Rockhopper launches arbitration claim against Italy
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Times | 23 March 2017

Rockhopper launches arbitration claim against Italy

by Emily Gosden

Rockhopper Exploration is fighting for compensation from Italy after it banned offshore drilling, leaving the company unable to develop one of its oil and gas fields.

The Aim-listed explorer said that it had begun international arbitration against the country for “very significant monetary damages” over the loss of future profits from its Ombrina Mare field.

The field, in the central Adriatic about six miles off the coast of Abruzzo, was discovered in 2008 by Mediterranean Oil and Gas, which Rockhopper acquired in a £29.3 million deal in 2014.

It is estimated to contain 40 million barrels of oil and 6.5 billion cu ft of gas.

In January last year, the Italian parliament banned new exploration and production activity within 12 nautical miles of the coast amid concerns for the environment and the high risk of earthquakes in the area. A ban had been introduced in 2010 but repealed in 2012.

Rockhopper, which was granted environmental approvals to develop the field in 2015 and had been close to securing a production concession, was told in February last year that the concession would no longer be awarded in light of the ban.

Rockhopper argues that the decision breaches the European Union’s 1998 energy charter treaty, which is supposed “to provide a stable platform for energy sector investments”.

It said that it had received legal and expert advice that it had “strong prospects” of recovering very significant compensation and had secured effectively no-win, no-fee funding for the case from a specialist in financing commercial litigation and arbitration claims.

They said that seeking damages on the basis of future lost profits rather than past investment meant the company was looking at compensation that could be many times its estimated sunk costs, of about €30 million.

Rockhopper said that if it won damages above a “nominal threshold” it would retain “a very material proportion of any award”.

source: Times