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Stuff.co.nz (New Zealand): Pohokura partners in row

Stuff.co.nz (New Zealand): Pohokura partners in row

02 May 2005 

By MARTA STEEMAN

The $1 billion development of the crucial Pohokura gasfield may be slipping behind schedule because of a bitter row between energy heavyweight Shell New Zealand and Todd Energy over operating key New Zealand gasfields.

Pohokura is the biggest gasfield development since Maui, which is expected to run dry by 2007.

Shell and Todd and the other owner of Pohokura, Austrian firm OMV, have committed to first production of gas from Pohokura from mid-2006 and have contracted to sell the gas to mainly electricity generators.

However, Shell has expressed concern that work on exploiting the gasfield is falling behind schedule.

Shell and Todd are developing Pohokura through Shell Todd Oil Services (STOS), a 50:50 unincorporated joint venture, but the arrangement appears close to disintegration with their disputes spilling over into the High Court.

STOS also operates the Maui, Kapuni, McKee and Mangahewa fields.

Shell wants to take over the operator’s role and run the fields from STOS. Todd has stopped that, gaining an interim injunction late last week that prevented the STOS board from voting on resolutions that would have resulted in STOS resigning as operator of the gasfields and Shell taking over the role.

AdvertisementAdvertisementThe injunction was granted by Justice Goddard. She said the resolutions could not be voted on or carried out till further orders came from the court.

In the court judgment, Shell said STOS’s unincorporated structure was unheard of around the world. It was usual practice for the operator to be one of the equity parties.

Shell said the venture was beset by disputes and its “dysfunctionality” was raising concerns that the 2005 work programme would not be met.

Shell’s exploration and production commercial manager, Ajit Bansal, told the court that if Todd was granted the interim injunction there could be “continuing and further slippage in the Pohokura and Maui development schedules, and exposure of Shell to claims for damages from third parties who have entered into contracts with the Pohokura joint venturers”.

Todd disputes that and in information presented to the court it said the real problem between the two was the fees a Shell company, Shell International Exploration and Production, was proposing to charge STOS for technical support, advice and other services, as well as other charges Shell wanted to impose.

The problem was with the costs imposed by the wider Shell group, Todd said.

The viability of STOS would be at risk if the changes were implemented, it said.

STOS’s budget for 2005 was $362 million.

Shell spokesman Simon King said yesterday that Shell wanted to operate directly the assets in which it had an equity interest.

It was common international practice for the company with the largest equity stake to take the operator’s role.

However, the legal proceedings had put Shell’s aspirations on hold.

Mr King said Shell was determined to meet the work programmes of the Pohokura and Maui fields, and implementing the changes Shell proposed would ensure the programmes were met.

Shell believed there would not be significant staff disruption if it took over operating the gasfields.

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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