PETER KLINGER
Tap Oil is bracing for a Supreme Court showdown with its aggrieved customer, Indian fertiliser tycoon Pankaj Oswal, after yesterday applying for a declaration to try to limit damages from a potential failure to supply Mr Oswal with gas to about $US25 million ($30.8 million).
Mr Oswal said last night he would oppose Tap’s application, made in the WA Supreme Court.
And he added that Tap’s actions would only accelerate a long-planned move by Burrup Fertilisers to force Tap and Harriet joint venture partners Apache Corp and Kufpec to provide court guarantees they had 20 years worth of gas reserves to fulfil Mr Oswal’s offtake agreement.
“I don’t want compensation,” Mr Oswal said. “I want my gas.”
The Supreme Court is yet to decide whether to hear Tap’s application, and if so when.
Mr Oswal’s insistence last night he would oppose the Tap move is set to spark a bitter battle as both sides argue their interpretation of the 25-year gas sales agreement between Mr Oswal, which allowed him to build the $700 million ammonia plant on the Burrup Peninsula, and the Harriet partners.
Tap, the smallest of the Harriet partners, has already declared force majeure — disputed by Mr Oswal — amid expectations it will run out of its share of gas within five years.
Apache and Kufpec have other gas assets off WA’s North-West coast although they are expected to contest demands by Mr Oswal to use other projects to backfill the Harriet supply contract.
Tap chief executive Peter Stickland said his court application was not an early concession that its force majeure claim would be defeated by Mr Oswal, but designed to provide certainty for the Perth company.
“It is prudent for Tap to have the court remove uncertainty about Tap’s potential liability for damages if the force majeure is successfully disputed,” he said.
“There is exploration and development activity going on so there is a possibility that we may add more gas to the Harriet joint venture, but it’s just a case of being prudent.
“I guess the key thing with the (Burrup) claim is that there may be general damages, we are saying that that is just not a credible interpretation of the contract.”
Tap derives its potential liability cap by claiming it would be eligible for $US1.1 million to $US1.5 million per year of liquidated damages in the event it ran out of gas from about 2013-14.
Mr Oswal is disputing that figure, saying liquidated damages only apply to events such as equipment failure, and that Tap’s liability in the event of a gas shortfall would be in the hundreds of millions of dollars, equivalent to the value of the gas it would need to source from other parties to make up the Burrup shortfall.
Apache would not comment.
PETER KLINGER