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Maui a dry argument: draft report

It looks as if the Maui gas field will dry up in mid-2007 and force the big three users to urgently find alternative gas supplies, if adjudicator Netherland Swewell's draft report is anything to go by.

Maui a dry argument: draft report

It looks as if the Maui gas field will dry up in mid-2007 and force the big three users to urgently find alternative gas supplies, if adjudicator Netherland Sewell’s draft report is anything to go by.

Contact Energy today confirmed it had received a copy of the draft report by Texan firm Netherland Sewell and Associates International and said the numbers were “broadly consistent” with those of Contact’s own advisors.

This probably means NSAI thinks the Shell New Zealand downgrade, announced in November 2001, of original Maui reserves is accurate; and that the field only ever contained about 3800 Petajoules (PJ) of recoverable gas and not the 4085PJ on which the Maui gas supply contracts were based.

Early industry comment had NGC Holdings and Contact Energy being able to survive losing physical gas and rights to pre-paid gas, while losing physical gas might put Methanex New Zealand out of business.

However, lately some commentators have said the recent more flexible Methanex approach to gas pricing, coupled with Contact’s deferral of its third Auckland gas-fired power station, might soften the blow of reduced Maui reserves.

These factors, plus the more robust Kiwi gas market, could see the rights to Maui and non-Maui gas being traded vigorously by a variety of players in the New Zealand energy scene over the next few years.

Methanex is believed to be prepared to pay a bit more than its $US1 per Gigajoule “world standard” for extra gas for its Motunui and Waitara Valley methanol plants. Contact and fellow electricity generator Genesis Power have recently signed contracts to take Kaimiro and Rimu gas respectively. Their future gas trading might also include the just discovered Kahili and Surrey finds, which could free up some significant quantities for Methanex to buy.

Contact chief executive Steve Barrett said from Wellington today that the final report from Netherland Sewell would provide an estimate of expected remaining Maui economic recoverable gas reserves. This in turn would lead to an adjustment to Contact’s entitlement under its supply contract with the Crown.

“Based on present information, it appears that volume of gas for which Contact would lose a contractual purchase entitlement will be broadly offset by reductions in our on-sale obligations under downstream supply contracts.

“However, it should be stressed that it is too early to predict with certainty the impact of the redetermination process on Contact. The outcome will depend on the independent expert’s final determination, the volume of gas allocated to Contact, and the profile that will apply to future delivery of gas,” said Barrett.

He noted that the Maui redetermination process was not expected to significantly affect the availability of gas to residential and smaller commercial customers, as their total demand was relatively small compared to total current use.

Just last week Maui Development Ltd chairman Lloyd Taylor said he was not expecting anything substantive from Netherland Sewell before mid-January at the earliest. However, it now appears Netherland Sewell wanted to make a “Christmas present” to the parties involved and send out copies of their draft before the end of the year.

Before NSAI can reach any final conclusions, there is the requirement for any preliminary views to be delivered to the parties involved, for their consideration. The parties can make submissions to NSAI, after which NSAI will deliver its final and binding conclusions.

Barrett said that final report was now expected early in the New Year.

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