agreed to take up to 15-20% stake in Vostok Oil, tied their plans up to Rosneft’s capacity to strike a deal with Russian government for tax breaks worth 2 .6 trillion rubles ($41 billion) over the next 30 years. “Vostok Oil is a newly established company that was formed to unite Rosneft’s projects in northern Russia, including the Lodochnoye, Tagulskoye and Suzunskoye oilfields, and other projects, including the Ermak Neftegaz venture with BP”. The project will require $157 billion of investment, as it needs construction of extensive infrastructure: pipelines, sea port, roads.
Vostok Oil will be one of the main beneficiaries of new financial incentives approved by the Russian government, as a zero-level extraction tax for the first 12 year of new projects will be introduced. Consequently, Indian company would have agreed to join Vostok Oil project, as Rosneft claims.
The Russian Arctic contains potential resources estimated at 240 billion barrels of oil equivalent, but their exploitation is highly challenging not only due to difficult conditions (low temperatures, ice situation, lack of infrastructure), but to US and EU sanctions as well. Russia “set a target for its oil production to remain stable at 550 mmt per annum through to 2030 (just over 11 mb/d). This is a slight reduction on nowadays’ output, but is nevertheless a tough target for the Russian oil industry given the likely decline in existing fields over that period”. Moreover, 90% of oil production in Russia is based on discoveries made during in Soviet Union, with only 10% of production done at the fields discovered in 1990s and 2000s. Actually, “to overcome production decline rate, Russia has to annually commission 3-4 oil fields comparable with Vankor”.
According to some opinions, Russia is undermining its production replacement rate by sticking to OPEC+ deal aimed at production cuts, which are expected to increase oil price on the global markets. But that decision would hamper Russian oil production rate, and that even despite of the fact that because of the US sanctions affecting Iran’s and Venezuela’s oil sectors, Russia is the main exporter of heavy oil.
Belarus as a leverage in oil negotiations with Russia
At the end of 2019, Belarus did not reach a final agreement on oil supplies from Russia in 2020. In the meantime, Kremlin had connected its talks with Belarus on oil discount with further integration of Union of Russia and Belarus. Kremlin said that Russia was not ready to “subsidize” Belarus’ energy imports, unless it accept greater economic integration.
The transit through Belarus to European Union, including Poland, was not affected. But in an interesting move, Belarussians entered a temporary deal with Neftis and Russneft Safmar Group owned by oligarch Mikhail Gutseriev. Furthermore, Belarus signed a deal to buy oil from Norway; Belarussian state oil company Belneftekhim said its subsidiary bought 800,000 tonnes of crude oil from Norway.
Though importing from alternative sources is more expensive than the cheaper Russian oil supplies, Minsk has been using the leverage of diversification with help of Azerbaijan, Ukraine, Poland or Baltic States as a tool of negotiation with Moscow. President Aleksandr Lukashenka announced that his country sent a proposals of oil import deals to those partners.
Belarus embraced the idea of oil imports from different suppliers several times in recent period, but such moved ended up with agreement on imports from Russian suppliers on better conditions. Although it is technically possible to stop oil imports through Druzhba pipeline to European Union, and to start pumping it to the East for the benefit of Belarussian consumers, it is hard to imagine such scenario due to many challenges that it would require its implementation. Other solution is to modernize Druzhba pipeline to allow physical reverse oil supplies through Poland. Minsk could also import oil from Baltic states or Ukrainian oil terminals. Belarus is in talks with Kazakhstan, but any imports from this direction would pass through Russia. Hence, any serious agreement would need Russian Transneft cooperation. Any deal allowing Belarus to diversify oil supplies would impair its role as an oil and oil products key transit partner for Russia. A role that is critically important for Belarussian economy, dependent on oil transit fees. In this context, Lukashenka’s statements on diversification are still perceived as part of negotiation process with Russia. The same considerations could also apply to the idea to impose an ecological tax on oil transit reaching 50 percent of profits for Russian companies. It needs to be underlined that Saudi and American blends pointed out as tools of diversification are all light oil, and the infrastructure in Europe, especially in its Central and Eastern parts, like Belarus, is adjusted to heavy oil.
