Adds attorneys' statement in last paragraph.
A Texas court has awarded trading firm Mabanaft $523.8mn in its dispute with Oriental Energy after the Chinese importer backed away from a term LPG contract.
Mabanaft sued Oriental Energy in late 2016, alleging it defaulted on a term contract to purchase US LPG starting in 2017. OE argued Mabanaft demanded a more than six-year standby letter of credit, knowing it could not comply.
The six-year term contract was for a minimum of 83,600t and a maximum of 92,400t of propane to be loaded each month between January 2017 and December 2022. The contract, set on a Mont Belvieu, Texas, LPG price plus a terminal fee, was entered into at a time when the US arbitrage to Asia-Pacific was at about $300/t. By January, when Oriental Energy was required to buy the cargoes, that arbitrage had shrunk to $120/t.
The ruling was issued by a Harris County district court on 10 April.
OE attorneys indicated the company will appeal and noted the damages were less than the $660mn originally sought by Mabanaft.
"When we were brought into the case, we had hoped to persuade the judge to change his liability finding, which was already in place or reduce the amount of damages," said Lynne Liberato, a partner at Texas-based lawfirm Haynes and Boone, and appellate counsel to Oriental Energy. "We were successful in reducing the damages and in getting one of the two defendants dismissed from the case and now we look forward to appellate review of the judgment."
