A $300 million feud has erupted between the owners of the Bass Strait oil and gas province at a time when investment is required to ease an acute shortage of gas along the country’s east coast.
Japan’s Mitsui has asked the Federal Court to invalidate a $156.3 million payment demand from its Bass Strait partner ExxonMobil and a similar $141.6 million demand from incoming operator Woodside Energy.
Exxon and Woodside requested the money in the belief Mitsui should have shouldered a greater proportion of the petroleum resource rent tax payable to the federal government for gas extracted from Bass Strait’s Kipper field.
Melbourne’s Federal Court will hold the first hearing into the case on Friday morning, with Woodside and Exxon expected to fight the matter.
Bass Strait provides about 40 per cent of the gas that flows into the east coast gas market, and Mitsui has participated in the province since 2016 when it spent $520 million buying Santos’ 35 per cent stake in the Kipper gas and condensate field. As part of the deal, Mitsui inherited an agreement that detailed the fees payable to Woodside and Exxon for services such as processing, compressing and delivering the gas extracted from the field.
The agreement operated without tension until 2018 when the Australian Taxation Office hit Woodside and Exxon with amended assessments, which challenged the way they had accounted for the Kipper field, and demanded they pay more tax for the five years between 2013 and 2017.
Exxon and Woodside effectively passed on a portion of the burden from that ATO claim in June 2018 when they wrote separate letters to Mitsui requesting $156.3 million and $141.6 million respectively.
Mitsui believes it’s not liable for those debts, and argued it had paid too much to Woodside and Exxon between April 2017 and May 2018 for “usage-based fees”, which is a reference to the fees it paid those companies to process, compress and deliver gas from Kipper.
Mitsui asked Woodside and Exxon to each pay $20.3 million to reimburse it for the alleged overpayments.
Mitsui filed its claim to the Federal Court in August, just three days after Woodside agreed to take over from Exxon as the operator of the Bass Strait province. The Japanese giant has vowed to pursue its partners for interest and costs. It comes six months after the three companies vowed to spend $200 million expanding the Kipper field through the “Kipper 1B” project.
Woodside’s agreed elevation as operator of the Bass Strait province – a role Exxon had held since the 1960s – was viewed by analysts as making it more likely that Woodside would invest in four new Bass Strait gas fields that could deliver up to 200 petajoules of gas to the east coast market.
Woodside is arguably Mitsui’s most important partner in Australian oil and gas. The Japanese company is a shareholder in Woodside’s North West Shelf facility, its Greater Enfield project in Western Australia’s Carnarvon Basin and the undeveloped Browse project off the Kimberley coast.
Woodside, Exxon and Mitsui declined to comment.
“When you share your news through OGV, you’re not just getting coverage – you’re getting endorsed by the energy sector’s most trusted voice.”
