Alcoa launches $158m gas supply lawsuit

Apache Energy and Tap Oil have been hit with a $158 million lawsuit by Alcoa, which claims a gas supply contract was breached when services were disrupted by the Varanus Island gas explosion in 2008.

At the time of the Varanus Island incident, Alcoa had a gas sale agreement in place with Harriet Joint Venture participants Tap Oil, Apache Energy and Kufpek Australia and another separate supplier.

Alcoa claims that the Harriet JV participants and the other supplier breached terms of their contracts by failing to deliver contracted quantities of gas during the disruption.

According to Alcoa, liquidated damages provisions under the supply contract should be declared invalid because it was not a "reasonable, good faith or genuine" estimate of Alcoa's losses due to an extended disruption of gas supply.

Tap said it would attempt to enforce liquidated damages against the joint venture of $564,971 in accordance with the gas supply contract.

If the liquidated damages are held to be invalid, Alcoa's claim will be for around $158 million against the joint venture participants and the other supplier.

Alcoa has also made an alternative claim against the joint venture participants for breaches of statutory and common law duties of care.

"Alcoa makes an alternative claim against those entities for the same amount of general damages as referred to above in relation to the contract claim, but the statement of claim does not identify the portion of that sum for which it is alleged that Tap is said to be liable," a statement from Tap Oil said.

"As Tap is a minority participant in the HJV it is likely to be some fraction of the
aggregate amount claimed."

After the gas explosion, Tap Oil said it claimed force majeure under the supply agreement in relation to the disruption of gas deliveries.

Under terms of the agreement, a party not able to perform its obligations due to force majeure would be deemed not to be in breach, Tap Oil said.

Tap Oil, which holds a 12.2 per cent interest in the Harriet joint venture, said it would vigorously defend all claims made by Alcoa.