NEW ZEALAND ENERGY 2006

Legal actions increasing in NZ petroleum industry

LITIGATION in the New Zealand energy industry is now big business, with more than 30 cases being heard so far this decade, most of them over money or control of fields, lawyer James Willis told the 2006 New Zealand Petroleum Conference in Auckland yesterday.

Legal actions increasing in NZ petroleum industry

Willis said the first legal tussles started appearing in the 1980s. Sometimes they involved private companies fighting between themselves, in other instances it was explorers taking on the government.

There had been over 33 cases, including appeals, since early 2000. Most major companies operating in New Zealand had been involved in court actions.

Willis said most of the court cases involved disputes over petroleum assets worth anything from hundreds of millions of dollars to NZ$1 billion or more.

He said that sometimes litigation was the only means to resolve disputes, but it was risky and required substantial human resources.

Litigation was comparable to oil exploration, applying conventional E&P risk evaluation and analysis, according to Willis.

“Some litigation can make perfect sense, and be seen as a value-enhancing strategy,” he said.

In a prominent case, Greymouth Petroleum took on Austral Pacific over operatorship of the small onshore Taranaki Goldie oil pool. The High Court found Austral guilty of gross negligence and wilful misconduct regarding operating the Goldie field. Greymouth subsequently took over Goldie and nearby Ngatoro from Austral and its partners.

Todd Energy had a couple of losses in the High Court last year.

The court dismissed Todd’s claim that third party access to the strategic Maui gas pipeline was only possible with the unanimous approval of the Maui partners, Shell, Todd and OMV.

NGC now operates the Maui gas pipeline – from Taranaki to Huntly – on behalf of the Maui partners, who own the line, and there is a general third party access agreement, which is now allowing parties to pump non-Maui gas north to energy-hungry Auckland and its neighbours.

The High Court last year also ruled against Todd and for Shell and OMV in allowing Shell to take over from Shell Todd Oil Services (a Shell-Todd owned zero-equity operator) as Pohokura operator from April.

High Court battles are continuing regarding Shell also taking over operating the Maui field.

A still unresolved case is the Todd versus NGC dispute, which involves Todd claiming more than its current 50% of the onshore Taranaki Kapuni field.

In another recent case, Tap Oil took the government to court after the Crown granted Origin Energy an offshore Canterbury licence, PEP 38262, which Tap had earlier applied for under the priority in time (PIT) provisions.

Crown Minerals awarded Origin the licence, primarily because of Origin’s more aggressive work program. The High Court subsequently rejected Tap’s appeal.

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