The full state­ment from Trinidad Pe­tro­le­um Hold­ings Lim­it­ed

The Pe­tro­le­um Com­pa­ny of Trinidad and To­ba­go ad­vis­es the na­tion­al com­mu­ni­ty that it has set­tled the ar­bi­tra­tion dis­pute be­tween it­self and A&V Oil and Gas Lim­it­ed (AV Oil) avoid­ing the pay­ment of mil­lions of dol­lars in dam­ages. As an in­di­ca­tion of the cor­dial na­ture of the set­tle­ment, Her­itage, the na­tion­al Oil Com­pa­ny, is en­ter­ing in­to an En­hanced Pro­duc­tion Ser­vice Con­tract (EP­SC) with AV Oil for the pur­chase of crude oil.

The set­tle­ment is root­ed in the par­tial award de­liv­ered on the 11th June 2021 by the ar­bi­tra­tion pan­el in favour of AV Oil. 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 dur­ing the pe­ri­od from April 2016 to Ju­ly 2017.

Based on that find­ing by the pan­el, 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. The find­ings of the ar­bi­tra­tion al­so mean that AV Oil is en­ti­tled to pay­ment of the sum of TT$84,699,879.47 that Petrotrin is hold­ing in es­crow in re­la­tion to the sums due on its un­paid in­voic­es for the pe­ri­od 1st June 2017 to the 31st De­cem­ber 2017 to­geth­er with in­ter­est at the rate of 3per cent per an­num from the due date of each in­voice un­til the date when the prin­ci­pal sum was paid in­to es­crow. Ad­di­tion­al­ly, 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 1st Jan­u­ary 2018 to the 28th Feb­ru­ary 2018 in the amount of US$2,284,398.40 to­geth­er with in­ter­est at the rate of 3 per cent per an­num from the date when each pay­ment fell due un­til the date of the Award.

No ev­i­dence of cor­rupt prac­tices by AV Oil

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 fol­lowed there­fore, that AV Oil al­so has the right to be paid dam­ages for wrong­ful ter­mi­na­tion of the IP­SC Agree­ment. Those dam­ages to AV Oil will in­clude loss of net earn­ings for the pe­ri­od from 19th No­vem­ber 2019 to the 18th No­vem­ber 2024.

Fur­ther, be­cause of Petrotrin’s in­abil­i­ty to es­tab­lish that it had rea­son­able grounds for sus­pect­ing that AV Oil had mis­con­duct­ed it­self or oth­er­wise been in­volved in wrong­ful or fraud­u­lent ac­tiv­i­ty, which would have en­ti­tled Petrotrin to ter­mi­nate the IP­SC Agree­ment and be­cause it had been un­able to prove that AV Oil was in­volved in seal tam­per­ing or any in­ap­pro­pri­ate prac­tice in the process of the de­liv­ery of crude oil to Petrotrin dur­ing the pe­ri­od April 2016 to Ju­ly 2017, Head 1 of Petrotrin’s coun­ter­claim for the sum of US$143,892,397.12 was dis­missed.

As a con­se­quence of the de­ci­sion of the pan­el, in ad­di­tion to the sums pro­vid­ed for and men­tioned above, the fi­nan­cial ex­po­sure to Petrotrin for as­sessed dam­ages could be as high as an ad­di­tion­al TT$800,000,000.00, which will not in­clude fur­ther le­gal costs. This is why this mat­ter has been re­ferred to by many com­men­ta­tors as the “bil­lion-dol­lar claim”.

Fur­ther le­gal ac­tion will bring ad­di­tion­al costs with low chance of suc­cess

The Board of Di­rec­tors of Petrotrin care­ful­ly con­sid­ered the con­se­quences of the par­tial award and the ex­treme­ly strong view held by its own le­gal team that ap­peared be­fore the ar­bi­tra­tors that fur­ther lit­i­ga­tion should be com­menced to have the award set aside.

