BG Global Energy Ltd (Formerly BG International (Nsw) Ltd) and Others v Talisman Sinopec Energy UK Ltd (Formerly Talisman Energy (UK) Ltd) and Others Talisman Sinopec North Sea Ltd (Seventh Party) Rigel Petroleum UK Ltd (Eighth Party)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 27 January 2015 |
| Neutral Citation | [2015] EWHC 110 (Comm) |
| Docket Number | Case No: 2013 Folio 29 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 January 2015 |
[2015] EWHC 110 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cooke
Case No: 2013 Folio 29
and
and
John McCaughran QC and Nehali Shah (instructed by Bond Dickinson LLP) for the Claimants
Sa'ad Hossain QC and Emma Jones (instructed by Pinsent Masons) for the 1st, 2nd Defendants and 7th and 8th Parties
Alain Choo Choy QC and Alec Haydon (instructed by Memery Crystal LLP) for the 3rd Defendant
Hearing dates: 14th, 15th, 19th January 2015
th, 15th, 19th and 20th January 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice CookeIntroduction
Mr Justice Cooke The Claimants (together, "BG") are part of the BG Group, which is listed on the London Stock Exchange and is a leading participant in the global energy market.
Talisman Energy Inc is a global upstream oil and gas company headquartered in Canada. The First Defendant ("Talisman") has since about 17 December 2012 been in a joint venture between Talisman Energy Inc and the Sinopec Group (prior to that Talisman was the principal operating subsidiary of Talisman Energy Inc in the UK). The Second Defendant and the Seventh and Eighth Parties are wholly-owned subsidiaries of Talisman.
The Third Defendant ("Idemitsu") is a subsidiary of Idemitsu Kosan Co Ltd, which is primarily an integrated energy company headquartered in Tokyo. Idemitsu is the principal upstream oil and gas subsidiary of Idemitsu Kosan Co Ltd in the UK.
The agreed Case Memorandum sets out the subject matter of the dispute in the following way.
BG together with Talisman, the Idemitsu and the Seventh and Eighth Parties were at the material time the licensees of production licences relating to the Blake Field, a hydrocarbon accumulation underlying an area covered by Blocks 13/24a, 13/24b and 13/29b on the UK Continental Shelf. The First Claimant (BG International) was at all material times the operator of the Blake Field.
The Defendants are the current licensees of production licences relating to an adjoining field, the Ross Field, a hydrocarbon accumulation underlying an area covered by Blocks 13/28a, 13/28c and 13/29a on the UK Continental Shelf. Talisman is the operator of the Ross Field.
The owners of the Blake Field and the owners of the Ross Field entered into a Transportation, Processing and Operating Services Agreement dated 22 June 2001 (the TPOSA). Pursuant to the TPOSA, Talisman (as Transporter Operator) on behalf of the owners of the Ross Field (the Transporters) agreed to provide certain transportation, treatment, processing, storage and off-loading facilities to the owners of the Blake Field (the Shippers) to enable (i) production from the Blake Field to be accepted into the floating production, storage and offloading vessel (the Ross FPSO) used to process production from the Ross Field, and (ii) stabilised crude oil (SCO) allocated to the Blake Field to be re-delivered therefrom.
The TPOSA obliged BG International (as Shipper Operator), to pay for the services provided under the agreement, initially by way of an oil tariff (in the Initial Term) and then, from 1 January 2007 onwards (the Secondary Term), by way of a contribution to Operating Expenditure. Such contribution was to be on a production rate basis so that BG International paid that proportion of Operating Expenditure which related to the SCO allocated to the Blake Field.
The use of the Ross FPSO in developing and producing the Ross Field was initially provided pursuant to an Agreement for the Provision and Operation of a Floating Production Storage and Offloading Vessel for the Ross Field dated 2 April 1997 (the 1997 FPSO Agreement) between Talisman and Bluewater (Floating Production) Limited (the owner of the Ross FPSO). The 1997 FPSO Agreement was replaced in June 2001 with an agreement (the 2001 FPSO Agreement) that addressed the provision of the services to the Shippers under the TPOSA in respect of the Blake Field, in addition to the services previously provided in respect of the Ross Field.
