CGX Resources Inc. has obtained from the Commercial Court of Guyana an injunction order restraining Repsol Exploracion from proceeding with its announced 30 per cent farm-out of the Kanuku petroleum prospecting license to RWE Dea AG.The ruling was made on Friday, January 17, by Justice Rishi Persaud, sitting in the Commercial Court in Guyana, and is pending the hearing and determination of the arbitration proceedings commenced by CGX Resources against Repsol, according to an announcement made by parent company CGX Energy Inc. yesterday.

CGX Chief Executive Officer Dewi Jones said, “CGX Energy is pleased with the decision of the Commercial Court, and will continue to work towards protecting the interests of its shareholders by pursuing this claim against Repsol.”

MOVE TO THE COURTS
The parent company announced, on December 23, 2013, the commencement of an arbitration proceeding under the rules of the London Court of International Arbitration. The legal proceeding against Repsol is in connection with the expiry of the petroleum prospecting license covering the Georgetown Block.

CGX contends that Repsol allowed the jointly-held Georgetown license to lapse, contrary to is obligations as operator of the block, and then also in bad faith immediately applied for sole ownership of the Kanuku license, covering essentially the same area as the Georgetown license, thereby excluding CGX’s shareholders from their rightful stake in the license.

On December 30, 2013, Repsol announced that it had reached agreement to farm-out 30 percent of the Kanuku License to RWE Dea, despite CGX’s legal challenge. However, regulatory approval from the GGMC had not yet been procured by Repsol.

In view of Repsol’s announcement of an intended farm-out, CGX sought injunctive relief in Guyana to prevent Repsol from farming out the license until the court of arbitration had ruled on the matter.

In a statement released yesterday, CGX has advised that its challenge is related solely to Repsol, and that the issue at hand is a corporate matter and in no way impugns any regulatory agencies within Guyana.

The company has also expressed its interest in continuing in the license with or without Repsol, and did so in accordance with the terms of the JOA.

Repsol, in turn, has unilaterally decided not to pursue renewal of the license, and then seek a new license on its own.

GOING FORWARD
Also commenting on the court’s decision was the company’s co-Chairman, Professor Suresh Narine.
He said, “When the Georgetown Block partners decided to cease drilling and plug the Jaguar 1 well due to safety considerations, CGX Energy immediately indicated its intention to continue exploring the Georgetown Block, because we strongly believe in its prospectivity, as we indeed strongly believe in the prospectivity of the Guyana-Suriname Basin.

“This latest step with the courts in Guyana seeks to further protect our shareholders’ rights with regards to the results uncovered by the Jaguar 1 well.

“CGX Energy has a long history of operating and in supporting law and order in the basin, and this injunction is a significant endorsement of those who want to ensure an orderly functioning of the petroleum industry in Guyana, as more players enter into the basin.”

The company, in its statement, made it clear that it is “highly motivated” to speedily resolve the issue, so that it and its partners can “expeditiously continue activities designed to realize the goals of its shareholders and the Government and people” of Guyana.
Those stated goals are: to find commercial quantities of petroleum in the basin. It is therefore open to Repsol to negotiate a satisfactory and speedy conclusion to this issue.

The company’s general counsel, Michael Galego, commenting on the company’s move forward, said: “CGX is still very much committed to exploring the Guyana-Suriname Basin, and we hope that we can resolve this dispute with Repsol and move forward with drilling our next well.”

CGX tried to engage Repsol constructively to resolve this dispute, around the middle of last year. However, Repsol declined to engage in any discussions.
The consensus among stakeholders is that the decision not only ensures that no move can be made by Repsol before the matter is resolved, and therefore prevents the situation from becoming complicated, but also it sends a strong message internationally that the legal landscape in Guyana is one which is in accordance with international law, and that all companies can rely on a robust legal system to protect their operations and investment.

Several international companies have expressed concerns about operating in foreign jurisdictions, because of perceptions of how difficult it is to ensure adequate legal recourse, and the decision is said to be one that sends a strong message about Guyana’s regulatory environment.
Written By Vanessa Narine