Norway’s $1.8 Billion Pipeline Spat Moves to Appeals Court

  • Investors sued Norway over surprise tariff cut, lost 1st trial
  • Plaintiffs introduced new e-mail evidence in appeals court

Offshore gas-pipeline owners faced off again with Norway in an Oslo court on Tuesday in an appeal trial over tariff cuts that investors claim will cost them about $1.8 billion in income.

The plaintiffs, companies owned by investors including Allianz SE, Abu Dhabi’s sovereign wealth fund and Canadian pension funds, are seeking to overturn a 2015 ruling that the government had acted lawfully in cutting fees for transporting gas through pipelines from Norway to the U.K. and continental Europe.

The investors, who in 2011 and 2012 collectively spent about 32 billion kroner ($3.9 billion) buying a 44 percent stake in pipeline-owner Gassled, were stunned in 2013 when the government decided to cut tariffs by as much as 90 percent for future gas volumes, reducing projected cash flows.

“There’s no basis to change the tariffs in the way they have done, based on the relevant regulations,” Kurt Georgsen, chief executive officer of Silex Gas Norway AS, a company fully owned by Allianz, said in an interview on Tuesday. “This is quite simply a gift to the oil and gas companies, which isn’t justified by resource-management considerations.”

The four plaintiffs -- Solveig Gas Norway AS, Njord Gas Infrastructure AS, Silex Gas Norway AS and Infragas Norge AS -- said in documents filed to the Borgarting Court of Appeal that the cuts, which they deem illegal, will reduce their income by as much as 15 billion kroner from 2016 to 2028. The companies bought their stakes from oil companies including Norway’s state-controlled Statoil ASA and Exxon Mobil Corp.

E-Mail Evidence

The plaintiffs also contend that the Petroleum and Energy Ministry failed to disclose that it was looking at tariff changes just as it was considering applications to approve their acquisitions of Gassled stakes. Jan Jansen, a lawyer representing the investors, on Tuesday presented an e-mail dated Nov. 23, 2010, where the head of the ministry’s Oil and Gas Department, Lars Erik Aamot, said the ministry needed to look at studies of past returns on the pipelines before it finished processing Njord’s acquisition of Exxon’s Gassled stake.

“This shows the ministry had much better knowledge of the work they were doing than the impression created” in the previous trial, he said in an interview.

Aamot didn’t immediately reply to call seeking comment.

Hurt Reputation

While two consecutive governments have justified the move by the need to stimulate offshore exploration and make gas discoveries more profitable, the international investors have said the tariff cut has hurt Norway’s reputation as a stable and predictable environment for business.

The Oslo District Court in September 2015 ruled that the government had every right to change the tariffs. But it also ordered the parties to each pay their own legal fees, giving the government some of the blame for the dispute arising. Total costs of $11 million for the first trial made the case one of the costliest ever in Norway.

Norway owns 46 percent of Gassled through Petoro AS, while Statoil, owned 67 percent by the state, still holds 5 percent of the pipeline network. Solveig Gas, which is held by the Canada Pension Plan Investment Board, Allianz Capital Partners and Abu Dhabi’s wealth fund, is Gassled’s second-biggest owner with 25 percent of the shares, followed by Njord with 8 percent.

The appeal proceedings are planned to last until April 7, though they could end a little earlier, Judge Kyrre Grimstad said in court on Tuesday. The case has the official docket number 16-005707ASD-BORG/01.

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