Origin Energy Seeking Damages for Delays on BassGas Project

Yolla Field, Bass Strait, Australia
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Origin Energy advises that as a result of significant delays in the completion of the BassGas project in Victoria, Origin and the other Joint Venture participants in the BassGas project confirm they intend to seek liquidated damages from the EPIC contractor, Clough Engineering Limited. 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.

Based on informal advice from Clough, Origin has previously reported 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. Unfortunately, RFSU was not met by the EPIC contractor Clough, and Clough is yet to formally advise of the completion date.

Clough has indicated that the project delays are due at least in part to productivity issues and weather delays, both of which are the responsibility and liability of Clough.

Drilling of the first development well on the Yolla field was completed on 6 August and handed over to Clough for tie-in on 10 August. 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.

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. This eventuality was anticipated in the contractual arrangements with Clough and consequently the onshore plant was designed with the flexibility to deal with this issue. 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.

The participants are Origin Energy Resources as operator with 32.5%; Origin Energy Northwest Limted with 5%; AWE Petroleum with 30%; CalEnergy with 20% and Wandoo Petroleum with 12.5%.

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