Primeline turns against CNOOC

Chinese energy company Primeline Energy said on Wednesday it would start arbitration proceedings against oil giant CNOOC.

The move follows the arbitration proceeds initiated by Primeline Energy last month against Zheijang Gas, relating to a dispute over non-payment for gas from an offshore gas field in China.

Primeline Energy has now, as previously announced, turned against CNOOC, its partner in the field in question.

Namely, Primeline Energy asserts that CNOOC didn’t do enough to enforce payments from Zheijang for gas taken from their jointly run LS36-1 gas field offshore field in the East China Sea.

The company says the subject of the CNOOC Arbitration includes claims in respect of CNOOC’s mismanagement in relation to the development of LS36-1 and breach of fiduciary duties as agent under the Gas Sales Contract.

Zheijang dispute on ice

Following the launch of arbitration against Zheijang, Zheijang challenged Primeline’s assertions as invalid at court, saying Primeline had no jurisdictional basis from Primeline to initiate the arbitration proceeds against Zheijang, as the gas sales deal was signed between Zheijang and CNOOC, and not between Zheijang and Primeline.

Thus, the arbitration has been put on ice until the court resolves the claim launched by Zheijang.

Primeline said it may face default under its project finance loan with China Development Bank, China Export and Import Bank and Shanghai Pudong Development Bank, without full payment from Zhejiang Gas and continued operation of LS36-1 by CNOOC operator.

Primeline added it was in discussions with the banks to secure its support during the Zhejiang Gas Arbitration and CNOOC arbitration.