The 2001 FPSO Agreement was replaced with a Bareboat Charter on 30 November 2005 (the Bareboat Charter), pursuant to which Talisman took over operatorship of the Ross FPSO from Bluewater on 1st December 2005 and became duty holder of the vessel.
Talisman says that it gave BG International the opportunity to consent to being charged on the basis of the Bareboat Charter. BG International did not consent to the Bareboat Charter either before or after its execution. BG International relies upon the fact that, prior to Talisman entering into the Bareboat Charter, it informed BG International that it did not consider that its consent was necessary and that it would not be seeking its consent, because it would continue to charge during the Secondary Term by reference to the 2001 FPSO Agreement. Talisman relies upon all of the correspondence in relation to the question of consent and the disputed issues regarding the construction of the TPOSA.
During the Secondary Term commencing on 1st January 2007, Talisman has charged for a contribution to Operating Expenditure by reference to the 2001 FPSO Agreement. There is an issue between the parties as to whether such charging arrangement was on the basis of a reservation of rights as to what amounts could properly be charged pursuant to the TPOSA.
BG claim that on the true and proper construction of the TPOSA, alternatively, by implication, Operating Expenditure thereunder falls to be calculated and invoiced to the Blake Field owners by reference to the 2001 FPSO Agreement. BG contend that, since the commencement of the Secondary Term, Talisman has failed to calculate and render invoices for Operating Expenditure in accordance with the TPOSA, which has resulted in overcharges to BG in an amount currently estimated at £34.5 million.
BG's claim is to recover the amount of such alleged overcharges, either as damages for breach of contract or restitution of sums paid pursuant to a mistake and/or for a consideration which failed and/or for monies had and received. BG claim such sums from Talisman (as Transporter Operator, for itself and on behalf of itself and the other Transporters: the Second and Third Defendants), alternatively from each of the Defendants as Transporters.
The claim is brought pursuant to a Conflict Management Procedure, dated 16 April 2012, by which the parties agreed that BG would only be entitled to commence proceedings in their capacity as Shippers and, consequently, would only be entitled to claim the amount of the alleged overcharges that corresponded to their aggregate percentage interest in the Blake Field, being 44%.
The Defendants deny BG's claim on the basis that: (i) on the true and proper construction of the TPOSA, Operating Expenditure falls to be charged by reference to the costs and expenses actually incurred, irrespective of the agreement under which they are incurred and, on that basis, BG have been undercharged under the TPOSA during the Secondary Term, as the charges actually incurred under the Bareboat Charter should be taken into account in calculating the Operating Expenditure to which the Blake Field owners are required to contribute, and (ii) even if Operating Expenditure falls to be charged on the basis of the 2001 FPSO Agreement, BG have still been undercharged under the TPOSA during the Secondary Term. Further, Idemitsu denies that BG is entitled to bring a claim against it at all.
Each of Talisman (as Transporter Operator) and the Third Defendant (as Transporter) counterclaims against BG International (as Shipper Operator) in respect of sums said to have been wrongfully withheld and also in respect of the alleged undercharges. The Third Defendant claims its 30.82% share of those sums in the alternative.
BG deny the counterclaims. In particular, BG contend that, if they are wrong on their case as to the proper construction of the TPOSA, or the implication thereof, as set out above at paragraph 13, the Defendants are estopped from contending that charges can be made in excess of what the charges would have been under the FPSO Agreement and/or they have waived any right to do so. BG also contend that there is no basis for Idemitsu to claim any sums, alternatively to claim any more than its unit share.
BG International (as Shipper Operator) has brought a Part 20 Claim against Talisman, Idemitsu and the Seventh and Eighth Parties (i.e. the other owners of the Blake Field) for an indemnity and/or contribution in respect of the First and Third Defendants' counterclaims if, contrary to its primary case, it is found liable (as Shipper Operator) in respect of the alleged undercharges, insofar as they are attributable to Blake Field owners other than BG.
The Part 20 Defendants admit that they are required to contribute, in proportion to their interests in the Blake Field, to sums properly incurred by BG International as Shipper Operator under the TPOSA. However, they contend that the commencement of the Part 20 proceedings by BG International was unnecessary and premature as their liability to contribute as Blake...
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