Shares in Genel Energy opened down more than five percent on Friday morning, before recovering some ground, after the company said it will claim compensation from the Kurdistan Regional Government (KRG).
It says the claims, which relate to KRG's intention to terminate the Bina Bawi and Miran production sharing contracts (PSCs) are "substantial", and will be brought in a London-based international arbitration.
The statement from the company this morning:
Genel Energy plc ('Genel') provides the following update on the Bina Bawi and Miran Production Sharing Contracts ('PSCs').
Further to Genel's announcement of 20 August 2021 that notices of intention to terminate the Bina Bawi and Miran PSCs had been received from the Ministry of Natural Resources of the Kurdistan Regional Government ('KRG'), Genel has received from the KRG formal notices purporting to terminate the PSCs. The KRG has also stated that, pending resolution of the dispute as to whether such notices are effective to terminate the PSCs, it will not perform those obligations under the PSCs that would enable Genel to progress the development of the Bina Bawi and Miran fields.
Since entering into the PSCs in February 2017, Genel has made every effort to engage with the KRG on the development of the Bina Bawi and Miran fields and has submitted numerous development proposals to the KRG for its approval. However, the KRG has for some time made clear its intention not to permit the development of the fields in accordance with the terms of the PSCs.
In these circumstances, the Board has concluded that it is left with no practical alternative but to accept that the PSCs are terminated as a consequence of the KRG's repudiatory breach and to claim compensation from the KRG. Genel's claims are substantial and will be brought in a London seated international arbitration to be commenced in accordance with the disputes process set out in the PSCs.
Genel has a long and constructive relationship with the KRG, and continues to work with the KRG on the development of our other assets, as we look to deliver our mutual goal of increasing production in the KRI for the benefit of all stakeholders.
Genel will update the market on future developments.
Following the termination of the PSCs, the balances associated with holding title to these PSCs will be derecognised and therefore removed from the balance sheet.
(Source: Genel Energy)