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Santos WA Boss, John Anderson Pic Ben Crabtree /WA News 10/06/2011 **FAIRFAX ONLINE AND FINANCIAL REVIEW OUT**
The West Australian Santos WA Boss, John Anderson Pic Ben Crabtree /WA News 10/06/2011 **FAIRFAX ONLINE AND FINANCIAL REVIEW OUT**

The first public cracks have emerged in one of WA's most successful resources partnerships, with US giant Apache taking Santos to court over development of the Spar gas project off the Pilbara.

In a writ lodged with the Supreme Court last week, Apache is demanding that Santos' notice of a breach of joint venture agreement in relation to Spar be declared "invalid and of no effect".

Apache is also seeking a permanent injunction to prevent Santos from using the breach notice to force the removal of Apache as operator of the Spar joint venture.

Neither side would yesterday discuss why Santos claims Apache is in breach of the agreement. Apache's writ suggests the dispute relates to the work program and budget for development of the Spar-2 well, part of the Spar joint venture designed to deliver 120 terrajoules of gas a day into the WA market by 2015.

Apache operators Spar and has a 55 per cent equity interest. Santos has 45 per cent. The equity split with Santos has been used successfully by the two com- panies in the past, most notably in the development of $1.1 billion Devil Creek domestic gas project south of Karratha.

Devil Creek was officially opened last year and cemented Apache and Santos' position as arguably the most important diversified domestic gas suppliers in WA, a role Apache has frequently trumpeted as it tries to rebuild its credibility in the State after the 2008 Varanus Island explosion.

Asked about the court action yesterday, Apache spokesman David Parker said: "Apache has taken steps to protect its commercial rights while undertaking negotiations with Santos."

Santos WA and Northern Territory general manager Michael Hackett said the court action was an attempt by Apache to prevent its removal as Spar's operator.

"We have advised Apache that they are in breach of the Spar joint venture operating agreement and we have given them time to fix those breaches," Mr Hackett said.

"We are keen for the court to consider the issue as soon as possible because negotiations with Apache on it have gone nowhere. In the meantime, we stand by our position that Apache is in material breach of the Spar JV operating agreement."

'Apache has taken steps to protect its commercial rights.' " Apache spokesman *David Parker *