Todd considers appeal on Pohokura

Todd Energy is not throwing in the towel yet, after losing its $274 million High Court claim for damages against its partners in the Pohokura gas field in Taranaki.

Last night Shell New Zealand welcomed a High Court decision "entirely dismissing" proceedings brought by its minority joint venture partner, Todd Energy. But Wellington-based Todd Energy said it was carefully reviewing the decision to decide whether it would appeal against the outcome.

That was despite an unusual plea from the judge for the parties to settle the matter themselves and not go back to the court.

In the High Court in Wellington earlier this year, Todd Energy's lawyers said oil giant Shell and Austrian-based firm OMV's New Zealand offshoot had "colluded" to limit production from the Pohokura gas field to 70 petajoules a year.

Last night Todd Energy managing director Richard Tweedie said Todd was "disappointed" the High Court found against it.

"Todd Energy believes it had a strong case that Shell and OMV have no contractual right to limit output from the field."

The limits imposed on the field since it started production in 2006 had been "very harmful to competition in New Zealand gas markets", Mr Tweedie said.

Shell said Todd claimed that producing the Pohokura field at less than capacity was in breach of the Pohokura Joint Venture Agreement and the Commerce Act 1996.

But the court ruled the majority of the joint venture was entitled to decide the rate of production from the field in the way it had. Neither the joint venture agreement nor the Commerce Act required production at full capacity at all times.

"We are pleased the court has found no anti-competitive effect or purpose in the way we have managed our commercial contracts," Shell chairman Rob Jager said.

"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."

Justice Robert Dobson awarded costs to Shell and OMV, but urged a discussion between the parties in a way that was constructive for the business relationship.

The parties have six months to resolve the issue before returning to court.

He also anticipated an appeal.

"Nonetheless, I take the unusual step of recording my view that the issues this judgment leaves the parties to grapple with ought to be resolved by negotiation between them, and not by further litigation.

"I venture that view not as a judge apprehensive that the Court of Appeal might arrive at a different view on any of the material issues.

"Rather, I do so as a New Zealander 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."

- © Fairfax NZ News