Westport firm seeks return of Pakistani oil and gas field

A Westport-based oil and gas exploration firm is in the midst of an international arbitration case with millions of dollars hanging in the balance.

The American Energy Group in Westport is preparing for its June 16 final arbitration hearing before an International Chamber of Commerce tribunal in London in an effort to regain control of a subsidiary that it sold to a Turkish company in 2003 through a stock purchase agreement.

AEGG claims that the Turkish company, Hydro-Tur, misrepresented itself and committed fraud when it acquired Hycarbex-American Energy from AEGG in 2003.

As part of the sale agreement, AEGG each month was promised an 18 percent share of the gross amount of each monthly gas sale from the Yasin concession block in Pakistan, but Pierce Onthank, president and CEO of AEGG, said Thursday that payments have stopped.

"They owe us $3 million. That's why we went to court," he said, adding that Hydro-Tur and its successor, Singapore-based Hycarbex-Asia, and Hycarbex-American are defendants.

A Wilton resident, Onthank said he expects the ICC to render a decision by early September. The process started in March of 2012.

If AEGG wins the arbitration case, it will be forwarded to the Pakistani courts for enforcement. Pakistan is a signatory of the 1940 international arbitration agreement with the ICC.

AEGG has been doing business in Pakistan since 1996.

Should the Pakistani courts agree with AEGG, it would regain a business that controls a parcel the size of three-quarters of Rhode Island.

"It's producing over 10 million cubic feet of gas per day," Onthank said, adding that the Yasin block has a proven reserve of 200 billion cubic feet of gas and the potential for oil drilling, as well. "If we get the whole company back, we hit a home run."

But because oil and gas fields deplete, the value might not be as high as AEGG believes, according to Tom Biracree, senior financial editor at IHS Herold in Norwalk.

"It depends on the geology," he said.

When making deals in foreign countries, particularly in South Asia, situations like the one encountered by AEGG often occur, Biracree said, commenting that parties in those countries often do not live up to agreements.

"It shows the difficulty of enforcing judgments in Pakistan from Westport, Conn.," he said.

AEGG sells all the oil and gas it retrieves in the country to Pakistan.

"They need it, and they've never reneged," Onthank said. "We're the only American company doing exploration in Pakistan. I'm very excited to be working in Pakistan. It's a diamond in the rough. When we tell people we're drilling in Pakistan they tell me `you're out of your mind'. But when you're a small company you have to think out of the box."

AEGG is traded over the counter with the ticker symbol "AEGG".


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