Santos v Delhi Petroleum Pty Ltd - [2002] SASC 272

SANTOS & ORS V DELHI PETROLEUM PTY LTD
[2002] SASC 272
Full Court: Lander, Williams and Besanko JJ

LANDER J. This is an appeal and a cross appeal from a decision of a judge of this Court in which he made declarations at the behest of the plaintiff/respondent (Delhi) affecting the first defendant/appellant (Santos) and orders requiring the defendants (appellants) to pay to Delhi the sum of $8,000,000 which includes interest.
History
The Cooper Basin lies below ground in the North Eastern area of South Australia and the South Western area of Queensland. It is approximately 640 kilometres long and 240 kilometres wide at its widest point. The Cooper Basin is a sedimentary basin which is covered by a much larger basin known as the Eromanga or Great Artesian Basin.
The Cooper and Eromanga Basins represent Australia’s largest onshore oil and gas reserves. More than 1200 wells have been drilled and 123 gas fills and 58 oil fills have been discovered in the Cooper Basin region since 1963.
The Cooper Basin operations are centred at Moomba which is located in the Central Australian Desert approximately 800 kilometres North of Adelaide. A plant at Moomba, which commenced operating in 1969, was constructed in phases. The plant was built for the recovery and processing of natural gas and oil in the Cooper and Eromanga Basins. Natural gas commenced flowing into Adelaide from Moomba in 1969. Moomba which also processes gas from the Queensland part of the Cooper and Eromanga Basins now produces about 13.2 million cubic metres of gas per day.
The gas is distributed by underground pipelines to South Australia, New South Wales and the Australian Capital Territory and is used for both domestic and industrial purposes. In the State of South Australia gas is the major fuel for the generation of electricity.
Apart from gas the Cooper and Eromanga Basins fields produce crude oil and gas liquids.
Each of the parties to these proceedings, including Santos, are explorers and producers of natural gas and oil. They are collectively referred to as the “Producers”.
Santos is the “Operator”.
In the 1950s Santos obtained exploration licenses to explore for oil and gas in South Australia and Queensland.
On 6 May 1958 Santos entered into an agreement with the respondent for the joint exploration by them for petroleum in the permit areas then held by Santos.
Between 1958 and 1963 a series of agreements were entered into between Santos, the remaining appellants and Delhi under which Santos farmed out certain areas which were within and subject to the exploration licences. Each farm out resulted in a sub-division of the licence area into a smaller area known as a “Block”. Santos also entered into Joint Operating Agreements with other Producers.
Natural gas was discovered in 1963.
In 1966 Santos and Delhi entered into a contract to supply gas to the South Australian Gas Company Limited. Further contracts were entered into by the Producers with other South Australian enterprises. In 1968 the Producers entered into…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2002] SASC 272
Decision Date: 23 December 2002

CaseChat Overview and Summary

Santos v Delhi Petroleum Pty Ltd is a case involving disputes between natural gas producers regarding the apportionment of costs and revenues between them. The case originated from a decision by a judge of the Supreme Court of South Australia, which declared that Santos, the operator, had wrongly apportioned certain items of repayment and expenditure among the producers. Delhi Petroleum, one of the producers, appealed against this decision, and Santos cross-appealed certain aspects of the decision. The Full Court of the Supreme Court of South Australia, consisting of Lander, Williams, and Besanko JJ, reviewed the case. The Court upheld the original decision, finding that the apportionment of certain costs and revenues between the producers should be based on their respective contributions to the costs associated with the design, engineering, construction, and installation of specific assets. The Court also found that no estoppel arose to prevent Santos from changing the historical accounting practice. Additionally, the Court upheld the judge's declaration that Santos was entitled to debit the joint operating account for costs and expenses incurred in relation to these proceedings. The Court requested the parties to provide further written submissions regarding the appropriate declarations and orders, including those related to the payment of interest.

Orders