Earlier this month EnergyReview.Net told of the bitter dispute between the two Kiwi energy heavyweights that had recently spilled over into the courtroom and might threaten the speedy development of the possible NZ$1 billion Pohokura gas field off Taranaki.
Shell confirmed it wanted to directly operate the fields in which it held major equity interests – Maui, Kapuni and Pohokura – though Todd Energy temporarily stopped that move by gaining an interim High Court injunction. Shell’s subsequent appeal against that injunction is due to be heard by the Court of Appeal late this month.
“It certainly is a manifestation of the dysfunctionality in the Shell-Todd relationship, a dysfunctionality that has been greatly increased with the move of management and control of the Shell New Zealand business to Singapore in 2003-04 as part of the Asia Pacific regional business unit of Royal Dutch Shell,” one un-named industry source told ERN.
“The relationships that were formerly managed by the New Zealand managing director and country chairman are impossible to do from Singapore on a fly in, fly out basis every six months.”
Current Pohokura operator Shell Todd Oil Services was not a party to the original Pohokura joint venture operating agreement and was, in effect, a contract operator, having taken over from Fletcher Challenge Energy when Shell bought FCE early this decade.
“The Pohokura parties have significantly more control over STOS, and more voting power, than if Shell itself was the operator. This is particularly so in the context of the STOS service agreement with Shell International – essential for STOS to be able to deliver.”
A second source said STOS was “totally emasculated” due to Todd’s 50% ownership. “In essence what you are seeing are the failings of Shell’s new global business model that was introduced formally in January 2004, but which had started to influence dynamics from mid-2003.
“The model is fatally flawed as implemented in New Zealand by virtue of a STOS employee also being Shell country chairman, combined with the issues of being remote from the business decision makers in Singapore.”
Todd Energy has told the Wellington High Court the real problem is the fees Shell International is proposing to charge STOS for technical support, advice and other services, as well as other charges Shell NZ wants to impose, and that these threaten the viability of STOS.
Shell, on the other hand, has told the court if Todd is granted the interim injunction there could be further slippage in the Pohokura and Maui development schedules, as well as exposure of Shell to claims for damages from third parties who have entered into contracts with the Pohokura joint venture parties.
