Four years after Petrotrin prematurely ended a contract with A&V Oil and Gas Ltd, in what became known as the “fake oil scandal,” Trinidad Petroleum Holdings Ltd (TPHL) on Tuesday announced a settlement in an arbitration dispute with A&V Oil, which it described as a “win-win for Petrotrin, TPHL and TT.”
A&V Oil will receive $18 million as full and final payment for any and all damages suffered by it in connection with the termination of the production sharing contract.
TPHL said this settlement avoids the payment of millions of dollars in damages to A&V Oil, which was awarded by an arbitration panel. In addition to the $18 million payment, A&V Oil will get a new exploration licence with national oil company, Heritage Petroleum.
Heritage will enter into an enhanced production service contract (EPSC) with A&V Oil for the purchase of crude oil for a period of ten years as an indication of the cordial nature of the settlement.
On a political platform four years ago, Opposition Leader Kamla Persad-Bissessar alleged that A&V Oil, owned by Nazim Baksh, was charging the State for oil not actually produced. Petrotrin subsequently investigated the claims and ended A&V Oil’s drilling contract for crude from the Catshill field in Rio Claro.
Petrotrin was later restructured with the interest vested in TPHL. A&V Oil sought legal redress.
In June, A&V Oil successfully argued its case before an arbitration panel headed by former president of the Caribbean Court of Justice, Sir Dennis Byron. The panel said it found no evidence of corruption by A&V Oil.
The panel unanimously awarded a payment of TT$84,699,879.47 that Petrotrin held in escrow in relation to sums due on its unpaid invoices from June 1, 2017 to December 31, 2017, together with interest at a 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 to Petrotrin during January 1, 2018 to February 28, 2018, in the amount of US$2,284,398.40 together with interest at a rate of three per cent per annum, from the date when each payment fell due until the date of the award.
The State was urged to appeal the arbitration.
TPHL said the settlement is rooted in the partial award delivered on June 11 by the arbitration panel.
It said it explored its options carefully, considering the consequences of having the award set aside which could have brought additional costs of over $1 billion, with little chance of success. The opinions of two legal luminaries – Rolston Nelson, SC, and Simon Hughes, QC, 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," TPHL said.
The board also noted that the decision of the arbitration panel, was not only firm but unanimous and conscious of the advice it received that setting aside a decision of an arbitration panel is not an easy task, as courts are minded to respect the decisions of arbitrators, unless the decision can be shown to be entirely unsupportable.
Legal costs and expenses incurred by A&V Oil in the arbitration proceedings are still to be agreed by the parties.