Pitkin Petroleum, a subsidiary company of PXP Energy Corporation chaired by businessman Manuel V. Pangilinan, has formally served a ‘notice of dispute’ and seeks US$100 million claims against Australian partner Karoon Gas Australia Limited on the latter’s alleged breach of drilling commitment for a petroleum exploration venture in Peru.
PXP Energy said the dispute arose from the Australiam firm’s “breach of obligation to Pitkin Petroleum Z-38 SRL to drill a second well in Peru Block Z-38 located in offshore Peru.”
The company added that the failure of Karoon Gas to drill the second well prompted the Pangilinan-led firm to demand “for damages and other reliefs resulting from the breach at an amount in excess of US$100 million.”
PXP Energy has 53.43-percent shareholdings in Pitkin; and Pitkin in turn, has 25-percent participating interest in the Peru Block Z-38 venture.
The Perupetro license contract for the exploration of hydrocarbons in Block Z-38 in Peru has been granted by the Peruvian government in April 2017.
In the joint operating agreement (JOA) between Pitkin and Karoon’s KEI (Peru Z-38) Pty Ltd Sucursal del Peru or KEI, it was stipulated that the latter “has an obligation to drill a second well, if not in the third period of the exploration phase under the contract, then in the fourth period of the exploration phase.”
As explained, this is part of the required fourth period work program in the Peru petroleum exploration venture for Block Z-38.
The agreement between Pitkin and KEI further fleshed out that if “the second well is not drilled in the period of the exploration phase,” then there are conditions that the Australian firm must adhere to.
Firstly, KEI will need “to satisfy or procure satisfaction of the contractor’s guarantee obligations under Clause 3.10 of the contract until such time as the second well has been drilled in the fourth exploration phase.”
Secondly, the Australian firm has “to pay Pitkin’s participating interest (25%) share of all expenditure – as defined in the farm-in agreement – incurred under the contract and JOA during the required fourth period work program until such time as the second well has been drilled and all drilling operations relating to the second well have been completed.”
PXP Energy, nevertheless, noted that KEI has already manifested its reluctance to enter the fourth exploration phase for Block Z-38, hence, suggesting that it “will not comply with the second well obligation or the Pitkin carry obligation.”
It is anchored on that premise then that Pitkin served the notice of dispute relating to the alleged infraction on the well drilling commitment of the Australian company, adding that “KEI is in breach of its obligations to Pitkin by not entering into the fourth exploration phase. “