Todd loses High Court stoush over Pohokura gas field

Tuesday 13th July 2010

Multi-national oil companies Shell and OMV have prevailed in a High Court action brought against them by Todd Energy, alleging they colluded to limit output from the Pohokura gas field to the detriment of Todd and New Zealand consumers.

Judge Robert Dobson found against Todd's claims, totalling $274 million damages, under both the Pohokura contracts and the Commerce Act, and urged the long-warring parties to inject "a thorough breath of fresh air" into their commercial relationship.

Judge Dobson also asserted that even if he were wrong about the legal questions in the case, he was satisfied Todd could still "not make out the losses claimed" by the steps Shell and OMV took to limit off-takes in any one year.

He awarded costs against Todd, which expressed disappointment at the outcome, while claiming it had been "vindicated" in some respects and would now take time to consider an appeal.

In a 173-page judgement, liberally spiced with evidence of the long-standing rancour between New Zealand-owned Todd and its multi-national partners, Shell and the Austrian oil company, OMV, Judge Dobson urged "discussion between the parties on costs, having regard to the desirability of a positive on-going business relationship, rather than a sole focus on the history of the litigation."

Todd and OMV own 26% each of the Pohokura field, while Shell owns 48%.

The judge took the unusual step of urging against an appeal, saying "the issues this judgement leaves the parties to grapple with ought to be resolved by negotiation between them, and not by further litigation."

He urged this "as a New Zealand concerned that the resource vested in these parties by virtue of the permit they have from the Crown deserves to be managed without the significant inefficiency caused by the distraction of this dispute."

"Even on Todd's view of the dispute, flexibility of off-take has substantial value and after the very thorough airing all Todd's arguments have had, the prospects of securing any basis for disproportionate offtake without enforceable arrangements to redress the physical and/or financial consequences of doing so are surely negligible," he said.

Todd managing director Richard Tweedie said the judgement found that Shell and OMV had acted in bad faith by agreeing secretly to vote together on issues relating to Pohokura, "which meant that Todd Energy was misled into thinking that issues were open for genuine debate when they were not."

Shell said in a brief statement it was "pleased the court has found no anti-competitive effect or purpose in the way we have managed our commercial contracts."

“Shell looks forward to putting this contractual matter behind it and working with our joint venture partners to maximise the field’s economic recovery for New Zealand for many years to come," said Rob Jager, Shell's New Zealand chairman.

Businesswire.co.nz

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