Shares of Hans Energy, controlled by mainland businessman David An and which had been engaged in a protracted legal dispute with China Petroleum & Chemical (Sinopec) over a 20-year fuel storage contract, surged as much as 42 per cent on Wednesday after Hans said a settlement was reached with Sinopec giving a lucrative crude oil procurement deal to Hans.
Hans’ shares traded 29 per cent higher at 35.5 HK cents at 11:05a.m.
Hans won an arbitration case at the Guangzhou Arbitration Commission just over a year ago over Sinopec’s failure to fulfil its obligations in a 20-year fuel storage service agreement signed in 2004.
The commission had ordered Sinopec to pay a 607.3 million yuan in one-off default payment to Hans, but Sinopec failed to do so, prompting Hans to bring the case to a Guangzhou court.
The two firms have entered into a settlement agrement, under which both sides agreed to terminate the storage service agreement, and Hans agreed to withdraw its court application to enforce the arbitration ruling, Hans said in a filing to Hong Kong’s stock exchange on Wednesday.
The two firms have also signed a five-year agreement, under which Sinopec’s trading unit Unipec Asia will purchase up to 15 million tonnes of crude oil in the first year, and up to 25 million tonnes in following four years. The procurement price will be based on a pricing formula that Hans did not disclose.
Hans spokesman Jack Fang Zhengquan said the oil procurement deal is huge, but did not offer more details about its profitability.
“This is not a contract ordinary companies can get, the annual volume involved is as big as the consumption of some countries,” he told the Post.