During Sochi meeting between Lukashenka and Putin no progress on oil deal was made. Belarus and Russia were able to reach deal on gas price, but the talks on oil are to be continued. According to one Russian source, Lukashenka warned that further problems with oil imports from Russia might lead Belarus to take transit oil from “Druzhba” pipeline. However, given the dependence of Belarus on Russian oil transit, such tactics might be detrimental for Minsk.
President of Belarus met with Igor Sechin, Rosneft’s CEO and Vladimir Putin’s close ally, to talk oil supplies in 2020. Lukashenka and Sechin underlined long term cooperation and trustworthy relationship between Belarus and Rosneft. Previously, Lukashenka had threatened Russia that he could draw oil from Druzhba pipeline dedicated to export for Belarussian needs if there is no agreement until the end of February.
Given the declarations made by Lukashenka during the meeting with Rosneft’s CEO, and posted on Belarus Presidency’s website, there are increasing prospects for Belarus and Russia to conclude soon an agreement on oil transit : “President of Belarus Alexander Lukashenko is counting on an agreement with Rosneft on further cooperation. He stated this on February 18 at a meeting with Igor Sechin, chief executive officer and chairman of the board of Rosneft”
Gas: By securing agreement on Nord Stream 2 crossing, Baltic Pipe cleared the path to its completion
Polish Gaz-System signed an agreement with Nord Stream 2 AG on Baltic Pipe and Nord Stream 2 crossing each other. It means that there should be no obstacles for the crossing of both pipelines, which significantly increases Baltic Pipe’s prospects to be completed according to schedule.
Baltic Pipe, which is a crucial project for Polish energy diversification strategy, aims to provide Poland with natural gas coming from Norway through Denmark starting October 2022. Its designed capacity is 10 bcm annually, and when completed, it will transport gas from Norway to Poland via Denmark, and potentially to other countries in the region. Poland is currently importing between 8 to 10 bcm of Russian gas on the basis of the so-called Yamal contract, a political agreement between Poland and Russia signed in 1993, renewed in 2010, and questioned by European Commission because it is not aligned with EU 3rd energy package.
According to Polish government officials, Baltic Pipe supplies could replace Yamal contract, which lasts until the end of 2022. Warsaw is mulling to replace Yamal deal with a different contract with Russia’s Gazprom. Renewal of Yamal deal is ruled out by Poland; also Polish PGNiG refused to negotiate in 2019 when the opportunity window from the contract was opened.
In this context, Baltic Pipe, together with the LNG terminal in Świnoujście, and the planned FSRU in Gdańsk Basin, is critical element of Poland’s energy strategy, which aims, inter alia, to remove dependence on Russian gas supplies . Any delay past October 2022 would trigger a weaker leveraging position for PGNiG in negotiations with Gazprom, because LNG supplies might or might not be an effective alternative, depending on its price competetiveness to Russian offer. Norwegian gas from own PGNiG licenses in Norway will be a steadily competitive supply.
The agreement between Gaz-System and Nord Stream 2 AG was demanded by Danish Energy Agency as a condition of Nord Stream 2 permit for the route going south of Bornholm through the Danish Exclusive Economic Zone waters between Poland and Denmark, which were contested over last half of century. The agreement between the parties, signed in 2019, which solved the territorial dispute between the two countries, was the reason that triggered DEA’s decision to ask Nord Stream 2 for a new route, which would have included waters that were not disputed anymore. Finally, Nord Stream 2 AG did receive a permit in October 2019. The condition was that Nord Stream 2 AG achieves agreements on crossing with any Baltic infrastructure, cables, pipelines, and so forth, such is the case of Baltic Pipe.
That is why the political agreement between Poland and Denmark secured Baltic Pipe and Nord Stream 2 crossing. Otherwise, Nord Stream 2 AG, owned 100 percent by Gazprom, would have been able to leverage its position in talks with Gaz-System, with high risk on delaying the project perceived to be its competitor.
