PXP Energy, through subsidiary Pitkin Petroleum Z-38 SRL, has launched a case against Australian partner Karoon Gas Australia Limited for breach of its obligation to drill a second well in its service contract area off Peru’s Pacific coast.
In a disclosure to the Philippine Stock Exchange on Tuesday, PXP said that Pitkin is demanding a settlement of at least $100 million (around Php4.81 billion) from Karoon as claims and damages for failing to deliver on its contract.
Pitkin, which is 53.43% owned by PXP Energy, has a 25% stake in Peru Block Z-38.
PXP pointed out that Karoon subsidiary KEI Sucursal del Peru, the block’s operator, was supposed to drill the second well during the third exploration phase, in compliance with its contract. Otherwise, KEI should continue drilling until the fourth period of the exploration phase, which began on May 25.
The Manny V. Pangilinan-led firm cited KEI’s April 23 letter, saying that “in its own capacity and not in its capacity as operator…will not take any action to extend the term of the contract or any exploration phase, including by seeking to enter into the fourth period of the exploration phase.”
“KEI is in breach of its obligations to Pitkin by not entering into the [fourth exploration phase],” PXP responded in the disclosure.
PXP also said that Karoon required is to pay Pitkin’s participating interest of 25% in all expenses accumulated until it completes the second well.
Karoon likewise said in its letter that: “If Pitkin wishes to exercise its rights by entering into the [fourth exploration phase], KEI would exercise its rights to withdraw from the Joint Operating Agreement.”
PXP said that this implies that KEI does not intend to comply with its second well obligation.
Map image from PXP Energy website.
