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Gassled Owners See Legal Action Against Norway on Pipe Snub

Dec. 6 (Bloomberg) -- Norway, western Europe’s largest gas exporter, will face legal action from owners of the Gassled pipeline network after the government decided against reversing a tariff cut by the previous administration.

“We will try this case because we believe the government’s decision lacks a legal foundation,” Trygve Pedersen, chief executive officer of Gassled investor Solveig Gas Norway AS, said by mobile phone today. “That now seems to be the only alternative.”

Norway’s Conservative and Progress parties, which formed a new government in October, said during the election campaign they would review the Labor-led coalition’s cuts to gas pipeline tariffs as investors threatened a legal fight over almost $7 billion in lost income. The government won’t overturn its predecessor’s decision, Oil and Petroleum Minister Tord Lien said in a statement today.

“Good resource management means that profits should be generated at the fields and not the infrastructure,” Lien said in the statement. “Lower tariffs will stimulate exploration, development and production of oil and gas, strengthen competitiveness of Norwegian gas and ensure that the best transport solutions for gas are chosen.”

Norway’s previous government, led by Jens Stoltenberg, pushed through cuts as deep as 90 percent to the tariffs that operators of the gas pipelines can charge to ship the fuel.

Wealth Fund

The changes, announced in June, will see the tariffs for new gas transport agreements reduced from October 2016.

Gassled’s owners, which are controlled by investors including Canadian pension funds, a UBS AG infrastructure fund and a unit of Abu Dhabi’s sovereign wealth fund, have said they will take legal action to prevent the loss of income. The investors spent 32 billion kroner ($5.2 billion) buying about 45 percent of the gas pipeline network from groups including Statoil ASA, Royal Dutch Shell Plc and Total SA.

A subpoena from Solveig Gas, Silex Gas Norway AS and Infragas Norge AS, which are represented by the same law firm, will probably be delivered at the beginning of next year, Silex CEO Kurt Georgsen said today.

Solveig Gas owns 24.8 percent of Gassled, Njord Gas Infrastructure AS holds 8 percent, Silex Gas Norway AS 6.1 percent and Infragas Norge AS 5 percent.

Polarled Integration

“We still have a very good legal basis to possibly try this case,” said Dan Jarle Floelo, CEO at Njord Gas. Norway’s Ministry of Petroleum and Energy declined to comment beyond its earlier statement today, spokeswoman Lise Rist said by phone from Oslo.

The four companies will now shy away from new investments in Norway’s gas-pipeline infrastructure, like buying out oil and gas companies such as Statoil, Shell and ConocoPhillips, who have decided to invest 25 billion kroner in the new Polarled pipe in the Norwegian Sea, Georgsen of Silex said.

“Everyone has considered that when Polarled was finished, it would be integrated into Gassled,” he said. “We would have seriously considered taking it off the hands of the initial investors if they were interested, but in the current situation, our investments will be limited to contractual obligations.”

The government’s decision not to reverse the tariff cut is a “major setback” to Norway’s reputation as a stable regulatory environment, said Jaroslava Korpanec, managing director of Allianz Capital Partners, in an e-mail. “If this statement is confirmed we will challenge the decision as we do not see that it has a legal basis,” she said. Allianz owns Silex Gas and also has a stake in Solveig.

To contact the reporters on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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