BassGas sees light at end of long tunnel Business The Australian


THE troubled BassGas project, between Victoria and Tasmania, should be fully operational by the end of the month, more than two years after the scheduled start-up.
The project, which is subject to a huge and acrimonious damages claim and counter-claim between Origin and Clough - the original engineering, procurement, installation and commissioning contractor - is set to supply about 10 per cent of Victoria's energy needs for the next 15 years.
Commercial gas had begun flowing into the Victorian transmission system and fine tuning to optimise LPG and condensate production was almost complete, Origin sources said yesterday.
Managing director Grant King has refused to discuss the dispute with Clough except to confirm the arbitration process is continuing two years after it began.
The companies agreed when the contract was signed to arbitration as a less costly approach than taking each other to court.
But already it has had an impact on Clough, which in the 12 months to June 2005 recorded a net loss of $59.6million, which it said was largely the result of the BassGas dispute.
Clough said last year that it had a claim for $110 million against the BassGas joint venture - which is led by Origin.
Clough said it expected the arbitration process to be completed by the end of this year. Mr King declined to identify just how much was being claimed in liquidated damages against Clough but industry observers believe the added costs to bring BassGas on stream could top $300 million.
In April 2002, Clough Engineering won a $400 million contract to build the project designed to commercialise the Yolla gas and liquids reservoir in Bass Strait.
According to Victoria's Department of Energy, the Yolla field contains reserves of 324 petajoules of sales gas, 14 million barrels of condensate, 972 thousand tonnes of LPG and 800,000 barrels of oil.
The plan was to commission the project in June 2004, leading to full production in September that year.
But in mid-2004, Origin announced that as a result of significant delays in the completion of the project, production would not begin until October.
That statement unleashed a string of public claims about the project, including Clough's assertion that Origin and its partners had not designed the plant to remove mercury from the gas stream - an expensive and essential piece of equipment if the project were to operate safely.
BassGas is a joint venture partnership between Origin Energy as operator (37.5 per cent), Australian-listed AWE (30 per cent), the Warren Buffett-owned CalEnergy (20 per cent) and Mitsui subsidiary Wandoo Petroleum (12.5 per cent).