The Financial Express

Azerbaijani firm files case against Bapex

| Updated: February 24, 2021 19:43:34

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Azerbaijani firm files case against Bapex

Azerbaijan's state-run oil and gas company Socar AQS lodged a lawsuit against Bapex in international court over the long-pending dispute over payment regarding drilling of onshore gas-wells.

Socar recently filed the case in the Singapore International Arbitration Centre (SIAC), seeking compensation in connection with its onshore drilling job in Bangladesh.

Hearing of the case has not yet started, said a senior official of the state-run Bangladesh Petroleum Exploration and Production Company Ltd (Bapex).

Currently, the state-run Petrobangla and its subsidiary Bapex have a pending case against Canadian oil and gas exploration firm Niko Resources in the International Centre for Settlement of Investment Dispute (ICSID).

Final verdict from the ICSID is expected soon, said a senior Petrobangla official.

Sources said Socar ASQ was appointed by Bapex in 2017 for drilling three onshore gas wells at a cost of around US$33 million.

The Azerbaijani firm was paid around $11.8 million against its drilling of Semutang South-1 gas-well in Khagrachhari under Chattogram division.

Semutang is the lone well that Socar AQS drilled among the three Bapex-owned gas-wells. The well was found dry after drilling.

Begumganj-4 in Noakhali and Madrganj-1 in Jamalpur were the two other gas-wells that Socar was bound to drill under the contract with Bapex.

The dispute between Socar and Bapex surfaced when the former moved to drill the Begumganj well, claiming an additional amount of $6 million in advance for its preparatory works.

The Azerbaijani firm, in a letter in June 2019, informed Bapex of its decision to terminate the contract, as it was not 'paid within 28 working days of completion of works'.

Socar, however, took almost double of its stipulated time to complete the drilling, it has been alleged.

The cost for drilling by Socar was among the lowest compared to other foreign firms involved in similar drilling job under deals with Bapex, it claimed.

Socar left the country without finishing the drilling job it was assigned for, a senior Petrobangla official said.

The exit of Socar from Bangladesh, meanwhile, put around half a dozen local and global oil and gas service providers in a fix, as the Azerbaijani firm kept its dues to those service providers unpaid.

This is the first incident in the country's oil and gas sector that an international oil company left its drilling job unfinished without clearing dues to the relevant service providers.

The firms that are yet to get payments from Socar against their services include - Schlumberger, Derrick Solutions International, KN Harbour, Arnib and KS International.

Socar AQS owes around Tk 380 million to these firms in total, industry insiders said alleged.

These oil and gas service providers were assigned by the Azerbaijani firm for different sorts of works to facilitate drilling of gas-wells.

They provided various drilling equipment, including rig, following successful negotiations with Socar.

But the company did not pay charges to these firms, either partially or fully, despite taking their services, they alleged.

Most of these firms wrote several times to Socar AQS to give their outstanding payments.

Some of these firms also sought return of their delivered goods in case of Socar's failure to clear payments.

After receiving no feedback from the Azerbaijani firm, they also wrote to the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources, Petrobangla and Bapex to have a remedy.

Bapex has been awarding drilling jobs to international oil and gas exploration companies over the past several years, due to technical and manpower bottlenecks.

Currently, the country's overall natural gas production is around 2,890 million cubic feet per day (mmcfd), including the supply of re-gasified liquefied natural gas (LNG) to the tune of around 400 mmcfd, according to Petrobangla statistics as on February 21.

Gas production from the Bapex-owned eight gas-fields was around 92 mmcfd against their total production capacity of around 145 mmcfd.

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