Shell Australia has launched legal action against Woodside Energy and Paladin Resources, claiming a $86.6 million compensation for the levy it paid over the Northern Endeavour.
Shell Australia has launched legal action against Woodside Energy and Paladin Resources, claiming a $86.6 million compensation for the levy it paid over the Northern Endeavour.
In a writ lodged to the Supreme Court of Western Australia, Shell alleged Woodside and UK-based Paladin Resources were obliged to reimburse the federal levy it paid from 2022 under agreements the parties signed.
Shell alleged Woodside and Paladin must indemnify it for any liability for any tax under the latter’s purchase agreements of Shell’s interests in Northern Endeavour and seabed infrastructure.
According to the writ, Shell claimed Woodside denied liability to pay the levy when demanded.
A Woodside spokesperson told Business News the company intended to defend the action.
“Woodside confirms that Shell Australia has commenced legal proceedings against it and another defendant in relation to amounts payable by Shell Australia on its offshore production under the offshore petroleum levy legislation,” the spokesperson said.
“Woodside is currently reviewing the documents filed with the Supreme Court of Western Australia.
“As the matter is before the courts, we are unable to provide further comment.”
Northern Endeavour was a floating, production, storage and offtake vessel used to extract oil from the Laminaria and Corallina fields in the Timor Sea, originally owned and operated by Woodside.
In 2016, Woodside sold Northern Endeavour to Northern Oil and Gas Australia but the company went bust four years later.
The Northern Oil and Gas Australia group of companies include Timor Sea Oil & Gas Australia (TSOGA).
According to the writ, Paladin Resources is the parent company of TSOGA.
The Northern Endeavour and seabed infrastructure were located within a petroleum exploration licence area that was granted to Woodside, Shell and BHP Billiton Petroleum in 1997.
Woodside was the operator, having a 50 per cent stake, while Shell and BHP explored and developed the area with a 25 per cent interest each, according to the writ.
It is understood BHP sold its stake in the licence area to Paladin in 2004.
Under a purchase agreement signed in 2005, Woodside acquired two-thirds of Shell's interest in the licence area where the Northern Endeavour and seabed infrastructure were located in, Shell claimed in the writ.
Shell also agreed to sell the remaining third of its interest to Paladin in 2005.
Both deals covered Shell's assets and agreements in the relevant petroleum licence areas including its interest in the Northern Endeavour and infrastrcuture, according to the writ.
Shell claimed, in the writ, that TSOGA took no steps to maintain or decommission Northern Endeavour since 2020 and has abandoned the vessel and seabed infrastructure.
The Australian government became responsible for Northern Endeavour, in charge of decommissioning a rusting, 270-metre vessel and the associated subsea equipment with a clean-up bill of at least $500 million and expected to reach $1 billion.
The federal government introduced a special levy to cover the cost, to be paid by offshore oil and gas producers.
In the writ, Shell sought a court declaration that Woodside and Paladin must indemnify Shell for any or all amounts held liable to the tax office under the government’s levy.
Shell alleged the Australian government started decommissioning the vessel and infrastructure because of TSOGA’s failure and refusal to maintain Northern Endeavour.
Shell also claimed, in the writ, a judgment sum of $86.6 million being $42.2 million taxed under the levy in the financial year ending June 2022 and $44.3 million for FY23.
Fellow oil and gas player Chevron is also involved in the decommisioning of Northern Endeavour, having estimated it would pay about 22 per cent of the costs, despite having no interest or involvement in the oil fields of infrastructure.
The levy collected $391 million in the year to June 2023, the first year in which it applied.
To avoid a repeat of the Northern Endeavour incident, the federal government has also amended the Offshore Petroleum and Greenhouse Gas Storage Act to introduce a new trailing liability.
