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PETROBANGLA, CHEVRON PREPARE FOR LEGAL BATTLE OVER PAYMENT DISPUTEDHAKA, 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) |