Green Dragon in $40m ConocoPhillips settlement

ConocoPhillips and Green Dragon Gas have put a long-running dispute over Chinese unconventional plays behind them after the latter agreed to make a sizeable pay-off.

The agreement to the "mutual satisfaction" of both parties has, however, cost Green Dragon $40 million in cash.

The agreement, which follows what the London-listed Chinese coalbed methane (CBM) player said was "a period of arbitration and subsequent appeals", means US giant ConocoPhillips will drop any claims and awards in the case.

An appeal from Green Dragon due to be heard in Singapore has also been withdrawn.

The $40 million has already been made made from Green Dragon's existing cash reserves.

ConocoPhillips agreed in mid-2009 to a farm-in deal with Green Dragon unit Greka Drilling concerning the development of CBM reserves at three of its production sharing contracts.

Under the agreement, ConocoPhillips was to pay an initial $20 million to compensate Greka for past costs incurred, as well as fund up to $30 million to drill surface-to-inseam wells in the Shizhuang South, Shizhuang North and Qinyuan PSCs in Shanxi province.

ConocoPhillips had an option to acquire 50% of Greka’s interest in the three PSCs by paying up to $120 million, subject to approval Chinese authorities.

The US major was also entitled to another option until mid-2011 to participate in Greka’s midstream and downstream business.

In the end, Green Dragon received $42.6 million from ConocoPhillips in relations to the deal.

Commenting on Friday's announced deal, Green Dragon chairman Randeep Grewal said: "While we feel strongly in the merits of the company's appeal, there is risk in any litigation, which this pragmatic settlement eliminates.

"The conclusion of this matter is the last of several that had pre-occupied us in protecting the substantial shareholder value that was being challenged."

Newsletter signup


Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?