In 1997, Fort Worth oilman Richard Moncrief waded into the murky post-Soviet Russian energy landscape and struck what he says was a deal with a unit of OAO Gazprom to develop a big natural gas field in Siberia.
Eighteen years later, Moncrief, the grandson of one of the original Texas wildcatters, is still trying to enforce his company’s claim against the Russian energy giant, this time before a state court jury in his hometown.
The trial, which started with opening statements Thursday, may be the best chance for his Moncrief Oil International to claim compensation from Gazprom after losing in other courts.
Moncrief Oil seeks $1.37 billion in damages from Gazprom and several subsidiaries. It lost in a German court in 2010, and a separate lawsuit over the same deal was dismissed by a federal court in Texas in 2007.
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Gazprom backed out of the deal, sabotaged a joint venture and stole the company’s trade secrets, Moncrief’s attorney Michael Anderson told jurors Thursday.
“The defendants over here played by no rules whatsoever,” Anderson said. Russia’s largest company “destroyed Moncrief’s work on the venture,” the attorney said, and misappropriated trade secrets.
Gazprom lawyer Van Beckwith told the jurors: “This wasn’t a trade secret. It was a sales pitch, and it was a bad one for Gazprom.”
The trial’s location is a concern for Gazprom, Mike Calhoon, another lawyer for the Russian company, told prospective jurors this week. He 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 that they would be.
A jury of six men and six women was selected Wednesday to hear the case.
Richard Moncrief is the son of William “Tex” Moncrief and the grandson of the late William “Monty” Moncrief, who was among the original wildcatters making discoveries in East Texas in the 1930s, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.
“The Moncriefs have been synonymous with Texas oil and big finds for a long time,” Bullock said.
Moscow-based Gazprom contends that Moncrief Oil should be pursuing its claims in Russia, not the U.S. But Moncrief sued in the U.S. because Russia is “not a realistic option given the culture of lawlessness that pervades Russian society,” its attorneys said in court papers.
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 to develop the field.
Moncrief says the initial deal was muddied by corruption in Russia before Vladimir Putin became prime minister and then president. Gazprom dropped the deal later, after it was seemingly 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 U.S. Occidental agreed to the 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 and proposed 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.
Moncrief says 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 traveled to Fort Worth, Houston and Boston to participate in talks, which included Moncrief’s study of the U.S. natural gas market and the prospects for building a liquefied natural gas import terminal near Corpus Christi. That project would have been a partnership with Houston-based Occidental.
But Beckwith, the Gazprom lawyer, said there was no deal with 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. No leases or deeds were signed, he said.
“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 re-gasification plants in the U.S. About 30 such proposals were being discussed at the time, Beckwith 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 businesspeople 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.”