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PETROBANGLA, CHEVRON PREPARE FOR LEGAL BATTLE OVER PAYMENT DISPUTE
DHAKA, Mar 17, 2009 (AsiaPulse via COMTEX) --
Petrobangla and the US-based
international oil company Chevron are preparing for a legal
battle in the World Bank's independent arbitration court over 4
percent charge taken from the IOC for the use of gas
pipeline.
The final hearing on the dispute will take place at the
World Bank's International Centre for Settlement of Investment
Disputes (ICSID) in London on May 18.
The dispute over the 4 percent wheeling charge is a
longstanding issue between the government corporation
(Petrobangla) and the foreign company (Chevron), which has
stemmed from a difference of opinion between the parties
regarding the use of the pipeline.
Petrobangla has been deducting 4 percent money as wheeling
charge from the payments it make to Chevron for gas purchase
from Jalalabad gas-field operated by the American company under
production-sharing deals.
Chevron maintains that the 4 percent wheeling charge is not
applicable as Petrobangla's own pipeline is being used to
transport the gas from Chevron's Jalalabad field to
Petrobangla's third-party clients.
The same is true in the case of gas from Bibiyana and
Moulvibazar - the two other hydrocarbon mines operated by
Chevron.
The company is sticking to its opinion that the gas from all
three of its fields is being supplied only to Petrobangla, and
to no other third parties, and so levying the 4 percent
wheeling charge is invalid.
On the other hand, Petrobangla says that it deducts the
charge as per provisions of the Production Sharing Contract
(PSC) and gas sales and purchase agreement (GPSA) and that
Chevron made no objection to it at the beginning.
Since the beginning of the dispute, both sides have tried to
settle their conflict amicably through means allowed in the
PSC. Having failed, the parties took the option of referring
the dispute to ICSID for arbitration.
Initially, Petrobangla sought to fight this legal battle in
the local court, but finally it agreed to move on to ICSID,
which is the proper venue as regards the PSC.
In August last year, both sides placed their arguments and
supportive documents in favour of their respective claims at
the hearing held at The Hague's ICSID office. Petrobangla's
lawyer Dr Kamal Hossain made a submission on the issue while
Chevron's also made submission.
"We are taking a full-dress preparation to make our argument
in the ICSID. We're fully confident about winning the legal
battle," said a Petrobangla director, Major (Retd) Muktadir
Ali.
According to Petrobangla officials, the state-owned agency
would have to pay back about $40 million to Chevron if it lost
the case at the ICSID.
About the arbitration, Chevron's Bangladesh president Steve
Wilson said, "Chevron is confident about the strengths and
merits of its case. We are not commenting further until the
International Centre for Settlement of Investment Disputes
(ICSID) rules on this issue."
Despite the dispute, both sides have been working on
maintaining a professional and commercial relation.
Officials claimed that recently Chevron and Patrobangla came
up with an innovative solution to bypass problems linked with
various bottlenecks in the pipeline system, by installing a
spur line at Jalalabad.
The pipeline is supposed to be commissioned later this month
and it will bring an additional 60-80 MMSCFD gas production to
the northeastern part of the country.
"We have always honoured the PSCs, which were based on
Petrobanglas own model and whose dispute-resolution clauses
direct for ICSID arbitration," said one official of the
company.
Chevron will respect the ICSID verdict, regardless of which
party it favours.
"Whether Chevron wins or lose the arbitration, we are
committed to abiding by and honouring the decision of the ICSID
arbitration tribunal," he added.
(UNB)
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