Energy Voice | Spirit and Taqa lose legal fight over £68m North Sea pension deficit

Spirit Energy and Taqa have lost a legal battle with Marathon Oil over a £68million deficit in a North Sea pension scheme.

The Court of Appeal has ruled Spirit and Taqa are liable for 54% – £36.9m – of the bill to meet the deficit in the programme for workers on the Brae fields.

Spirit and Taqa argued that Marathon as operator was responsible for the “runaway costs” and contested that as partners they were “not compelled” to meet them.

In 1980 Marathon entered a joint operating agreement (JOA) with Spirit, which was then Centrica, and Taqa ahead of production starting on the Brae facilities.

Marathon successfully argued that it was entitled under the JOA to require the partners to pay a 54.41% share of the debt recovery charges.

The “substantial deficit” arose from issues including volatility in the economy, which the court decision said “became evident for some years”.

Spirit and Taqa initially “paid their share without complaint” until 2014, when the oil price crash occurred, arguing they “never foresaw nor contemplated” the costs when the pension scheme was first agreed.

The argument came to a head in a four-day trial in November 2017, when a judge found in favour of Marathon.

Spirit and Taqa challenged the ruling, but three appeal court judges dismissed their argument last week.

Despite the argument of the two firms, Lord Justice Green stated “several articles in the JOA make clear that the participants are required to pay the pensions costs”.

He added: “There is no identifiable logic whereby the participants can take the benefits but avoid the risks”.

The decision was bolstered by the fact that an “in advance” system of approval was put in place by the operating committee on issues including pensions.

The committee worked with the “supervision and direction” of Taqa and Spirit as partners.

Marathon declined to comment.

A spokesman for Spirit Energy said: “We note the judge’s decision in this case, and we continue to work with our joint venture partners in the best interests of the assets.”

A Taqa spokeswoman said: “We confirm there is a court process ongoing and that a judgment was recently handed down by the Court of Appeal.

“TAQA is currently considering its position following this decision.”

The only other avenue to contest the ruling lies with the Supreme Court, the final appeal court for civil cases in England, Wales and Northern Ireland.

The Brae complex lies around 170miles north-east of Aberdeen.

Marathon Oil submitted draft decommissioning plans for the Brae Alpha, Bravo and East Brae in 2017.

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