Media Release Tuesday 1 December 2009

Gas Competition Case To Be Heard In High Court Next Year

A major gas competition case will commence in the High Court in February 2010.

Todd Energy is alleging that its Pohokura joint venture parties, Shell and OMV, have conspired to hold gas production at the Pohokura gas field at a level below the field’s production capacity.

Richard Tweedie, Todd Energy Managing Director said “Production is artificially constrained to 70PJ per annum, when the field can produce at least 85PJ per annum.”

“The constraint occurs because Shell and OMV have resolved to prevent production beyond that level, despite our objections,” he said.

Todd Energy alleges that the restraint imposed by Shell and OMV is a breach of the Commerce Act in that it has the purpose and effect of substantially lessening competition in the gas market.

“Todd Energy considers the restraint has resulted in artificially holding gas prices at a higher level than they would otherwise have been,” said Mr Tweedie.

A substantial damages claim is involved for the share of gas not produced and the loss in value of condensate by not producing and selling at the high prices prevailing at the time.

This litigation is a continuation of the litigation that Todd Energy brought against Shell and OMV to force them to connect the Todd Energy export pipelines from the Pohokura Production Station.

Shell and OMV sought to block Todd Energy from connecting its pipelines unless Todd Energy signed up to the production constraint, with the effect that Todd Energy would have been prevented from uplifting its share of gas and condensate produced from the field. Todd Energy refused to do so. The High Court granted an injunction in favour of Todd Energy on 23 August 2006.

Since then there has been a series of interlocutory arguments as the case is prepared for a substantive trial.

Mr Tweedie said that the recent Court of Appeal decision dismissing an application by Todd Energy over discovery matters and interrogatories was just “one of a number of decisions, some won by Todd Energy and some not.”

“They have no direct relevance to the determination of the substantive issues to be heard in the High Court in February 2010,” added Mr Tweedie.

ENDS

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