In 2008, Sinopec Group bought a 60-percent stake in Puffin oil field in the Timor Sea from Australian oil producer AED Oil Ltd.
China Petrochemical Corporation (Sinopec Group) may have to pay a huge settlement to Norway-based Sea Production Ltd. for the premature suspension of operations of its oil production joint venture with Australian company AED, the 21st Century Business Herald reported Tuesday.
In 2008, Sinopec Group bought a 60-percent stake in Puffin oil field in the Timor Sea from Australian oil producer AED Oil Ltd. The deal cost Sinopec Group US$561 million (about 3.864 billion yuan) and was made by the Chinese oil giant to reduce its reliance on domestic refining companies.
However, not long after the deal finalized, the Puffin joint venture suspended operations after alleging that the Sea Production Ltd.-managed Front Puffin oil production and storage platform breached safety standards.
Sea Production denied the claim, seeking $60 million USD from the Sinopec-AED joint venture in compensation for lost revenue during the closure. An international arbitration panel later ruled in favor of Sea Production, and the Puffin joint venture was ordered to make a "substantial payment," AED said in a statement on August 4.
On Monday, AED said it would appoint auditing firm KPMG as a voluntary administrator, largely due to the arbitration panel's decision against the company, the Wall Street Journal reported.
An unnamed employee in Sinopec Group's Australia office said the incident caused Sinopec to become vigilant about the potential safety hazards of Sea Production's platform. "The lesson we learned [in Australia] was quite costly," the employee said.