Scorpion Nederlandse B.V, Venezuela Branch., a wholly-owned subsidiary of Scorpion Offshore Ltd., has filed an official notice of arbitration related to its payment dispute with UrdanetaGazprom-1 S.A. ("Gazprom") on February 16, 2010 pursuant to the terms of the drilling contract.
The venue for arbitration is Paris, France and is governed by Venezuelan law. The Company has contracts with two Gazprom affiliates (the "Contracts") each for one well plus options for two additional wells.
The Offshore Vigilant completed operations on the first well contract for Gazprom in mid-October 2009 with over $30 million in undisputed invoices outstanding. In October, Scorpion issued a notice of mediation to Gazprom, which resulted in Scorpion collecting $19 million against outstanding invoices. Currently, $15.9 million in invoices remains outstanding and overdue.
At completion of the first well contract, Gazprom advised Scorpion that it was not in a position to commence operations on the second well in direct continuation of the first well as provided in the Contracts. At Gazprom's request, the Company mobilized the Offshore Vigilant to Trinidad where the rig is currently operating for a US independent oil and gas company. Scorpion is currently in discussions with Gazprom regarding its future plans and timing of the second well contract.
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