Scathing verdict on Indo Pacific

A High Court judgment has delivered a scathing verdict on Wellington-based Indo Pacific's operation of the Goldie oil field in Taranaki.

The judgment related to litigation between Indo Pacific and Auckland-based Greymouth Petroleum, argued in a three week hearing that ended on April 4.

Greymouth, which has a 59.57 per cent interest in Goldie, sued Indo Pacific, claiming its operation of the field was wasting the resource.

Indo Pacific, which made the Goldie discovery as a sole-risk operator, countersued, claiming it could run the field as it pleased until it had earned its contractual premium for finding the oil.

Justice Wild found that Indo Pacific's subsidiary Ngatoro Energy was guilty of gross negligence in its operation of the Goldie field and that Greymouth was entitled to remove Ngatoro as operator.

Much of the argument related to Ngatoro's refusal to produce a development plan for Goldie and its flaring off of gas while it was in production.

Greymouth said the gas would have been worth more than $4 million and it had not agreed to any flaring. Furthermore, Ngatoro did not have a permit from the Ministry of Economic Development (MED) to flare gas for a period of 14 months.

Production at the well ended on August 31 last year after the MED refused to grant Ngatoro a flaring permit.

Justice Wild found Ngatoro had acted "in bad faith and with a lack of candour in relation to flaring consents".

The judgment found that Ngatoro had operated the field sub-optimally by flaring off gas that could have been sold.

However, Greymouth's claims for damages because of the resulting loss were dismissed. A separate claim for exemplary damages was reserved for further argument.

Mark Dunphy, Greymouth's chairman, said: "We are pleased to have this decision from the court. We hope now to be able to move quickly to development of the Goldie resource. It is disappointing that the actions of Indo Pacific Energy required this matter to be resolved through court proceedings."

He said Greymouth Petroleum is to become operator of Goldie.

The Goldie well was in production between April 2001 and August last year. During that time it produced 230,000 barrels of oil worth about $11.35 million.

Because of its sole-risk operator status, Ngatoro has the right to oil worth $18 million from Goldie before the other partners, including Greymouth, can begin to take their share. This right continues whether Ngatoro operates the field or not.

Indo-Pacific president Dave Bennett said: "Greymouth is welcome to operatorship given that Indo's paramount entitlement to Goldie revenues has been recognised by the High Court".

Bennett said Indo Pacific would "apply for injunctive relief" if Greymouth failed to perform as operator.

The remaining interest in Goldie is owned 35.43 per cent by New Zealand Oil & Gas and 5 per cent by Ngatoro Energy.