Frontier: Arbitrator appointed to handle dispute with UMW-OG

PETALING JAYA: The Philippines-based oil and gas group Frontier Oil Corp said the Singapore International Arbitration Council has appointed an arbitrator to manage the dispute over an alleged breach of US$20 million (RM76.20 million) drilling contract in northwest Palawan in the Philippines.

On April 10, oilfield and drilling services provider UMW Oil & Gas Corp Bhd (UMW-OG) stated in its filing with Bursa Malaysia that the group had filed a lawsuit against Frontier, seeking compensation for the alleged breach of contract.

UMW-OG said the group was seeking an award for damages and/or compensation for all losses arising from Frontier’s breach of contract, but not limited to the early termination fee amounting to US$19.2 million.

“Frontier has a robust defence against the claim and takes the view that UMW had no basis to terminate the drilling contract. As a consequence of UMW’s unlawful termination of the drilling contract, Frontier has suffered significant losses, which will be determined in the arbitration,” Frontier said in a statement yesterday.

Initially, both parties signed a drilling contract in September 2014, with UMW-OG to provide a drilling unit, UMW Naga 7, and other related services to drill, deepen, sidetrack, work over, re-enter, tie back, and conduct any other such operations on a well.

The services were to be rendered by UMW-OG until the completion of each well as a producing well or have each well suspended, plugged, and/or abandoned.

In return for these services, Frontier was to arrange the issuance of a bank guarantee of US$5 million and an advance payment of US$15 million before the deadline on Dec 15, 2014. However, Frontier did not arrange for the bank guarantee and the advance payment.