LNG: Bulgaria is moving towards lasting LNG imports
On January 8, 2020, Bulgartransgaz announced that it concluded a contract for 20% purchase of Alexandropoulis LNG terminal, in northeast Greece, close to Bulgarian border. The project will be connected with the Interconnector Greece-Bulgaria (ICGB) and TAP pipeline, and it is planned to serve both Greek and regional markets. Bulgartransgaz is a subsidiary of Bulgarian Energy Holding, which holds 50% of ICGB. Alexandropoulis LNG terminal is developed by Greek energy company Gastrade, and under the deal Bulgartransgaz buys 20% of Gastrade S.A. share capital. Bulgaria’s participation in Alexandropoulis LNG terminal was approved by the government, and it is also part of country’s 2020 Energy Strategy, which aims diversification of gas supply sources and routes. Alexandropoulis project will have a capacity of 6.1 billion cubic meters (bcm) per year and a storage capacity of 170 000 cubic meters of LNG.
Bulgaria’s annual gas consumption in 2018 was about 3.48 bcm, of which 3.17 bcm were Russian gas imports. But in 2019, Bulgaria started its first LNG imports-nearly half a billion cubic meters-, via the Revithoussa terminal in Greece. Furthermore, ICGB pipeline, which will have a capacity of 3bcm/year from Greece to Bulgaria (with potential to expand to 5bcm/year), and of 2bcm/year in reverse flow into Greece, is expected to be completed in October this year.
ICGB will transport approximately 1 bcm of gas from Azeribajan-one third of Bulgaria’s gas consumption-but also nearly half a billion of LNG from Greek terminals. According to the statements of Bulgarian minister of energy, made after a meeting with US energy officials, Bulgaria is aiming to have, by the end of 2020, half of its energy supplied from diversified sources: Azeri gas and LNG, of which, very likely , most part will come from the US producers.
Aramco and Sempra closer to FID on Port Arthur LNG, which may be one of the global LNG largest projects
Saudi Arabia’s Aramco and Sempra moved closer to FID on Port Arthur LNG, as they signed an interim agreement for project participation (IPPA) in the project. The IPPA follows a heads of agreement signed in May 2019 for a 20-year sale and purchase agreement for five million tonnes per year of LNG from Port Arthur LNG, and 25% equity investment in Phase 1 of the project.
Port Arthur LNG export project aims to be one of the largest global LNG projects: two liquefaction trains-with potential expansion capabilities of up to eight liquefaction trains or approximately 45 Mtpa of capacity-, up to three LNG storage tanks and associated facilities to enable the export of approximately 11 Mtpa of LNG on a long-term basis. However, there are many steps before the project finalization, as each party should take a FID , and the project is contingent to various important factors: obtaining binding customer commitments, completing the required commercial agreements, securing all necessary permits, obtaining financing. The project will take approximately four years to build and the road construction is anticipated to take 18 to 20 months
Aramco would not be the first foreign company with long-term sale and purchase contract with Port Arthur. In 2018, the Polish PGNiG concluded a 20-year agreement with Port Arthur LNG (subsidiary of Sempra), made on Free-on-Board basis, for the export of 2 million tonnes, or approximately 2.7 bcm, per annum of LNG from the Port Arthur LNG to Poland.
In this context, it is worth mentioning that previously, in 2019, the Saudi company eyed participation (10% stake) in Novatek’s Arctic LNG 2 project, but the Russian company preferred the Japanese consortium of Mitsui and Jogmeg companies.
Electricity: New regulations pushing the EU single electricity market
On January 1, 2020, EU Regulation EU/2019/943 on the internal market for electricity entered into force. The Regulation establishes the general principles of the operation of future common electricity market: (1) balancing (balancing capacity, separated of balancing energy, must be performed by TSOs, facilitated at regional level, and be market-based); (2 ) harmonization of trade intervals and gate-closure times for day ahead and intraday markets ; (3) dispatch priority given to renewables and high-efficiency co-generation facilities with installed capacity of less than 400kW (from 2026, only to facilities with installed capacity of less than 200kW; (4) capacity mechanisms (capacity mechanisms must be open to direct cross border participation; a CO2 emission limit of 550 g of CO2 per kWh applies for new generation capacity, and from 2025, 350 kg CO2 per year per installed kWe for existing capacity; (5) congestion management and capacity allocation (capacity shall be allocated by means of explicit capacity auctions or implicit auctions including both capacity and energy; TSOs must make at least 70 per cent of transmission capacity available); (6) the roles of ENTSO-E, TSOs and DSOs ; network codes and guidelines
The EU Agency for the Cooperation of Energy Regulators (ACER) published on January 28, three decisions on the framework for implementation of EU-wide trading platforms for electricity balancing . The decisions will effectively integrate all national balancing markets into one single EU electricity balancing market, which will help increase security of supply, reduce cost to consumers, and limit carbon emissions. Two of the decisions govern the electricity balancing from frequency restoration reserves with manual activation (mFRR) and with automatic activation (aFRR), while the third decision establishes a harmonised methodology on pricing of balancing energy.
