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Sunday, 18 June 2017 | MYT 11:48 PM

Petronas explains termination of contract given to MHS Aviation

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) said it decided to terminate the helicopter services contract awarded to Boustead Holdings Bhd’s subsidiary MHS Aviation Bhd due to safety concerns.

“The termination is within Petronas Carigali’s contractual rights, following the service suspension of the EC225 since April 2016 due to safety concerns arising from a fatal accident involving the same aircraft model in Norway in the same month of last year,” it said in a statement over the weekend.

Under the June 2011 contract, MHS, which is 51% owned by Boustead, provides the services of five EC225 helicopters from Kertih, Terengganu, for the transportation of personnel to offshore facilities operated by Petronas’ exploration and production arm Petronas Carigali in Peninsular Malaysia.

Petronas noted also that the suspension of the EC225 service by the Norwegian and UK civil aviation authorities had yet to be lifted. 

“Most major oil and gas companies have also ceased using the aircraft model pending assurance of its safety and airworthiness,” it said.

In a filing with Bursa Malaysia on Friday last week, Boustead said that Petronas Carigali had given its subsidiary MHS a 90 days’ notice of the oil company’s intention to terminate “without cause” the contract for the provision of rotary wing aircraft, equipment and services for heavy type aircraft (EC225).

“MHS has put on record that it did not agree that this termination notice has been validly issued,” Boustead said. “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.”

Meanwhile, Petronas, which issued its statement via Bernama wire late on Sunday, said the safety of its employees remained 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,” it added.

Boustead completed the acquisition of a 51% stake in MHS, which provides helicopter services to oil and gas companies, for RM100mil in June 2011.

On the reason for the proposed venture into the air charter business, Boustead told Bursa Malaysia on Dec 22, 2010 (the day it inked the memorandum of understanding for the share purchase) that Petronas Carigali had awarded the EC225 contract to MHS for a period of 10 years with an option to extend for another five years starting from April 1, 2011, to March 31, 2021.

“The board believes that this contract which amounts to approximately RM3.1bil will further ensure the continued revenue from air charter business and utilisation of the aircraft for the benefit of BHB (Boustead Holdings Bhd) group,” it said at the time.