Joel Julien

Go­ing against the "ex­treme­ly strong views” of its own le­gal team, the Trinidad Pe­tro­le­um Hold­ings Ltd (TPHL) com­pa­ny board has agreed to pay A&V Oil and Gas Ltd over $100 mil­lion and grant the com­pa­ny a new ten-year En­hanced Pro­duc­tion Ser­vices Con­tract (EP­SC) with Her­itage Pe­tro­le­um.

In a re­lease yes­ter­day, TPHL stat­ed that there can be no doubt that the set­tle­ment of this mat­ter “is in the cir­cum­stances, a very good out­come for Petrotrin and T&T.”

In fact it is a win, TPHL added.

“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 favourable and in the best in­ter­est of Petrotrin, the TPHL Group of Com­pa­nies and the coun­try,” it stat­ed.

Speak­ing to Guardian Me­dia yes­ter­day, TPHL chair­man Michael Quam­i­na said he “played no part in the de­ci­sion mak­ing process” for the set­tle­ment but as­sured it was done above board.

“In terms of ne­go­ti­at­ing con­tract terms and the as­sess­ment as to that $18 mil­lion (in dam­ages to be paid), that as­sess­ment was premised on da­ta and an analy­sis of da­ta, not on any kind of as­sess­ment or ap­prox­i­ma­tion,” he said.

Quam­i­na al­so said the 10-year con­tract be­ing of­fered to A&V Oil was “ab­solute­ly no more favourable” than any oth­er con­tract cur­rent­ly be­ing of­fered. He al­so said plans are be­ing put in place to en­sure that “prop­er mea­sure­ment tools” will be used to ac­cu­rate­ly de­ter­mine the amount of oil be­ing pro­duced.

The set­tle­ment is root­ed in the par­tial award de­liv­ered on June 11, 2021, by the ar­bi­tra­tion pan­el in favour of A&V 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 A&V 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 A&V 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 A&V 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 June 1, 2017 to 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, the ar­bi­tra­tors al­so award­ed pay­ment to A&V 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.

His­to­ry of the mat­ter

The is­sue sur­round­ing AV Oil be­gan just over four years ago, when Op­po­si­tion Leader Kam­la Per­sad-Bisses­sar raised the is­sue of “fake oil” in­volv­ing Prime Min­is­ter Dr Kei­th Row­ley’s self-pro­claimed friend, AV Oil CEO Hanif Baksh.

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.

And, as such, it fol­lowed that AV Oil al­so had the right to be paid dam­ages for wrong­ful ter­mi­na­tion of the IP­SC Agree­ment, TPHL stat­ed. “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,” TPHL stat­ed.

“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 SC, 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 QC a lead­ing Silk spe­cial­is­ing 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.”

TPHL said the le­gal costs and time al­ready in­curred in this mat­ter are al­ready very sig­nif­i­cant.

And that fur­ther lit­i­ga­tion, along with the ex­po­sure to con­se­quen­tial dam­ages if Petrotrin were to con­tin­ue to be un­suc­cess­ful, could take the fi­nan­cial ex­po­sure to well over $1 bil­lion.

“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 ad­vis­ers 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,” it stat­ed.

TPHL said with re­spect to the grant of a new li­cence by Her­itage “it 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,” it stat­ed.

“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,” TPHL stat­ed.

The set­tle­ment

The TPHL board said it was made aware by its in­ter­na­tion­al fi­nan­cial ad­vis­ers 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.

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 mil­lion 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 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$2.2 mil­lion.