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Montevideo, January 31st 2023 - 12:32 UTC

 

 

Rockhopper could net £210m compensation from Italian government because of offshore drilling ban

Thursday, August 25th 2022 - 10:03 UTC
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Italian government banned oil exploration and production within a 12 mile-limit off Italy’s coast in 2015, scotching the company’s planned Ombrina Mare oilfield Italian government banned oil exploration and production within a 12 mile-limit off Italy’s coast in 2015, scotching the company’s planned Ombrina Mare oilfield

A corporate tribunal has ordered the Italian government to pay more than £210m to the UK/Falklands oil company Rockhopper as compensation for an offshore oil drilling ban. Rockhopper’s case was launched after the Italian government banned oil exploration and production within a 12 mile-limit off Italy’s coast in 2015, scotching the company’s planned Ombrina Mare oilfield.

Following a closed-door tribunal operating under the energy charter treaty (ECT), which has been criticized for its lack of transparency and operating outside national court systems, a panel of judges unanimously agreed on Wednesday that Italy had breached its obligations to Rockhopper, entitling it to a compensation payout of about six times more than the estimated £33m it had invested in the project.

The ECT was drawn up to protect the profits of European energy companies as the Soviet Union crumbled in the early 1990s. Under the terms of the ECT, companies can sue governments if they make policy decisions that could cut profits. This poses a clear challenge as governments seek to reduce their fossil fuel emissions.

Payouts under the treaty could reach as much as US$ 1.3tn by 2050, according to Yamina Saheb, an ECT official turned whistleblower, who is also the lead author of a UN Intergovernmental Panel on Climate Change (IPCC) working group paper on climate mitigation.

Saheb said Wednesday’s panel decision was “exactly in line with my earlier projection, and confirms its accuracy”.
“If policymakers want to make the EU climate neutral they must withdraw from the energy charter treaty and stop protecting fossil fuel investments,” she said. “The choice is between climate neutrality and the treaty. We cannot have both.”

A rancorous debate about the treaty came to a head in June, when a “modernization” proposal that would continue to protect fossil fuel investments in the EU and UK for 10 years was agreed in principle by its signatories.

Laurence Tubiana, one of the architects of the Paris climate agreement and the chief executive of the European Climate Foundation, said: “This new verdict is yet another example of why it is imperative that the EU and its member states must withdraw from the energy charter treaty immediately. The proposed ECT reforms are incompatible with the Paris agreement, and withdrawal is the only just and equitable route forward so that neither the planet nor taxpayers have to pay for dirty investments.”

A spokesperson for Rockhopper said that the tribunal’s award “was on the basis of lost profits rather than the sum invested, so that [the £33m] is not really the metric”.

The official declined to comment on the ruling’s implications for future climate action. A recent IPCC report, which Saheb worked on, warned that “regulatory chill” from payouts under agreements like the ECT could delay or stymie fossil fuel phase-outs.

A statement by Rockhopper’s chief executive, Sam Moody, said: “We are delighted to have won our case. A huge amount of work has been involved since we acquired Mediterranean Oil & Gas Plc in 2014 and commenced the Arbitration in 2017. I would like to pay tribute to our team for their dedication over such a long period. We will update the market in due course once we have been able to analyze fully the results of the arbitration and its full, very positive financial implications for Rockhopper. This positive milestone builds on our recent transaction with Navitas and while work still needs to be done on Sea Lion, we believe after collection of the award, it will make a material contribution towards our share of the development costs.” (chof 360.com)

 

Tags: Rockhopper.

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