ESB wins legal victory in gas price battle with Esso

ESB has won a significant legal victory against the multinational oil company Esso over the price of gas. Emmet Oliver reports.

Esso Exploration and Production UK argued recently in the High Court in London that a 15-year gas contract agreed with ESB should be seriously reviewed in the light of international prices.

The contract, which guarantees ESB a supply of gas until 2014, was agreed in November 1997. It was agreed during a transition period in the development of the gas market with companies switching to a liquid market rather than using wholly fixed contracts.

The contract was signed in 1997 but, by 2002, Esso sought to have the price re-negotiated. It pointed out that the price involved was only 85 per cent of current market rates. It said it triggered a review of the contract as a result.

The two companies differed over the definition of a review and the matter ended up in court. An earlier attempt to refer the matter to arbitration failed.

Esso told the court that the key consideration was to make sure that gas prices did not fall too far out of line with market prices. ESB countered that, while reviews were possible, they could not be done on the basis of long-term trends. ESB won the case because they successfully claimed that a change in the price could only take place based on "reasonable grounds" and these were not present in this case.