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Rift Opens Between Mobil, Maritimes

Rift Opens Between Mobil, Maritimes

A dispute has erupted in the Canadian courts between affiliates Mobil Oil and the Maritimes & Northeast Pipeline. Maritimes has filed a lawsuit with the Nova Scotia Supreme Court against Mobil, seeking C$3.29 million, plus C$100,000 in general damages, interest, legal costs and all out-of-pocket expenses.

Some industry observers probably saw this one coming, but the consequences of this dispute could be far reaching. The $1.2 billion Maritimes pipeline project received authorization to commence gas transportation services Dec. 1, 1999. However, the Sable Offshore Energy Project, which the pipeline was built to serve, wasn't ready to begin flowing gas until Jan. 1.

Although the companies would not discuss the details of the lawsuit, the dispute concerns a breach of contract in which Mobil failed to pay pipeline charges between Dec. 1 and Dec. 21.

Mobil signed the agreement in April 1998. It states that upon commencement of transportation service, Mobil would begin paying a monthly service charge to reserve space on the line.

Mobil has a 12.5% stake in the Maritimes project and is a partner in Duke Energy, which owns a 37.5% stake in the pipeline. Mobil also has a 51% stake in the Sable project and is Maritimes' largest capacity holder. It also has a "backstop" agreement with the pipeline in which the producer will pick up the tab if a certain amount of capacity goes unused.

Mobil still has not responded to the lawsuit.

The 650-mile Maritimes pipeline was designed to deliver up to 530,000 MMBtu/d of gas from the Nova Scotia gas procession facilities of the Sable project to markets in Canadian Maritimes provinces and New England.

Rocco Canonica

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