In a David-and-Goliath showdown that has captured the attention of the energy industry, Gas2Grid, a small oil exploration company (ASX: GGX) is going head to head with the French Government for a legal hearing on June 28. The hearing will determine the fate of Gas2Grid’s claim for a staggering $55 million in compensation. The claim, initially submitted in January 2020, has been scheduled by the Pau Tribunal in France after a deferral from the previous hearing date of June 29, 2022.
Gas2Grid’s legal battle stems from the alleged damages caused by the French Government’s refusal, deemed unlawful by previous court proceedings, to renew the St Griede conventional hydrocarbon exploration permit in accordance with the mining law. With the hearing fast approaching, the Company remains optimistic about its chances of success, relying on history. However, the ultimate decision rests in the hands of the Tribunal, leaving the outcome uncertain.
The protracted lawsuit traces its roots back to May 2013 when Gas2Grid’s St Griede (situated within the Aquitaine Basin in France) permit was due for its first renewal after an initial five-year term. Having fulfilled the terms and conditions of the work and expenditure commitments during the initial term, Gas2Grid submitted a renewal application in January 2013, intending to continue its work program toward drilling a well.
Typically, the renewal process is a routine matter once initial commitments are met. However, in September 2015, the French Government controversially decided not to grant the renewal. Gas2Grid responded by initiating legal action at the Pau Tribunal in November 2015, which culminated in a favorable judgment in early November 2016. The court ruled in the Company’s favor, annulling the government’s refusal to renew the St Griede permit and ordering compensation of $616.4k to be paid to Gas2Grid. Yet, the saga was far from over.
On January 3, 2017, the French Government lodged an appeal with the Appeal Court of Bordeaux, challenging the Tribunal’s November 2016 decision. Meanwhile, on December 23, 2017, the government issued a decree extending the St Griede license until May 31, 2018, contrary to the court’s directions. This extension provided Gas2Grid with a mere five months to complete a five-year work program proposed in the permit’s 2013 renewal application.
The Appeal Court of Bordeaux finally delivered its decision on March 5, 2019, favoring Gas2Grid in several respects. The court annulled a section of the Tribunal’s 2016 judgment and urged the ministers to reconsider the extension request within two months. It also imposed a penalty of €1,000 ($1,600) per day of delay for non-compliance and ordered the government to pay €2,000 ($3,210) to Gas2Grid Limited for costs.
The French Ministers’ persistent resistance over six years to renew the St Griede permit, coupled with the introduction of new laws aiming to phase out the petroleum exploration and production industry in France by 2040, as well as the perceived sovereign risk by the capital market, prompted Gas2Grid to relinquish its rights for permit renewal in April 2019.
The growing perception of sovereign risk in France has deterred potential investors from funding the Company’s oil and gas operations in the country.
Gas2Grid is currently trading with a market cap of just over $8 million. Seeing how things have unfolded in the country, it needs a win—hopefully a $55 million one—to secure its future plans.
Alinda is a Business Reporter for The Sentiment
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