Liquidated damages are payable by the contractor for each day that Separable Portion 3 of the contract (Ready for Start Up - RFSU) is not complete.

Origin Energy said that previously, based on informal advice from EPIC contractor Clough, it had reported to the ASX that start up of the BassGas project will be delayed into October 2004. This compares with the contractual date for RFSU of early June 2004.

Origin said this morning that RFSU was not met by the Clough, and Clough is yet to formally advise of the completion date.

On Friday Clough said the project has been impacted by a number of issues which will delay completion of the offshore works such as restrictions in access and in the provision of offshore accommodation by the client. Subsequently it said progress at the onshore plant has been impacted by the offshore delay as well as by productivity issues and weather delays.

“Our client has indicated its intention to levy liquidated damages on Clough with respect to the next milestone in the project (Separable Portion 3). We firmly believe that these liquidated damages are not payable, as a key reason for non-achievement of that milestone is that the client has yet to complete its offshore drilling program and provide gas suitable for introduction into the development. However, the client is withholding cash due to Clough under the contract,” said a Clough statement.

“Clough has outstanding claims on this project as noted in the year end accounts which have not been recognised and provide an opportunity against cost increases although the timing for resolving these claims is difficult to forecast.” David Singleton, CEO & managing director of Clough said today.

Returning fire this morning Origin said drilling of the first development well on the Yolla field was completed on August 6th and handed over to Clough for tie-in on August 10th. It said since that time the BassGas joint venture has been in a position to deliver gas aboard the Yolla-A platform.

“However construction and pre-commissioning of the platform and the onshore processing facility has been delayed and it is this delay that is the subject of the liquidated damages being claimed in accordance with the terms and conditions of the construction contract,” said Origin.

The final development well Yolla-3 is currently being tested and results will be released at the end of the testing program. Detailed analysis of the Yolla-4 results indicate that the raw gas is within contractual specifications but that traces of mercury have been detected in the Yolla gas stream.

Origin said this eventuality was anticipated and the onshore plant was designed with the flexibility to deal with this issue.

It said this has not impacted the delays experienced by Clough and is not expected to have any significant economic impact on the performance of the BassGas project.

Participants in the project are Origin Energy Resources 32.5%, Origin Energy Northwest Limited 5%, AWE Petroleum 30%, CalEnergy Gas (Australia) Limited 20% and Wandoo Petroleum 12.5%.