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The Kurdistan Regional Government has notified Genel Energy of its intention to terminate the production sharing contracts for two natural gas projects, the London-listed oil and gas firm said on Friday.
Genel has received notice from the Ministry of Natural Resources of the Kurdistan Regional Government of its intention to terminate the Bina Bawi and Miran PSCs, the company said in a statement.
“Genel believes that the KRG has no grounds for issuing its notices of intention to terminate,” said the firm, which has had to wait for months for payments from the KRG for oil sales.
In July, Genel said it had received payments for oil sales for May 2021, and the firm is now owed $141 million from the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020.
Referring to the two natural gas licenses the KRG plans to revoke, Genel Energy said that it “wishes to continue operations under the PSCs and to work with the KRG on the development of these fields.”
Genel reached an agreement with the KRG in September 2019 to develop the fields, but since then, it “has found it difficult to engage the KRG under the PSCs to obtain the necessary approvals to proceed with the development of the assets, and every effort has been made to obtain these so that the projects can be progressed.”
Genel vowed to take steps to protect its rights under the PSCs and, if necessary, seek compensation, including for its material investment.
“As a first step, Genel intends to issue notice of dispute to the KRG under each PSC, contesting the right of the KRG to issue any such termination notice and, in doing so, trigger an obligation to hold good faith negotiations to resolve this matter promptly and without the need for either party to refer the matter to international arbitration,” the company said.
Following the announcement, Genel Energy (LON: GENL) shares slumped by 10 percent in London at 2 p.m. local time.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com