To as­sist with its con­sid­er­a­tions and hav­ing re­gard to the view of the le­gal team, the Board sought not on­ly one but two le­gal opin­ions, one from Rol­ston Nel­son S.C., a lead­ing Se­nior Coun­sel in com­mer­cial law, a for­mer Jus­tice of Ap­peal and a for­mer Judge of the Caribbean Court of Jus­tice, and Si­mon Hugh­es Q.C. a lead­ing Silk spe­cial­iz­ing in ar­bi­tra­tions in the con­struc­tion and en­er­gy sec­tors in the Unit­ed King­dom. 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 Board al­so not­ed that the de­ci­sion of the ar­bi­tra­tion pan­el com­pris­ing as afore­men­tioned Sir Den­nis By­ron, along with Petrotrin’s nom­i­nee- Mr. Jus­tice Humphrey Stollmey­er, a for­mer Court of Ap­peal Judge and Lord David Hope, the for­mer Deputy Pres­i­dent of the Supreme Court of the Unit­ed King­dom and Privy Coun­cilor was not on­ly firm but unan­i­mous.

Fi­nal­ly, the Board was very con­scious of the ad­vice it re­ceived that set­ting aside a de­ci­sion of an ar­bi­tra­tion pan­el is not an easy task, and courts are mind­ed to re­spect the de­ci­sions of ar­bi­tra­tors, un­less the de­ci­sion can be shown to be en­tire­ly un­sup­port­able. Among oth­er things, the process to set aside the de­ci­sion would in­volve even fur­ther

lit­i­ga­tion at the High Court, the Court of Ap­peal and the Privy Coun­cil on­ly to re­turn, if Petrotrin is suc­cess­ful, to the orig­i­nal ar­bi­tra­tion pan­el iden­ti­fied above for a re­hear­ing.

The le­gal costs and time al­ready in­curred in this mat­ter are al­ready very 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.

It should al­so be men­tioned that cur­rent­ly, the TPHL Group is pur­su­ing re­fi­nanc­ing of all of its debt. The Board was made aware by TPHL’s in­ter­na­tion­al fi­nan­cial ad­vi­sors that the prospects for favourable terms are threat­ened with pend­ing lit­i­ga­tion of this mag­ni­tude; more so if find­ings were to once again go against Petrotrin.

A ben­e­fi­cial set­tle­ment

There­fore, the Board once more, ad­mit­ted­ly 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 TT$18,000,000.00 in full and fi­nal sat­is­fac­tion of any and all dam­ages suf­fered by AV Oil in con­nec­tion with the ter­mi­na­tion of the 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 (10) 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$460,000.00 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 TT$660,000.00 and fees for Head Li­cence and oth­er fees in the sum of US$164,000.00 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$2,200,000.00.

There can be no doubt that the set­tle­ment of this mat­ter, with the pay­ment by Petrotrin of $18,000,000.00 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.

New Ex­plo­ration Li­cence be­tween Her­itage and AV Oil

With re­spect to the grant of a new li­cence by Her­itage on terms no more fa­vor­able than li­cences cur­rent­ly be­ing grant­ed; the Board was mind­ful of the fact 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.

This grant is con­sis­tent with Her­itage’s strat­e­gy of hav­ing these mar­gin­al fields op­er­at­ed and fund­ed by small­er op­er­a­tors.

It is very im­por­tant to note that Her­itage has in­tro­duced and im­ple­ment­ed mod­ern pro­duc­tion mea­sur­ing tools which will sig­nif­i­cant­ly re­duce the risk of sim­i­lar dis­putes in the fu­ture.

What now re­mains to be set­tled is the ques­tion of costs of the ar­bi­tra­tion, which is like­ly to be sub­stan­tial, and is for Petrotrin’s ac­count. The par­ties are cur­rent­ly ex­chang­ing sup­port­ing doc­u­ments and at­tempt­ing to ar­rive at a ne­go­ti­at­ed po­si­tion. If this is not pos­si­ble, the par­ties will re­turn to the ar­bi­tra­tion pan­el for its as­sis­tance in the as­sess­ment of those costs.

A win in the cir­cum­stances for Petrotrin, TPHL and T&T

Petrotrin ac­knowl­edges that this mat­ter has gen­er­at­ed a tremen­dous amount of pub­lic in­ter­est. The Board is how­ev­er, ex­treme­ly con­fi­dent that hav­ing not been suc­cess­ful at the ar­bi­tra­tion, this out­come is fa­vor­able and in the best in­ter­est of Petrotrin, the TPHL Group of Com­pa­nies and the Coun­try.