Sinopec slaps Repsol with $5.5B arbitration notice

Spanish oil company Repsol has been served a $5.5 billion arbitration notice by China’s Sinopec.

Sinopec, together with its subsidiary, Addax Petroleum UK, has served the arbitration notice to Repsol’s subsidiaries Talisman Energy and Talisman Colombia.

According to a statement by Repsol, Sinopec and Addax are demanding a payback of around $5.5 billion for their 2012 investment in Addax and Talisman joint company Talisman Sinopec Energy UK (TSEUK), a company involved in exploration and production in the UK sector of the North Sea. Repsol further said that, at the same time, Addax intends to maintain its current stake in TSEUK.

Offshore Energy Today has reached out to Repsol, and TSEUK, seeking more info on these reports. We will update the article if and when we get a response.

To remind, the Spanish oil company bought Talisman Energy, incorporated in Canada, for $8.3 billion. The takeover was officially completed in May 2015.

Talisman Sinopec Energy UK , based in Aberdeen, Scotland, and the alleged reason for the arbitration, was created in 2012 as a joint venture between Talisman Energy Inc. and Addax Petroleum UK Limited, a wholly-owned subsidiary of China Petrochemical Corporation (Sinopec Group).

According to the info on TSEUK website, Repsol’s acquisition of Talisman Energy Inc included its 51% equity interest in the TSEUK joint venture.

Groundless claims

Responding to the arbitration claim, Repsol on Friday said that “the arbitration claim is groundless and is inconsistent with the loyalty to be expected from a business partner. ”

“The claims have commenced almost three years after Addax acquired a stake in TSEUK, even though Addax has participated at a management level and in all decisions adopted by TSEUK since then, without expressing any worries or concerns. Addax’s has chosen to commence legal proceedings trying to gain an illegitimate advantage in its own benefit instead of devoting all efforts to improving TSEUK’s performance, as it has occurred in the past months since Repsol’s entry into the Joint Venture, something that might explain its desire to remain as a shareholder in TSEUK,” Repsol said.

TSEUK, expected to be rebranded into Repsol Sinopec Resources UK, has interests in 49 fields, of which it operates 38, on the UK Continental Shelf.

Analyst surprised

Commenting on the arbitration notice new, analysts at BBVA said: “While we are surprised by Sinopec’s proceedings against Repsol after recent changes at
TSEUK, we do not expect these arbitration proceedings to result in any compensation payable and we continue to grant no value to Repsol’s interests in the North Sea. We do not expect negative implications for the development of Repsol’s and Sinopec’s joint interests in Brazil (60% Repsol: EUR1.6/ share in our valuation of Repsol.”

Addax confirms

Responding to Offshore Energy Today’s request for comment, Addax Petroleum said the following: “We confirm that Sinopec International Petroleum Exploration and Production Corporation and Addax Petroleum UK Limited have commenced arbitration proceedings against two subsidiaries of Repsol S.A. and that a Statement of Claim has been filed in the proceedings, seeking damages of at least US$5.5 billion. The arbitration proceedings are subject to strict confidentiality obligations between the parties, which Sinopec intends to comply with, and accordingly we will make no further comment on the dispute.”

Offshore Energy Today Staff