Transmission System Operators will establish, following ACER’s decisions, two common European trading platforms that will enable all balancing energy bids to compete at EU level, and all TSOs will be able to balance their national transmission systems by activating the cheapest bids available. The harmonised methodology to price balancing energy will support the establishment of platforms, and all balancing energy bids traded through the platform will receive a marginal price equal to the price of the bid that clears the market.
Oil and gas geopolitics: Coronavirus is shaking the global economy and oil and gas demand
Corona virus will negatively impact the world economy far wider than the 2003 SARS virus. At that time, China’s economy accounted for 4.2 % of world GDP; now it makes up 16.3 of world GDP, and it is the world’s second largest economy. More, the Chinese companies are largely integrated into global supply chains, and China is a significant supplier to the rest of the world; a long stoppage of manufacturers could interrupt supply chains in many sectors: automotive, electrical and electronic components, chemical, textile, and so forth. China’s share in global manufacturing was 30.5% in 2019, and the country is the world’s second-largest import market. For instance, Wuhan is as a hub for China’s flourishing industry of cars parts and accessories exports, a sector that has tripled over the last decade while engine and motor exports have risen four times. Many of these factories and plants in the region of Wuhan are closed.
“If the current and unprecedented confinement measures in China stay in place until the end of February, and are lifted progressively beginning March, the resulting economic impact will be concentrated in the first half of 2020, with a reduction of global real GDP of 0.8% in Q1 and 0.5% in Q2. In this scenario, the coronavirus and resulting measures will reduce global real GDP by 0.4% in 2020”. Nevertheless, economists and health professionals say opaque Chinese data and lack of precedent create difficulties in establishing accurate estimations.
First cooling symptoms for oil markets
The first syndromes that coronavirus could affect oil prices occurred at the end of January, when Saudi Arabia’s energy minister Prince Abdulaziz bin Salman Al-Saud said that he is watching developments in China, and added that he is convinced that the new virus will be stopped. According to him, the coronavirus impact on global markets-oil and other commodities is mainly driven by psychological factors, “and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand”.
He also emphasized that he was sure that Saudi Arabia and other OPEC members, as well as the cartel partners known as OPEC +, would be able to react and maintain stabilization in the oil market when needed.
Fearing the epidemic, a representative of KGHM company in China returned to Poland . A spokeswoman for KGHM Polska Miedź SA, Anna Osadczuk, told Polish Press Agency that the head of the company’s representative office in Shanghai would return for at least a few weeks from China to Poland, and he would remotely manage the office’s work from Polish representation’s office. Osadczuk said that the health of the employees is the most important, and the way that they approach the issue was not to expose the president to the possibility of getting infected. The office is located in Shanghai, not in the city of Wuhan, where the coronavirus is the most dangerous, but nevertheless the company decided to bring the employees back to Poland.
OPEC curbs oil demand outlook for 2020
Along with falling oil demand, oil prices in China affected by coronavirus epidemic had fallen by 20 %. Initially, the OPEC oil cartel did not react, but subsequently it consulted with China on how coronavirus may impact the oil demand, and what are the measures that the OPEC can take to stop prices falling any further. Initially, OPEC’s research division had presented two models with different estimates of how coronavirus may affect oil consumption. The worst-case scenario envisaged a fast-spreading epidemic that lasts six months and removes nearly 400,000 barrels a day of demand, before the market rebound to pre-virus growth levels in the second half of the year.
In a monthly report published on February 12, OPEC greatly lowered its forecast for oil demand growth in 2020, mentioning the outbreak of coronavirus as “the major factor” behind downward revision . Hence, oil demand growth in 2020 is revised down by 230,000 barrels per day (bpd) while global oil demand is forecast to grow by 990,000 bpd, with OECD oil demand growing by 100,000 bpd in 2020, while non-OECD oil demand nearly 980,000 bpd. The downward forecast could play an important part in the OPEC+ decision to cut additional output (see below).
