Alan MacKenzie, legal counsel for Indo-Pacific subsidiary Ngatoro Energy Ltd, opened the defendant's case late on Friday and rebutted all Greymouth's claims regarding the sole risk 2001 drilling of Goldie-1, the well's subsequent production, and the interpretation of the relevant joint venture operating agreement (JVOA).
NEL drilled the Goldie-1 well, within Ngatoro mining licence PMP38148, on a sole risk basis in 2001, after Shell New Zealand and New Zealand Oil and Gas had declined to participate. Shell NZ subsequently bought back into Goldie, after buying Fletcher Challenge Energy, for an initial payment of about $US750, 000 and agreeing to a premium of six times that amount before being entitled to a share of production. NZOG declined to "back in".
The Greymouth purchase of the Shell interests (59.57%) in the Ngatoro mining licence was completed in March 2002 and "almost immediately", Greymouth claimed to find serious deficiencies in the way NEL was conducting the Goldie operation, said MacKenzie. Within about four months Greymouth had issued high court proceedings. The damages sought ranged from $NZ10.5-17.5 million.
MacKenzie said Greymouth's interpretations were so draconian, and so slanted in favour of a new sole risk party, that it should require very clear words indeed to persuade the court that that was the intention of the parties.
"Those claims have only to be stated for their inequity to become apparent. NEL says that neither the language of the JVOA, nor the evidence, lead to the unjust results which Greymouth seeks to achieve."
NEL was entitled to complete the well, develop the discovery, and to retain petroleum to satisfy the premium, as there was no requirement in the JVOA that such development could only take place after a separate development plan for the Goldie reservoir had been approved.
MacKenzie said NEL would admit to breaching the Crown Mineral (Petroleum) Regulations 1999 regarding flaring Goldie-1 without proper consent, but that the breach was purely technical and not of any substance, as both NEL and regulator Crown Minerals had been under the impression that the existing flaring consent for the Ngatoro field applied.
NEL maintained the existing gas contract did not apply to Goldie gas, but only to gas from wells within the Ngatoro permit operated by all participants, and that it was required to offer Goldie gas to Shell. Shell apparently shared NEL's view that the existing gas contract did not apply, and that a separate gas contract would be necessary.
NEL said it offered Goldie gas to Greymouth, but that Greymouth persistently failed to take the gas. "The steps which would need to be taken to connect the Goldie well to the existing gas facilities have never materialised. The professed willingness of Greymouth to take the gas has not been genuine, its real objective was to ensure that production was shut down," MacKenzie said.
NEL's counterclaim was that Greymouth had breached its obligations under the JVOA, unlawfully interfered with NEL's rights, and intentionally hindered NEL. These actions had caused loss to NEL and NEL was entitled to damages. However, losses or damages could only be properly assessed and quantified when Goldie-1 was reopened.
NEL is calling five witnesses, among them Texas energy consultant Daniel Johnston.
