Chevron barred from approaching ICSID to settle payment dispute
Wednesday, 25 July 2007
M Azizur Rahman
A District Judge's court issued an injunction Sunday on the oil company Chevron Bangladesh, for preventing it from approaching the International Centre for Settlement of Investment Disputes (ICSID) to settle its dispute with Petrobangla over payment of gas.
The court also ordered Chevron to follow the gas purchase and sales agreement (GPSA) and production sharing contract (PSC) to settle the dispute.
The third district judge Shahinur Parvin in its verdict also turned down a Chevron appeal for quashing the case, filed by Petrobangla.
Earlier the High Court sent back to the lower court an appeal made by Chevron for quashment of the case.
Sources said the state-owned gas entity, Petrobangla, sued Chevron Bangladesh with the district court in the capital April last for its PSC and GPSA violations, signed between the two parties.
In the case, the Petrobangla had accused Chevron of breaching the agreements of the PSC and the GPSA through filing an arbitration suit with the ICSID over the "wheeling charges" of gas produced from Jalalabad gas field, a senior Petrobangla official told the FE Tuesday.
Chevron did not opt for settling the dispute in line with provisions of the PSC and the GPSA, the Petrobangla said.
Chevron, in April 2006, lodged an arbitration suit with the ICSID, an institution of the World Bank group, demanding payment of four per cent of the gas sale proceeds from Jalalabad gas field as wheeling charge over the years.
Chevron made the government of Bangladesh (GoB) defendant along with Petrobangla in the international arbitration centre.
In the case filed with the district court, the Petrobangla also accused Chevron of making the GoB defendant along with Petrobangla in the arbitration although the government was not a party to the GPSA.
"We have not received the certified copy of the order yet. We will be happy to discuss the issue when we receive it," a senior Chevron official told the FE Tuesday.
Sources said Petrobangla has been deducting 4.0 per cent from the price it has been paying to the company for the Jalalabad gas over the past eight years as wheeling charge while Chevron or its predecessor Unocal has been objecting to such payment.
Chevron's predecessor Unocal had threatened several times that it would go for arbitration over the issue before it finally lodged the complaint.
Petrobangla argues that as per the PSC and the GPSA, Chevron should pay 4.0 per cent of the gas sales as wheeling charge for transmission of gas to the national grid up to the point from where it is being marketed.
This payment goes to the Gas Transmission Company Limited (GTCL), a subsidiary of Petrobangla.
Chevron, however, argues that it is its responsibility for delivering the gas up to the national grid and once the gas enters the national grid, the company does not have any obligation and, therefore, it will not pay for the gas transmission.
In its arbitration suit, Chevron demanded around US$14 million initially for the 4.0 per cent share of gas it had provided to Petrobangla over seven years until 2006.
Chevron is currently producing gas amounting to 530 million cubic feet per day (mmcfd) from three gas fields - Jalalabad, Moulavibazar and Bibiyana.
Chevron is the successor of the Unocal, that took over the assets and liabilities of another US oil giant Occidental in Bangladesh.
Occidental was blamed for a massive gas field blowout at Magurchhara, in the country's northern gas-rich Sylhet region, in 1997.
Debate over the compensation of that gas field blowout is still continuing.
A District Judge's court issued an injunction Sunday on the oil company Chevron Bangladesh, for preventing it from approaching the International Centre for Settlement of Investment Disputes (ICSID) to settle its dispute with Petrobangla over payment of gas.
The court also ordered Chevron to follow the gas purchase and sales agreement (GPSA) and production sharing contract (PSC) to settle the dispute.
The third district judge Shahinur Parvin in its verdict also turned down a Chevron appeal for quashing the case, filed by Petrobangla.
Earlier the High Court sent back to the lower court an appeal made by Chevron for quashment of the case.
Sources said the state-owned gas entity, Petrobangla, sued Chevron Bangladesh with the district court in the capital April last for its PSC and GPSA violations, signed between the two parties.
In the case, the Petrobangla had accused Chevron of breaching the agreements of the PSC and the GPSA through filing an arbitration suit with the ICSID over the "wheeling charges" of gas produced from Jalalabad gas field, a senior Petrobangla official told the FE Tuesday.
Chevron did not opt for settling the dispute in line with provisions of the PSC and the GPSA, the Petrobangla said.
Chevron, in April 2006, lodged an arbitration suit with the ICSID, an institution of the World Bank group, demanding payment of four per cent of the gas sale proceeds from Jalalabad gas field as wheeling charge over the years.
Chevron made the government of Bangladesh (GoB) defendant along with Petrobangla in the international arbitration centre.
In the case filed with the district court, the Petrobangla also accused Chevron of making the GoB defendant along with Petrobangla in the arbitration although the government was not a party to the GPSA.
"We have not received the certified copy of the order yet. We will be happy to discuss the issue when we receive it," a senior Chevron official told the FE Tuesday.
Sources said Petrobangla has been deducting 4.0 per cent from the price it has been paying to the company for the Jalalabad gas over the past eight years as wheeling charge while Chevron or its predecessor Unocal has been objecting to such payment.
Chevron's predecessor Unocal had threatened several times that it would go for arbitration over the issue before it finally lodged the complaint.
Petrobangla argues that as per the PSC and the GPSA, Chevron should pay 4.0 per cent of the gas sales as wheeling charge for transmission of gas to the national grid up to the point from where it is being marketed.
This payment goes to the Gas Transmission Company Limited (GTCL), a subsidiary of Petrobangla.
Chevron, however, argues that it is its responsibility for delivering the gas up to the national grid and once the gas enters the national grid, the company does not have any obligation and, therefore, it will not pay for the gas transmission.
In its arbitration suit, Chevron demanded around US$14 million initially for the 4.0 per cent share of gas it had provided to Petrobangla over seven years until 2006.
Chevron is currently producing gas amounting to 530 million cubic feet per day (mmcfd) from three gas fields - Jalalabad, Moulavibazar and Bibiyana.
Chevron is the successor of the Unocal, that took over the assets and liabilities of another US oil giant Occidental in Bangladesh.
Occidental was blamed for a massive gas field blowout at Magurchhara, in the country's northern gas-rich Sylhet region, in 1997.
Debate over the compensation of that gas field blowout is still continuing.