A Heritage oil platform in the Gulf of Paria

The Petroleum Company of Trinidad and Tobago will not be going to court to try to set aside the results of an arbitration with A&V Oil and Gas.

Instead, it has settled the arbitration dispute with A&V Oil and Gas Ltd (AV Oil), avoiding the payment of millions of dollars in damages, its successor company Trinidad Petroleum Holdings Ltd said in a statement yesterday.

The company advised that it will re-commence doing business with AV Oil, stating that it is entering into an Enhanced Production Service Contract (EPSC) with AV Oil for the purchase of crude. It said the settlement was rooted in the partial award delivered on June 11, 2021 by the arbitration panel in favour of AV Oil.

It noted that in summary, the arbitrators-headed by former president of the Caribbean Court of Justice Sir Dennis Byron, found that Petrotrin had failed to establish that AV Oil was engaged in seal-tampering or any other inappropriate practices in the process of the delivery of crude oil to Petrotrin from April 2016 to July 2017.

The company outlined why it went against senior counsel Deborah Peake’s advice for Petrotrin to move quickly to file an application in the High Court to set aside the results of an arbitration between A&V Oil and Gas and Petrotrin that could cost the State company close to $1 billion.

The Petroleum Company stated to assist with its considerations, two legal opinions were sought.

It was the opinion of these senior specialist attorneys that further litigation was not advisable, the chances of success were low, and settlement of the matter should be pursued, the statement said.

It added that the board also noted that the decision of the arbitration panel was not only firm but unanimous.

It noted that the legal costs and time already incurred in this matter were already significant.

“Further litigation, along with the aforementioned exposure to consequential damages if Petrotrin were to continue to be unsuccessful, could take the financial exposure to well over one billion Trinidad and Tobago dollars,” the Trinidad Petroleum Holdings statement noted.

‘A very good outcome’

The release stated that the board, against the strong views of its legal team that appeared before the tribunal, appointed a high-level management team which entered into discussions with AV Oil to explore the terms of a settlement acceptable to both sides.

Those discussions were based solely on operational data and proved “very fruitful” in arriving at a settlement in the following terms:

(i) The payment to AV Oil of the sums already awarded by the arbitration panel for crude oil already supplied.

(ii) Payment to AV Oil of the sum of $18,000,000 in full and final satisfaction of any and all damages suffered by AV Oil in connection with the termination of the Incremental Production Service Contract (IPSC).

(iii) Payment to AV Oil of a sum of money to be agreed by the parties representing reasonable legal costs and expenses incurred by AV Oil in the arbitration proceedings or such sum to be assessed by the Tribunal in default of agreement.

(iv) Heritage to grant an Enhanced Production Services Contract (EPSC) to AV Oil for a period of ten years.

(v) AV Oil accepts and acknowledges that Petrotrin shall not be liable for and shall not pay any losses for mobilisation or demobilisation costs and expenses claimed by AV Oil in the arbitration and AV Oil hereby waives and relinquishes any call for payment in relation thereto including its request for the sum US$460,000 as made in the arbitration proceedings before the Tribunal.

(vi) AV Oil agrees to pay to Petrotrin all outstanding oil impost fees under the

IPSC in the sum of $660,000 and fees for head licence and other fees in the sum of US$164,000 within the first full month of AV Oil’s payment advice under the new EPSC.

(vii) AV Oil agrees to pay the outstanding funds for abandonment expenses under the IPSC sub-licence in the amount of US$2,200,000.

$84m payment

“There can be no doubt that the settlement of this matter, with the payment by Petrotrin of $18,000,000 in damages in addition to the sums awarded by the Tribunal to AV Oil for crude oil determined by the Tribunal to have already been supplied and received to Petrotrin’s benefit, is in the circumstances, a very good outcome for Petrotrin and Trinidad and Tobago,” the oil company’s statement said.

It noted that no finding of wrongdoing on the part of AV Oil had been made out, and that prior to this dispute, AV Oil had been a good long-standing partner in Petrotrin’s Joint Venture programme, “which continues to be a crucial component to the production of oil in this country”.

It stated that the grant of this contract was consistent with Heritage’s strategy of having these marginal fields operated and funded by smaller operators.

It stated that based on the arbitration, Petrotrin was not entitled to treat any of the crude oil delivered to it by AV Oil as not having been delivered in pursuance of the Incremental Production Service Contract (IPSC) Agreement between the two companies and that the findings of the arbitration also mean that AV Oil is entitled to payment of the sum of $84,699,879.47 that Petrotrin is holding in escrow in relation to the sums due on its unpaid invoices for the period June 1, 2017 to the December 31, 2017 together with interest at the rate of three per cent per annum from the due date of each invoice until the date when the principal sum was paid into escrow.

Additionally, it noted that the arbitrators also awarded payment to AV Oil of the sums due on its unpaid invoices for the crude oil supplied by the company to Petrotrin during the period January 1, 2018 to February 28, 2018 in the amount of US$2,284,398.40 together with interest at the rate of three per cent per annum from the date when each payment fell due until the date of the Award.

“The panel of arbitrators found that Petrotrin did not have reasonable grounds for suspecting that AV Oil had misconducted itself or otherwise been involved in wrongful or fraudulent activity which would have normally entitled Petrotrin to terminate the IPSC Agreement under Article 29.1,” it stated.

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