Petsec Energy is disputing a claim against a US$4.2 million letter of credit (L/C) guaranteeing that the Australia-listed oil and gas explorer would meet its exploration obligations in Block 7 in Yemen.

The claim was made against an L/C to Arab Bank, Sana'a, dated 25 November 2019 but Petsec says the precise circumstances of the claim are "far from clear", and added that it deemed the claim illegitimate because it was made by "rebel Houthi Minister for oil and minerals in Sana'a, Ahmad Daris".

Two governments

Petsec maintains that the legitimate, UN recognised government of Yemen based in Aden had expressly forbidden any financial dealing with the rebel Houthis which exert illegitimate control over the ministry for oil and minerals in Sana'a.

Also, the legitimate minister of oil and minerals, resident in Aden, Aws Abdullah Al-Awd, wrote to Arab Bank in Jordan and Sana'a saying, "we are the only entity part of the legitimate Yemeni government recognised internationally and by the United Nations... we have not made any arrangements, issued any instructions or claims to liquidate the L/C."

Bank confusion

In Petsec's opinion, the ministry of oil and minerals in Sana'a had no rights to claim on the L/C because of the force majeure status of the block. This is clearly stated in the Arab Bank L/C the company said.

While Petsec believes that Arab Bank, Qatar National Bank and Mitsui were duly advised that the claim was illegitimate, the oil and gas explorer has been advised that Arab Bank and Qatar National Bank, both located in Sana'a, both acted on the claim.

Petsec has been advised by Mitsui that the Commonwealth Bank Australia (CBA) also acted on the claim.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.