Flames leap into the air after a series of explosions at the Varanus Island gas facility in 2008.
Flames leap into the air after a series of explosions at the Varanus Island gas facility in 2008.

Verve Energy's claim that Woodside breached its obligation to provide gas at its usual price during the Varanus Island disaster has been rejected by the High Court.

The June 2008 explosion of the gas plant, operated by Apache Energy, slashed the state's gas supply by a third.

It also allowed competitor Woodside to sell some of its gas at a higher than usual price.

After the dramatic blast, which was caused by a corroded pipeline, Woodside and its North West Shelf (NWS) joint venture partners told Verve that they would not supply the utility with a supplemental maximum daily quantity of gas ("SMDQ") on top of the gas they were usually required to supply each day under a long-term sales agreement.

That lasted four months.

The energy companies instead offered to supply an equivalent quantity of gas to Verve at a prevailing market price, which was higher than what it paid for "SMDQ" gas.

Verve begrudgingly accepted, but commenced action in WA's Supreme Court, arguing Woodside and partners had breached their obligation to use "reasonable endeavours" to supply SMDQ to Verve.

The court found in favour of the energy companies and Verve then successfully appealed to the Court of Appeal.

By special leave, both Verve and the gas companies appealed to the High Court.

This morning, the High Court, by majority, held that Woodside and its partners did not breach their obligation to use "reasonable endeavours", dismissing Verve's appeal and allowing the gas companies' appeal.

Verve, which had sought financial restitution, was ordered to pay costs.

Woodside said in a statement that the joint venture welcomed the decision.

The company said the partners valued their long-standing relationship with Verve and would continue to honour ongoing contractual commitments.

"The NWS Domestic Gas Joint Venture is proud of its reputation as a reliable and safe supplier of domestic gas to the WA gas market," Woodside said.

The West Australian

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