Clough, Origin battle continues

An unusual war of words has been sparked between Clough Limited and Origin Energy Resources Limited over the BassGas project with the companies trading Australian Stock Market announcements over the dispute.

Clough has confirmed its plans to claim about $50 million from its client, the joint venture partners behind the BassGas project, based on $25 million in costs and a pair of milestone payments of about $12 million each.

For its part, the client can make a claim for liquidated damages of $200,000 a day, capped at $38 million.

Contractual disputes are not uncommon in the oil and gas industry. What is unusual about this case is the public nature of the argument.

Under the contract signed in 2002, the BassGas project was supposed to be ready to take gas in June this year. Origin claims it is not to that stage yet.

Clough claims it is ready for the gas to flow but the client cannot supply it because it has to fit a mercury containment vessel to the pipeline.

One of the key issues in the dispute has been the content of mercury in gas coming from the Yolla field that the offshore part of the BassGas project is situated on.

Clough was told to allow for the fitment of such a vessel as part of the contract.

Mercury is a concern because it can react with aluminium components, making them brittle.

It is understood another measure to avoid that problem had been avoidance of aluminium components on the offshore part of the project.

A Clough spokesman said it claimed it was owed more than 150 days in extensions and said there was also a 30-day grace period allowed for.

“Under that basis the completion date is in mid-December,” he said.

Clough also claims its client made various representations that constituted false and misleading conduct contrary to the Trade Practices Act, that the client’s purported imposition of liquidated damages is wrongful and that some of the client’s project manager’s actions in relation to the project were wrongful.

In response Origin Energy, one of the major joint venture partners in the BassGas project, has rejected Clough’s dispute of claim, saying that many of the matters raised had already been rejected by the joint venture partners when they had been raised earlier.

It has also hit out at Clough’s allegations against the project manager, who is an Origin employee.

The $450 million BassGas project is a joint venture between Origin Energy, AWE Petroleum, CalEnergy Australia, Wandoo Petroleum and Origin Energy Northwest Limited.

It involves an offshore gas platform off Victoria and an onshore processing facility.