Tri-Star Group claims APLNG has been underpaying royalties

11 Nov, 2022

Tri-Star Group’s claim against Australia Pacific LNG Pty Ltd (APLNG) is being heard by the Supreme Court of Queensland, where the Group contends reversionary rights were triggered in 2008 and that APLNG has been underpaying royalties.

In 2002, APLNG acquired various coal seam gas fields (assigned interests) from Tri-Star Group. These assigned interests are subject to reversionary rights and an ongoing royalty in favour of Tri-Star Group.

According to Tri-Star Group Country Manager – Australia Mr Andrew Hackwood, once triggered, the reversionary rights require APLNG to transfer back to Tri-Star Group a 45 per cent interest in those assigned interests for no additional consideration (reversionary interest).

“Reversion is triggered when revenue exceeds the aggregate of all expenditure plus interest, royalties and the original acquisition price of US$20 million,” he said.

Under the contractual arrangements, revenue is defined as:

all receipts, revenues, incomes, rights, entitlements and benefits derived from or in connection with the assigned interests; and
sales proceeds from gas produced from the assigned interests.

Mr Hackwood said based on Origin’s annual reports, the reversionary interest is equivalent to about 20 per cent of APLNG’s 2P and 3P reserves, making this a multi-billion-dollar claim.

Tri-Star Group also maintains that APLNG has been underpaying the royalty to Tri-Star Group. To date, the approximate value of that aspect of the claim is nearing $250 million, and it continues to grow each month.

“Origin Energy’s own half yearly and annual reports include extensive acknowledgements of Tri-Star Group’s reversion and royalty rights,” Mr Hackwood said.

The parties are currently waiting for the outcome of an application pursued by Tri-Star Group in April 2022 seeking orders for the Court to consider, as a preliminary question, whether the transaction between Origin Energy and ConocoPhillips in 2008 triggered reversion.

APLNG argued against getting that issue determined early. The parties have not received a decision but expect it imminently.

“Regardless of whether the Court decides to hear the preliminary question, Tri-Star Group is confident of its contractual rights and will continue to pursue the litigation to ensure that its rights are enforced.”

The coal seam gas fields in question include, but are not limited to: