Monday, 19 June 2017

Petronas: We have right to terminate contract with MHS Aviation over safety concerns

Petronas Carigali Sdn Bhd’s termination notice of its contract with MHS Aviation Bhd for the services of five EC225 helicopters is within its contractual rights, citing its service suspension since April 2016 due to safety concerns.

The concerns arose from a fatal accident involving the same aircraft model in Norway in April 2016.

Under the contract dated June 29 2011, MHS Aviation, a 51% subsidiary of Boustead Holdings Bhd, provides the services of five EC225 helicopters from Kertih, Terengganu, for the transport of personnel to offshore facilities.

“The suspension of the EC225 service by Norwegian and UK civil aviation authorities has yet to be lifted. Most major oil and gas companies have also ceased using the aircraft model pending assurance of its safety and airworthiness. The safety of its employees remains Petronas Carigali’s top-most priority. The company has had appropriate discussions and negotiations with MHS Aviation prior to reaching the decision to terminate the agreement,” Petronas said in a statement yesterday.

The statement follows Boustead’s filing with Bursa Malaysia Securities Bhd last Friday, deeming Petronas Carigali’s notice of termination not valid and that it will treat any attempt to proceed with termination, as breach of contract.

To recap, MHS had said the suspension of services of its helicopters was a breach of contract by Petronas Carigali, and issued a notice of arbitration against Petronas Carigali on Sept 1, 2016 claiming, among others, damages in the sum of RM42.76 million, general damages and costs.

In its filing with Bursa Malaysia, Boustead said MHS received the notice of termination on June 9, 2017, while discussions regarding arbitration proceedings were ongoing.

“For its part, MHS has put on record that it did not agree that this termination notice has been validly issued. MHS views this as a breach of the contract and will treat any attempt to terminate the said contract on the basis of such notice as a repudiatory breach of the contract,” it said.