Shrewd Business in Georgia29 Aug 2019 21:59
Makes an interesting read either ways and which ever side you might be on:
The US energy company, which claimed unprecedented size of its natural gas field in Georgia several years ago, is now involved in an international arbitration dispute before the Oil and Gas Corporation (GOGC).
Frontera demands $ 3.5 billion in unaccounted income from Georgia.
The controversy began in 2018 and became publicly known only from the GOGC audit report prepared by KPMG Big Four member.
The document states that the Georgian government initially initiated an arbitration dispute against the company. In July 2018, GOGC and the State Oil and Gas Agency of Georgia started an arbitration dispute over Frontera's breach of its financial obligations to Georgia. The case was related to breach of the PSA (Revenue Sharing) Articles by the company. Another clause in the dispute was a debt on the use of natural minerals, which the company avoids paying.
However, as it turns out, in September 2018, Frontera initiated a back-litigation dispute and demanded compensation from the Georgian side for unacceptable profits. The company is seeking compensation for "unacceptable profits" for 2012-2027, valued at $ 3.5 billion. An audit report prepared by KPMG says that the Gas and Oil Corporation considers Frontera's claim to be unfounded and the probability of their position being considered by the arbitral tribunal is minimal.
Frontera, which has been operating in Georgia since 1997, made the loudest announcement on February 1, 2016. Frontera chief executive Steve Nicandros told the Atlantic Council that natural gas supplies in the South Kakheti region could amount to 5.3 trillion cubic meters and that Georgia could gain energy independence and become an exporter by shale gas.
Soon after the announcement, the value of the company's shares rose 17%, and as time went on, it became clear that the company's statement was untrue. Despite numerous requests from the Georgian government, Frontera did not provide technical justification for its "discovery".
In January 2019, it was revealed that Frontera had been removed from the London Stock Exchange (AIM). The reason for the dismissal was the resignation of Cairn Financial Advisors, a designated advisor to Frontera on the stock exchange, and the existence of such advisor was a requirement of the exchange itself. Cairn Financial Advisors did not name the reason for his resignation.
Along with the Georgian state-owned company, the company is also suing a board member in the Cayman Islands court. The company blames it on a conflict of interest, saying a board member wanted to gain control of Frontera.
A further hearing on the Frontera arbitration lawsuit will take place in October 2019, according to the Gas and Oil Corporation audit report.
By: Shota Tkeshelashvili
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