Wednesday, May 31, 2023

Repsol settles its legal battle with Sinopec taking 100% of the joint venture they have in the UK

The group strengthens its presence in the country with the operation, which will not have a significant impact on the accounts. Repsol has reached an agreement with Sinopec that ends the legal battle it had with China, which will buy the latter’s 49% stake in the joint venture -Repsol Sinopec Resources UK (RSRUK)- which they have in the UK for a figure of around 1,903 million euros, which will also allow the group chaired by Antonio Brufau to strengthen its presence in this country.

As reported by the company to the National Securities Market Commission (CNMV), once the acquisition is completed, Repsol will become 100% owner of RSRUK. Specifically, the total amount of the agreement amounts to 2,100 million dollars (about 1,903 million euros).

However, Repsol stressed that the transaction will not have a significant impact on its results, since it has recorded in its accounts an arbitration provision -close to 800 million euros- and once consolidated the cash available in RSRUK for 49%, the net impact on cash flow for the company will be 1,100 billion dollars (about 997 million euros).

Therefore, both companies will immediately suspend and, upon completion of the transaction, resolve the lengthy arbitration proceedings relating to Sinopec’s acquisition of its stake in RSRUK from the Canadian group Talisman, subsequently acquired by Repsol.

The agreement is strategic for Repsol, as it allows it to close the legal fronts it had opened with Sinopec, once the operation is closed, expected by the end of 2023.

The story dates back to 2015 when Sinopec filed a lawsuit relating to the purchase of 49% of the shares of Sinopec Resources UK Limited in 2012 by Addax and China, and the investment commitments they acquired together with Talisman at the time, a company later bought by Repsol.

Since then, both companies have kept the dispute open, with questions and counterclaims, with Sinopec requesting compensation of 5,500 million dollars (about 5,100 million euros) for the damages of the investment committed in the joint venture in the United Kingdom. which he had then with the Canadian talisman.

Repsol thus resolves this confrontation with Sinopec, the traditional partner of the Spanish energy company, with which it maintains a strong alliance in Brazil, and also closes one of the large legal fronts it had opened.

This Thursday, on the occasion of a conference with analysts for the results of the first quarter of the year, the CEO of Repsol, Josu Jon Imaz, has already started “an open dialogue” with Sinopec, with the aim “to achieve what might be an equitable solution to this conflict”.

The executive recalled that in this arbitration there had been three partial awards, one in favor of Repsol, another unfavorable, and a third of five parties, “many of which in favor”.

In this sense, he recalled that Repsol is a partner of Sinopec in the United Kingdom and Brazil, which is why he insisted that the goal was “to find a reasonable solution to this legal dispute together”.

Repsol Sinopec Resources UK, headquartered in Aberdeen, Scotland, has 11 offshore crude oil production facilities connected to 48 fields in the North Sea, 38 of which are under management. It also monitors two ground terminals. Its current production is approximately 40,000 barrels of oil equivalent per day, of which 40% is gas.

With the acquisition of these assets, the company led by Josu Jon Imaz advances its ‘upstream’ strategy (exploration and production), focused on consolidating and growing its production portfolio in OECD countries.

Furthermore, having full control of the company, will accelerate the creation of value in these assets, allowing for greater efficiency in the decision-making process, greater synergies with other areas of Repsol, and the development of both production and decarbonization projects. energy transition, the cornerstone for the future of the company and of the ‘upstream’ unit.

Similarly, RSRUK has plans to develop new production at Claymore, Piper, Shaw, and Montrose. This oil and gas production makes it possible to supply the European Union, whose hydrocarbon deficit has been aggravated by the war in Ukraine.

This company is also developing one of the first green hydrogen projects in the UK at the Fleet terminal (Scotland). RSRUK’s facilities and infrastructure present attractive conditions for the development of C02 storage projects in line with the drive that the UK government intends to give this activity to make the country a technology leader in this space.

In addition, the company is exploring the use of its marine facilities to develop electrification projects for its own and third-party production platforms, which will help reduce the carbon footprint of hydrocarbon production activities.

World Nation News Desk
World Nation News Desk
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