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Last Updated: Monday, 6 February 2006, 10:12 GMT
Mauritania and firm row over oil
Map showing location of the Chinguetti oil development
The Chinguetti project is due to start by the end of February
Mauritanian leaders and Australia's Woodside Petroleum have still to reach agreement over contracts, a fortnight before an oil production deal starts.

In 2004 Woodside agreed to invest A$8370m ($600m) in developing Mauritania's Chinguetti oil project, off the West African country's coast.

The dispute concerns amendments to four offshore production-sharing contracts.

The deals were agreed by long-serving authoritarian leader Maaouiya Ould Taya , ousted by a military junta in 2005.

'Great detriment'

The controversial amendments cut the state's share in the oil revenue, lowered taxes and scrapped bank guarantees that were in the initial contract, the country's leader Colonel Elly Ould Mohamed Vall said.

It is estimated the amendments could cost Mauritania up to $200m a year.

Col Vall said Mauritania was determined to use the law to protect its interests.

Woodside is convinced that these amendments are appropriate, valid, and binding upon both parties
Woodside statement

The amendments were signed by former oil minister Zeidane Ould Hmeida in February 2004 and March 2005.

But Mauritanian authorities say they were signed "outside the legal framework of normal practice, to the great detriment of our country".

Mr Hmeida was arrested and charged in January for "serious crimes against the country's essential economic interests" according to an official statement.

Mauritania will start oil production on 17 February and oil exports in mid-March, but the dispute is not expected to hit schedules.

Talks continue

"Woodside is convinced that these amendments are appropriate, valid, and binding upon both parties," the company said in a statement.

It said it would continue talking to the government. When the deal was signed in May 2004, Woodside hoped to extract 75,000 barrels of oil a day from Chinguetti.

Chinguetti was discovered in 2001, and has proven and probable reserves of about 120 million barrels of oil.

Woodside, which started life as a small exploration firm in the mid-1950s, has a 53.85% controlling stake in the project.

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