04/09/2014 - 16:01

Santos, Apache court battle continues

04/09/2014 - 16:01

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Court action filed by both Santos and Apache is set to continue in the Western Australian Supreme Court over several disagreements relating to a joint venture of gas fields offshore in the Carnarvon basin.

Santos, Apache court battle continues

Court action filed by both Santos and Apache is set to continue in the Western Australian Supreme Court over several disagreements relating to a joint venture of gas fields offshore in the Carnarvon basin.

The court heard three separate actions today related to two gas field developments feeding into Varanus Island, which Apache operates and is a 55 per cent owner of (Santos owns 45 per cent).

Another directions hearing is scheduled for October.

Apache is trying to stop Santos from removing it as operator of the Spar gas field, which has been producing since 2011 and is slated for expansion.

In a second writ, Santos is claiming Apache breached its joint venture operating agreement by advancing the John Brookes inlet compression project on Varanus island without its approval.

Santos claims Apache submitted a work program and budget which included nearly $130 million spent during 2012 and 2013 that it did not put before the joint venture, and that Apache has projected a further $111 million for this year without approval.

Santos is claiming Apache is liable for all of the expenditure.

A third charge being heard involves a claim by Santos that Apache lifted more than its equity interest in the John Brookes gas project than was necessary, producing between 56 and 62 per cent of the total share and expressing interest in producing as much as 65 per cent.  

While the two parties had entered into a gas balancing agreement for gas supplied from the John Brookes field in 2010, which allows either party to occasionally take more than its equity interest of gas in exchange for compensation, Santos claims Apache overstepped the mark.

Santos is seeking a declaration that taking more of an interest should only be permitted to meet the variability of customer demand that arises from time to time and not as a matter of course or on a sustained basis.

The court case coincides with the Texan-based Apache trying to sell its interests in Australia and elsewhere as activist investor pressure forces it to focus on North American assets.

Apache said in August it intended to completely exit liquefied natural gas projects, including its 13 per cent stake in Chevron’s Wheatstone project.

 

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