The ripple effects of coronavirus on global gas markets
As the epidemic escalates, quarantine measures and transport restrictions are becoming more severe, making it difficult for hundreds of thousands, if not millions of migrant workers, to return to work. Factories also have difficulties in obtaining raw materials or selling their products. This means that while the demand for gas for residential use may increase, as most people stay at home, the fall in demand in the industrial, commercial and transport sectors will probably be much higher. According to Sinopec data for 2018, Chinese cities accounted for 33% of gas demand across the country; 11.1 % is consumed by apartments, 9 % is district heating needs, while 6.7% is public services and 6.1 % by transportation .
Chinese gas importers such as the state-owned China National Offshore Oil Corp (CNOOC), Jovo Group based in Guangdong and Xinao China Gas Investment are still assessing the impact of corona epidemic on gas demand. Many companies cannot stay closed for too long because they have to bear high operational costs. But even if industrial gas demand increases quickly, commercial demand may still be low because people are afraid of eating out or returning to shopping malls. Furthermore, a much greater risk to gas demand derives from the collapse of regional supply chains as factories began to inform customers of their inability to meet their supply obligations.
Coronavirus outbreak could put the gas markets in Europe and Asia under „severe stress„, international rating agency Fitch Ratings said, but the magnitude of demand loss will be determined by the speed of economic activity. Tough the impact is expected to worsen in coming weeks, the current estimates on demand vary from an expansion of just 6% this year, to only 4% year-on-year, compared with previous estimates of 13%.
In an unusual move, China’s biggest importer of LNG, China National Offshore Oil Corp (CNOOC), has invoked force majeure to suspend contracts with at least three suppliers, including Total and Shell, who reportedly rejected the force majeure, claiming that the Chinese company does not have cause. More, “as many as 35 February cargoes could be subject to force majeure declarations with at least five already diverted as of Feb. 7, the global brokerage company Poten and Partner estimated . Moreover, according to Poten and Partner, the hardest hit by force majeure declarations would likely be Australian cargoes, as “they are some of the most expensive supplies to China. Australia also accounts for just under half of Chinese imports”. Seemingly, in 2019, China bought from Australia an estimated 13 million metric tonnes (mt) of spot and short-term cargoes , with 5.5-6 million mt by Sinopec, 5.5 million mt by CNOOC and 1.5 million mt by PetroChina. About 47% of China’s LNG imports come from Australia. State-owned companies PetroChina and Sinopec have not declared hitherto force majeure but reportedly they have been aiming at delaying or diverting cargoes due to arrive in China.
One would expect Europe to be one of the destinations of diverted cargoes from China, but historically-low spot prices, and storage inventories are highly hindering factors.
Thus, on February 7, North Asian LNG prices hit to new low of $2.95 breaching the $3/mmbtu threshold for the first time while LNG storage inventories in Europe were at 51% of capacity on February 8. Natural gas in underground storage was also high, at about 68% of capacity, well above the five-year average of 46%. A prolonged period of low spot prices could not only trigger further attempts to divert, even renegotiate the contracts in Asia, but they may as well impact the cycle-production costs of projects developed by the US LNG producers.
What will OPEC + do?
As it was mentioned above, OPEC significantly slashed its forecast for oil demand growth projection with 230,000 bpd to 990, 000 bpd. The International Energy Agency (EIA) estimates even a lower growth than OPEC. Thus, demand expected to fall by 435,000 bpd versus the first quarter of 2019, IEA says in a report published on February 13. The consequences of coronavirus for global oil demand “will be significant”, IEA says. The agency also cut its growth forecast for 2020 to 825,000 bpd, a reduction of nearly a third from its previous target, and the lowest growth forecast since 2011.
But coronavirus affected not only global oil demand but the oil prices, too, and its impact has been “sharp”, according to IEA: Brent values fell by about $10/per barrel, or 20%, to below $55/per barrel. Before coronavirus outbreak, oil markets were “expected to move towards balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC supply growth”, the agency points out. Therefore, coronavirus crisis may likely trigger additional oil output cuts from producers. Hence, OPEC+ countries have been already considering additional cuts, especially that, after intense deliberations, the OPEC+ Joint Technical Committee had recommended that the alliance of OPEC, Russia, and nine other countries, to cut production by 600,000 bpd through the second quarter, in addition to the 1,7 million bpd in place until the end of first quarter.
