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Georgian government ‘terminates contract’ with US oil firm Frontera

30 April 2020
A Frontera well in Eastern Georgia's Kakheti Region. Photo: Mariam Nikuradze/OC Media.

The Georgian government is to terminate their contract with American oil and gas firm Frontera Resource, which has been extracting in the country since 1997. 

The decision came after a ruling by the International Arbitration Tribunal which the Georgian Government claims went in their favour.

Frontera has accused the government deliberately misrepresenting the ruling but have so far provided no details on which of the government’s claims were false. 

Georgia had accused the company of violating the terms of their contract, signed in 1997. They claimed that Frontera refused to return to the state land they were no longer using for extraction.

After Georgia filed the appeal at the International Arbitration Tribunal in January 2018, Frontera responded with a counterclaim, claiming $3.5 billion in damages. The company accused the government of trying to take resource-rich lands from them.

According to a statement released by the state-owned Georgian Oil and Gas Corporation, the tribunal upheld their claim that Frontera committed a ‘material breach of the contract’ by refusing to give up the land. These lands, the statement reads, comprise ‘99% of the entire contract area’.

After the government announced they had won the arbitration, Frontera issued their own statement in which they said that ‘the public statements made by Government and its paid legal advisors have been designed to purposefully mislead and distract from the actual results of the arbitration court’s ruling’.

They accused the government of spreading false information in a bid to ‘discredit the US Government and other supporters of US businesses like Frontera in Georgia’. 

‘Frontera remains pleased with the recent outcome of the arbitration court’s ruling’, they insisted.

The Georgian government said in their statement on Wednesday that the decision of the tribunal was final. 

‘The contract will be automatically terminated upon expiration of the term specified in it (27 July 2020).’ 

The Georgian Oil and Gas Corporation called on Frontera to ‘willingly carry out the decision of the Arbitration Tribunal at the earliest possible time, including reimbursing funding belonging to the Georgian side (approximately $6 million)’. 

Frontera Resources did not respond to repeated requests for details on which of the Georgian government’s claims they believe were false.

A controversial company

Frontera’s activities in Georgia have been dogged by controversy for years, including accusations they were not paying their workers. 

A number of members of the US Congress who have received campaign donations from Frontera have also spoken publicly in the company’s defence. Several legislators criticised the Georgian government’s actions towards Frontera and linked this with the state of the country’s democracy.

Frontera Resources is an international oil and gas exploration and production company headquartered in Houston, Texas. They have operated in Georgia since 1997 and according to their webpage, they operate over an area of  5,060 square kilometres in Georgia.

In 2015, Frontera announced that they had discovered 3.8 trillion cubic metres of gas in Kakheti Region, eastern Georgia.  A year later, then–Energy Minister Kakha Kaladze said that the company had not appealed to the ministry for permission to extract the reserves despite the government renewing contracts with them annually. 

In a statement in June 2016, the Georgian Oil and Gas Corporation said that ‘to confirm the existence of resources indicated in the report [of Frontera Resources], it is essential to carry out concrete aim-oriented activities; however, the company still hasn’t presented a plan that would serve this purpose’.

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