The Press and Journal (Aberdeen and Aberdeenshire)
Repsol sets aside £697m in dispute with Sinopec
Joint venture: Spanish oil company is expected to challenge latest ruling
A Spanish oil giant has set aside nearly £700 million in case it ends up on the wrong side of a longrunning dispute over a UK North Sea joint venture (JV).
A tribunal recently made a “partial award” to Chinese firm Sinopec and its Canadian subsidiary Addax over the JV – Repsol Sinopec Resources UK (RSRUK), headquartered in Aberdeen.
Madrid-based Repsol said it expected to challenge the latest ruling, which did not allocate compensation to the complainants.
“The amount of compensation that could be due is not known ”
Arbitration proceedings were launched in 2015 by Sinopec in a bid to recover the £1.15 billion its Addax subsidiary paid three years earlier for 49% of Talisman Energy’s UK North Sea business.
Sinopec argued the acquisition fee was too high and wanted further compensation to cover “any additional investment” and “loss of opportunity”.
It is demanding total compensation of £4.2bn.
Repsol became embroiled in the dispute after it bought Talisman for £6.4bn in 2015, a deal that gave it 51% of RSRUK, formerly Talisman Sinopec Energy UK.
In 2016, Repsol published a statement in which it described the legal action as “groundless” and “inconsistent with the loyalty to be expected from a business partner”.
Precious little detail about the case has been made public since then, but Repsol has now provided an update.
It said the tribunal in 2017 issued a “first partial award” dismissing all warranty claims made by Addax and Sinopec.
Judges also decided to split the proceedings into two phases – the first covering liability and second dealing with the “quantum of any liability found”.
The case edged forward earlier this year, when the tribunal found the Talisman subsidiaries acquired by Repsol were liable in relation to one “aspect” being assessed, but the tribunal’s work is far from finished and it is looking at five aspects as part of the liability phase.
Repsol said it did not know when the tribunal would rule on the remaining matters.
No timetable has been set for the next phase of the proceedings but a resolution is not expected before the first quarter of 2022, the Spanish firm added.
Repsol said it expected to challenge the most recent partial award before the Singaporean courts.
The amount of compensation that could be due is not known, but in an exercise of “prudence” Rep sol set aside £697 min its financial statements at the end of last year “for the entire litigation”.
RSRUK operates about eight currently-producing installation sin the UK North Sea, as well as the Flotta terminal in Orkney.
Last year, it reached an agreement for Global Energy Group, of Inverness, to take over the operation of the Nigg oil terminal jetty in the Cromarty Firth.
Seemingly unfazed by the legal action rumbling on in the background between its owners, RSRUK recovered from pre-tax losses of £3.7bn in 2014 to post profits of more than £1.3bn for 2018.