Sinopec Files $5.5Billion Claim Against Repsol Over Failed North Sea Projects
Repsol says it faces a $US5.5 billion arbitration claim from a Chinese state-controlled energy firm, adding to problems tied to one of the Spanish oil company’s largest acquisitions.
Sinopec International Petroleum Exploration and Production and its subsidiary Addax Petroleum UK are seeking compensation to cover their initial investment in 2012 in a venture in the British North Sea with Talisman Energy, a Canadian company that Repsol bought last year for $US8.3bn, excluding debt.
The claim also included “lost opportunities” from the British joint venture that has stakes in 57 North Sea oil and gas fields and related infrastructure, including pipelines and processing facilities, Repsol said on Friday.
Repsol said the $US5.5bn claim was groundless and had been classed as “remote risk” by the firm’s legal advisers. It said the claim, which was filed in Singapore, reflected Sinopec’s belief that its $US1.5bn investment in the British venture “has not delivered the results expected”.
Addax confirmed it and Sinopec had filed arbitration proceedings to collect at least $US5.5bn, but declined to provide further details, citing confidentiality obligations between the parties.
Sinopec wasn’t immediately reachable for comment.
The news is the most recent wrinkle for Repsol’s acquisition of Talisman, completed in May last year.
The Talisman deal was meant to bring new production capacity for a company that saw a large portion of its resources wrested away by a populist Argentine government in 2012. Folding in Talisman, a Canadian owner of shale acreage and offshore oil rigs, nearly doubled Repsol’s daily oil output and lowered the Spanish company’s exposure to volatile Latin American economies by increasing its exposure to North America.
But the purchase expanded the Spanish company’s debt as revenue and profit fell during the oil-price slump.
Repsol announced the transaction at the end of 2014, some six months into what has become a two-year-long rout in oil prices that has forced the entire industry to rein in spending.
At the time of the deal’s announcement in December 2014, oil prices had already more than halved from their midsummer peak of about $US115 a barrel. Hopes for a price recovery last year faded as a supply glut filled up crude storage tanks and weighed on markets.
Repsol’s profits have plunged and the company has lowered its dividend.
