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Further update on TWE CBM Project Arbitration Procedure
 
Further update on TWE CBM Project Arbitration Procedure

Wednesday, 23 October 2013

The Company was advised today by TWE that following issuance to CNPC of notice of referral of the unresolved CBM lands dispute to arbitration, TWE has followed the required process by providing notice of selected arbitration procedure to CNPC. Such notice to CNPC is provided according to the terms and conditions of the PSC.

  A summary of key points at issue, which TWE has sent to its shareholders simultaneously at the time of publication of this announcement, among others, is set out herein.

 

 

Reference is made to the announcements of the Company dated June 17 2013, September 9 2013 and October 15h relating to the unresolved dispute between TerraWest Energy Corp. (“TWE”),  and China National Petroleum Corporation (“CNPC”) regarding the coalbed methane (“CBM”) fairway lands within the Liuhuanggou CBM production sharing contract (“PSC”).

Following issuance to CNPC of notice of referral of the unresolved CBM lands dispute to arbitration, TWE has followed the required process by providing notice of selected arbitration procedure to CNPC. CNPC, in accordance with the terms and conditions of the PSC may respond with notice of its preferred procedure. In the event of a disagreement on procedure the terms and conditions of the PSC describe a default arbitration procedure to be followed, according to internationally-accepted due process.

A summary of key points at issue, which TWE has sent to its shareholders simultaneously at the time of publication of this announcement, among others, is set out below:

1.      Clarification on discrepancy of the CBM exploration area, including highly prospective CBM zones and fairway lands between the PSC and the renewed CBM exploration permits and investigation on reported unauthorized coal drilling activity within the PSC area and any land title mismanagement by CNPC;

 

2.      Dispute on CNPC’s failure to certify two international independent expert reports on evaluations of CBM discovered resources and natural gas resources originally in place (OGIP) commissioned by TWE and provided to CNPC in support of application for extension of the exploration period of the PSC;


3.      Dispute on CNPC’s failure to validate the capital expenditure incurred by TWE on the project as required by the PSC; and


  1. Dispute on CNPC’s failure to cooperate to clarify the land status with relevant ministries.

 

Additionally, a search of the web-based data of the Ministry of Land and Resources of China suggests that other coal exploration and mining permits have been issued and/or earlier permits have been renewed and greatly expanded without required consents within the PSC area since 30 December 2005 (the date of the PSC) in contravention of Chinese law. In this regard, CNPC and its affiliates have failed to assist to monitor unauthorized issuances of such permits. The holders of illegal permits are to be provided notice of dispute and the relevant ministries will be provided notice.

 

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