Oslo government move to reduce tariffs will impact return on investment
Abu Dhabi is part of a group of investors in Norway's offshore gas pipeline system which is suing the Oslo government over a plan to reduce tariffs for using the network.
Companies representing several international investment funds, such as the Abu Dhabi Investment Authority, the Canadian Pension Fund and German insurer Allianz, have spent $5.1 billion in recent years acquiring stakes in Norwegian pipelines, then considered a safe and steady investment bet.
The government said at the end of June it would stick to an earlier announced plan to lower the tariffs by 90 percent for new gas contracts, a move it said was intended to encourage higher production in mature fields and exploration in the frontier areas of the Arctic.
The move will lower investors return to 4 percent, when the group had projected a minimum return of 7 percent. Infinity Investments SA, a unit of the Abu Dhabi Investment Authority, is part of the investors in Solveig Gas Norway AS, which owns 24.8 percent of Gassled.
Alongside Solveig, Njord Gas Infrastructure AS and Silex Gas AS have issued notices to the government. Though the government decided that lower tariffs will apply from 2016, instead of this year as previously planned, investors insist the decision to cut them lacks legal basis and should be declared invalid. The government says it acted legally.
The three companies together hold almost 39 percent of Gassled venture. Norway's state-owned Petoro is the major stakeholder with 45.8 percent.
Norway's oil and energy ministry confirmed receiving letters from the three companies.
"We are taking them into the consideration," a spokeswoman said, declining to comment further.
“Notice contemplates that the company would claim compensatory damages for the loss the company suffers as a result of the decision," Njord Gas, which holds 8 percent of Gassled, said in a statement to the Oslo Stock Exchange.
Trygve Pedersen, head of Solveig Gas Norway, said the notification was "the initial step in the legal proceedings. "We are basically notifying that their (ministry's) decision lacks legal foundation, and that we will claim financial losses," he added.
Kurt Georgsen, Chief Executive Officer of Silex Gas, a subsidiary of Allianz Capital Partners, said litigation could be avoided if the ministry changes its position.
Norway exports gas via an 8,000-kilometre-long network to receiving terminals in Britain, France, Belgium and Germany.
Last year, Norway overtook Russia to become the European Union's biggest gas supplier, delivering 106 billion cubic metres of gas.
* With Reuters