Following ongoing delays to the offshore Victorian project and a breakdown in its relationship with the joint venture, engineering contractor Clough Limited has served a notice of dispute on the BassGas partners. Clough and Origin now have 14 days to resolve the matter or it will head to formal arbitration.

Clough is seeking $25 million in ‘quantified’ claims from Origin, plus ‘further general damages and damages under the Trade Practices Act’. These additional claims are understood to include $12 million in milestone payments Origin has withheld over the past two months and a similar amount in damages.

“It is very rare for Clough to proceed down the legal path and we still always prefer to settle these sorts of issues by discussion and negotiation,” said Clough CEO & managing director David Singleton.

“However, the continuing conduct of our client, which goes well beyond what we have seen before, has left us no option. We will pursue our claims very vigorously and ensure that we recover all that we are entitled to.”

Clough has insisted that it fulfilled its obligations in the $400 million BassGas turnkey contract, but delays to Origin's drilling program and concerns about the composition of gas had affected costs.

In the notice of dispute, Clough has contended that the joint venture’s attempt to impose liquidated damages was wrongful.

More specifically, Clough claimed that at the time that contract was being entered into the BassGas joint venture made various representations to Clough that were false and misleading. These representations related to the conduct of the joint venture’s project manager and to an undertaking to jointly identify and implement cost savings.

“The client’s project manager has not acted honestly and fairly as required under the contract, and the refusal by the client’s project manager to approve extensions of time, delay costs and adjustments to the contract price, is wrongful,” Clough said in a statement.

“In Clough’s view, the grounds for termination set out in the threat by Origin were spurious and Clough has sent an exhaustive response refuting each and every point,” the company said.

But in a statement released today, Origin repeated its dismissal of Clough’s claims.

“These allegations have previously been considered by the joint venture owners and found to be wholly without merit,” Origin said.

“The joint venture owners will defend these claims and prosecute their own claims for liquidated damages as a consequence of Clough failing to achieve completion of the project within the time stipulated by the contract. The joint venture wishes to advise that they have all confidence in the project manager and his integrity.”

Interests in the BassGas project are Origin Energy (operator) 32.5%, AWE Petroleum Pty Ltd 30%, CalEnergy (Australia) Limited 20%), Wandoo Petroleum Pty Ltd 12.5% and Origin Energy Northwest Limited 5%.