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Energy Moncrief tries home court in gas deal dispute with Russian company

Moncrief tries home court in gas deal dispute with Russian company

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Robert Francis
Robert Francis
Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

 

Tom Korosec and Margaret Cronin Fisk (c) 2015, Bloomberg News.

FORT WORTH – Moscow-based Gazprom backed out of a deal with Moncrief Oil International for rights to develop a natural gas field in Siberia, sabotaged a joint venture and stole the Texas energy company’s trade secrets, Moncrief’s lawyer said at the start of a $1.37 billion trial on Thursday.

Moncrief, based in Fort Worth, is arguing the case before a hometown jury after failing in two previous tries elsewhere. The company lost in a German courtroom in 2010 and a separate suit over the same deal was dismissed in a Texas federal court in 2007.

“The defendants over here played by no rules whatsoever,” Moncrief’s lawyer Michael Anderson of Fort Worth’s Kelly Hart & Hallman told jurors in state district court. Gazprom, Russia’s largest company, “destroyed Moncrief’s work on the venture,” the attorney said. Gazprom also misappropriated trade secrets, according to Moncrief.

“This wasn’t a trade secret,” Gazprom lawyer Van Beckwith said at the trial. “It was a sales pitch and it was a bad one for Gazprom.”

The trial’s location is a concern for Gazprom, a lawyer for the Russian company, Mike Calhoon, told prospective jurors on Jan 6. Moncrief Oil Chairman Richard Moncrief is a grandson of Monty Moncrief, one of the original Texas wildcatters.

Calhoon asked 150 prospective jurors whether they would be predisposed to favor someone from the locally prominent Moncrief family over a Russian business. Dozens raised their numbered cards to indicate they would be.

A jury of six men and six women was selected yesterday. The trial may take about six weeks.

Moncrief should be pursuing its claims in Russia, not the United States, Gazprom argued.

Lawyers for the Texas company said in papers filed with the court that Moncrief sued in the United States because Russia is “not a realistic option given the culture of lawlessness that pervades Russian society.”

Moncrief said it obtained its interest in Russia’s Yuzhno-Russkoye Field, also known as the Y-R Field, through a series of agreements with a Gazprom subsidiary in 1997. Gazprom later contracted with the German chemical company BASF SE to develop the field.

Moncrief said the initial deal was muddied by corruption in Russia before Vladimir Putin became prime minister in 1999. Putin is the current president of Russia. Gazprom dropped the deal later, after it had seemed to get back on track.

Moncrief said it relied on the purported deal with Gazprom to develop a separate joint venture with Occidental Petroleum that would import natural gas and sell it from Texas throughout the United States. Occidental agreed to the joint venture in exchange for an option to acquire an interest in the Y-R field from Moncrief, according to court papers.

Instead, Gazprom met with Occidental, proposing an arrangement that could “bypass any participation by Moncrief,” the lawyers said.

Gazprom’s representatives “pointedly closed the meeting by reminding Occidental of its significant Russian assets,” Moncrief lawyers said in the complaint. Occidental pulled out of the joint venture with Moncrief in 2007.

Gazprom “destroyed the joint venture,” the lawyers said.

Moncrief claims Gazprom misappropriated trade secrets that it obtained in meetings and discussions that followed the Russian company’s 2003 announcement that it planned to sell liquefied natural gas to the U.S.

Gazprom representatives went to Fort Worth, Houston and Boston and took part in talks, which included Moncrief’s study of the U.S. natural gas market and prospects for building a liquefied natural gas import terminal near Corpus Christi, Texas, according to court papers. That project would have been a partnership with Houston-based Occidental.

Gazprom relied on the confidential information to pursue the separate negotiations with Occidental, according to Moncrief’s suit.

Gazprom lawyer Beckwith said, however, there was no deal between the Russian company and Moncrief. The two companies made only preliminary agreements to “talk about doing things in the future,” he said.

Moncrief paid “zero dollars and zero cents” to Gazprom and its affiliates, he said, adding that no leases or deeds were signed.

“By 1999, the Russian economy collapsed and Moncrief couldn’t get financing for these deals,” Beckwith said. Moncrief’s participation in the Russian field “couldn’t happen,” he said.

In the early 2000s, a number of energy companies had proposed building regasification plants in the U.S. About 30 such proposals were being discussed at the time, he said.

With the development of shale gas fields in Texas and elsewhere, those ideas died, he said. “The price falls, gas floods the system and wise business people decide we’re not going to build it,” Beckwith said.

“This idea wasn’t being used by anybody,” he said. “It wasn’t used by Occidental. It wasn’t used by any other big oil company. It wasn’t used by Gazprom.”

Beckwith showed jurors an aerial photo of the site on the Texas coast where the plant was supposed to be built. It remains empty to this day, 10 years later, he said.

Margaret Cronin Fisk reported from Detroit.

 

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