Payment Dispute: Petrobangla, Chevron face off in int’l court on May 18

An international arbitration to settle payment dispute between the state-owned Petrobangla and the US-based oil company Chevron will take place on May 18 in London.

Chevron lodged the case with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) on the dispute over the payment of 4 percent wheeling charge for transmitting its gas into the national grid.

To face the arbitration, a Petrobangla team, led by its acting chairman Muktadir Ali, left Dhaka for London yesterday.

Petrobangla’s lawyer, Dr Kamal Hossain, who is now abroad, will lead a panel of lawyers in the international court of arbitration.

Official sources said Energy Secretary Mohammad Mohsin, who is now in Europe, may join the arbitration to lead the Bangladesh team.

Both the Petrobangla and the international oil company had taken hectic preparation for the face-off in the final hearing at the World Bank’s independent arbitration court.

The dispute on 4 percent wheeling charge is a longstanding issue between Petrobangla and Chevron.

Petrobangla has been deducting 4 percent wheeling charge from its payments to Chevron for the purchase of gas from Jalalabad gas field. A pipeline is being used to carry the gas from the Chevron’s Jalalabad field into Petrobangla’s own network.

Chevron claims that the 4 percent wheeling charge deduction is ‘illogical’ as the pipeline belongs to Petrobangla and it is used for carrying gas to Petrobanbgla’s own selling point.

The company contends that the 4 percent wheeling charge is applicable only if it uses Petrobangla’s pipeline to supply gas to other parties, but it has been supplying gas from the three gas fields — Jalalabad, Moulvibazar and Bibiyana — to only Petrobangla.

On the other hand, Petrobangla says that it has been deducting the 4 percent charge from the very beginning as per GPSA and Chevron had no objection to it.

Since the beginning of the dispute, both sides tried to settle their conflict through negotiations. But when they failed, they opted for legal battle.

Initially, Petrobangla was willing to face the legal battle in the local court, but finally it agreed to move to ICSID.

In August last year, both the sides placed their initial arguments and supportive documents in favour of their respective claims at the hearing held at in Hague ICSID office.

According to Petrobangla officials, the state-owned agency would have to pay back about $ 40 million to Chevron if it lost the case in ICSID.

Sources said Chevron “continues to work with Petrobangla to meet Bangladesh’s current energy demand and reduce the country’s dependence on imported energy”.

Despite the dispute, both sides are working maintaining a professional and commercial relation.

Source: The Daily Star, 15 May 2009


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