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The Age (Australia): Shell-Todd `Pohokura’ row goes to trial

The Age (Australia): Shell-Todd `Pohokura’ row goes to trial

“Energy heavyweights Shell New Zealand and Todd Petroleum will take a row over who develops and operates the gas field Pohokura to a full trial – a fresh sign their 50-year relationship is falling apart.”

Tuesday 26 July 2005

Energy heavyweights Shell New Zealand and Todd Petroleum will take a row over who develops and operates the gas field Pohokura to a full trial – a fresh sign their 50-year relationship is falling apart.

The High Court rejected Todd’s application for an interim injunction to stop Shell and Austrian oil company OMV voting to stop Shell Todd Oil Services acting as operator of the gas field, sited off the Taranaki coast.

Todd said that it intended to appeal against the decision.

The parties have, however, agreed to take a dispute over inconsistencies in the Pohokura joint venture agreement and the technical services agreement, an agreement between Shell Todd Oil and the Pohokura joint venture, to a separate trial concerned with “rectification”.

Todd wants the court to change the joint venture agreement to rectify the inconsistencies.

The High Court told the parties to try to resolve all interlocutory matters, including a timetable for exchange of submissions, by the second week in September.

Shell, OMV and Todd own the mining permit for Pohokura 48 per cent, 26 per cent and 26 per cent respectively. Shell and Todd each own half of the joint venture Shell Todd Oil, which is developing the field for production.

Shell and OMV want Shell to take over the operator’s role at Pohokura, which is due to start producing gas from mid-2006. Shell spokeswoman Jackie Maitland said that it was determined to meet critical timetables for the development of Pohokura.

Shell and OMV told the High Court they intended to vote together to remove Shell Todd Oil as operator.

The Pohokura joint venture agreement was amended in September 2002 and allows the operator to be removed with a more than 70 per cent vote of the joint venture parties.

Todd argued that clause 9 in the technical services agreement stated that such a decision had to be unanimous.

That the amended joint venture agreement did not reflect that was a mistake and it had been the three parties’ common intention that clause 9 would be the operative clause.

Mr Justice Fogarty rejected Todd’s arguments, saying there was no evidence the common intention of the parties was to have clause 9 prevail over the 70 per cent clause in the Pohokura joint venture agreement.

Shell and Todd are also fighting over who operates other oil and gas fields. Todd won an injunction in May from the High Court to stop the Shell Todd Oil board “resigning” as operator of these fields in favour of Shell.

Shell told the court in that dispute that if Todd won the injunction Shell had concerns about slippage in the development of the Pohokura field and being exposed to claims for damages from third parties contracted to buy Pohokura gas.

Shell has challenged the injunction.

SOURCE

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