OPEC+ are scheduled to meet on March 5-6 in Vienna, though delegates said that meeting could be moved forward the scheduled date to implement the cuts, if a consensus would be reached. But seemingly, consensus would not be achieved easily. Russia’s position on possible extension of the OPEC+ agreement on reduction of oil production is yet to be defined, Kremlin spokesman Dmitry Peskov said. Meanwhile, the Russian energy minister held a meeting with Russian oil producers, who “indicated widespread support for an extension of the OPEC+ production cuts through to the end of the second quarter, but at current production levels rather than with any deeper cuts”.
Another possible victim of corona virus: the Phase 1 of US-China trade deal
February 14 is the date when the long awaited and negotiated Phase 1 of US-China trade deal entered into force. Under the deal signed January 15, China committed to increase purchases of American products and services by at least $200 billion over the next two years, of which $52.4 billion of additional energy purchases (crude oil, LNG, refined products, coal) from a baseline of $9.1 billion in 2017. Hence, $18.5 billion of additional energy products should be purchased in 2020, and $33.9 billion in 2021. In 2017, before China started to retaliate against US tariffs, the crude accounted for half of all US oil exports to China, while natural gas liquids (ethane and butane), accounted for another third, and LNG for 15% of total US LNG exports.
But if Chinese import tariffs of 5% for American crude oil and 25% for LNG and propane would not be removed, the implementation of Phase 1 of the agreement will be challenging. Furthermore, the challenge would likely be increased by the impact of coronavirus. On February 12 , the US Treasury Secretary Steven Mnuchin told a Senate Finance Committee hearing that implementation of the Phase 1 of the US trade deal with China is being slowed by the virus.
Climate policy: Oil giant Total sued in France in two separate casis: for climate inaction and a mega project in Uganda
A lawsuit was filed on January 28, 2020 against French oil company Total, formulated by five NGOs (Notre Affaire à Tous, Sherpa, France Nature Environnement, Eco Maires and ZEA),
and 14 local authorities (Arcueil, Bayonne, Bègles, Bize-Minervois, Champneuville, Centre Val de Loire, Correns, Est-Ensemble Grand Paris, Grenoble, La Possession, Mouans-Sartoux, Nanterre, Sevran and Vitry-le-François), which accused the oil giant for “climate inaction”. This the first climate change legal case against a private company in France. The plaintiffs request that Total be ordered to take the necessary measures to heavily reduce its greenhouse gases emissions. They claim Total company is at the origin of around 1% of the world’s greenhouse gas emissions . According to a study, Total is on the list of top 20 global fossil fuel companies “whose relentless exploitation of the world’s oil, gas and coal reserves can be directly linked to more than one-third of all greenhouse gas emissions in the modern era”.
Total is challenged for failure to include any reference to climate change neither in its first vigilance plan (2018), nor in the second one (2019), as the French Duty of Vigilance Law requires it. Under this pioneering law, which came into force in March 2017, large French companies are required to identify human rights-related risks within their supply chain and to prevent violations, but also to publish annual plans that tackle the adverse impact of their activities, and those of subsidiaries and suppliers, on people and the environment.
But there is a second legal case brought against the French company by six NGOs (Friends of the Earth France, Survie, and four Ugandan associations: AFIEGO, CRED, NAPE/Friends of the Earth Uganda and NAVODA ) under the Duty and Vigilance Law, related to a mega-oil project developed Total in Uganda. However, the Nanterre High Court ruled on January 30, 2020, that it did not have the right to hear the case. The plaintiffs argued that the French company failed to come up with a vigilance plan to address the risk to human rights and environment of its operations at its Tilenga project in Uganda, as required by France’s Duty of Vigilance Law. In their legal application, the six NGOs claimed that Total failed to elaborate and implement its human rights and environmental vigilance plan in Uganda; they also accused the French company of intimidated local farmers into signing compensation agreements and forced them off their land without receiving adequate compensation.
The three judges hearing the case decided that the case did not fall within their jurisdiction, and the dispute should sit within the jurisdiction of the Commercial Court, which, the activists claim, “echoes the arguments of Total’s lawyers”. Friends of the Earth France and Survie NGOs are considering appealing the court’s decision.