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26 October 2014
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Contact urge rapid gas development

There needs to be much more urgency and focus on developing major new gas resources as New Zealand enters its post-Maui age, says Contact Energy.

The timely development of known gas reserves is the energy industry's most pressing priority for next year, say Contact Energy chairman Phil Pryke and managing director Steve Barrett in the company's annual report released today.

Reiterating earlier Contact concerns about the future security of gas supplies, the executives said New Zealand faced a challenging period of transition over the next few years - from the abundant energy of the last generation to a new and more uncertain era.

Recent supply constraints, with scheduled maintenance at the Maui field and Contact's Otahuhu-B gas-fired station in Auckland, has reduced both available gas and generating capacity. This has provided "a foretaste" of conditions expected during this transition, from relatively cheap and abundant Maui gas to the dearer and more diverse post-Maui market.

Pryke and Barrett are just some of the many energy executives who, over past months, have warned of possible power cuts, price hikes and insecurities of gas supply as Maui runs down 2.3 years earlier than the originally contracted end of 2009.

However, the Contact executives believe there is still "far too little urgency or focus" going into the commercial development of the only two major known new gas reserves - the marginal Kupe field off south Taranaki and the possibly massive Pohokura find off north Taranaki.

"Their timely development will help to close the gap created by the rundown of Maui. We urge the gas industry and Government to give this issue the priority it deserves," said Pryke, as not enough gas had yet been discovered to cover the predicted shortfall left by the Maui rundown.

Industry commentators, though, say Crown Minerals - the government organisation responsible for administering this country's petroleum estate - is doing a great job promoting and fostering exploration activity here.

The commentators also say the development of the possibly 1tcf Pohokura gas-condensate field is progressing well and that Kupe operator Genesis Power is doing well trying to make development of that marginal field an economic proposition.

The Contact executives said total electricity demand would soon approach total generating output, so significant investment in new generating capacity was becoming urgent. Without major new gas discoveries, New Zealand's new energy sources were likely to come from a mix of renewable, geothermal, coal or even imported diesel or LNG.

The men reiterated plans to defer any construction of new generation facilities until this uncertainty over gas supply was resolved. Earlier this year Contact postponed its planned Otahuhu-C combined cycle station, citing possible future insecurities of gas supply.

However, Pryke and Barrett said planned incremental upgrades in capacity at existing geothermal and hydro sites would go ahead, plus the use of liquid fuels (fuel oil, distillate) at the aging New Plymouth gas-fired power station as a back-up, if that proved feasible.

Australia remained a new source of long-term growth - "the best place for Contact" - due to its proximity, similar legal and economic system. Although the Aussie industry was in a state of unprecedented flux, opportunities remained for Contact to build an integrated energy business there, building on its existing interests in the 282MW Oakey and 300MW Valley Power gas turbine stations in Queensland and Victoria respectively.

New Zealand's largest energy company made a net surplus for the year ending September 30, of $NZ107 million, compared with $NZ131 million the previous year. Although average wholesale power prices were 50% lower than the previous 12 months, this was partly offset by strong revenue growth from an expanded retail customer base - of over 4490,000 electricity and 105,000 gas customers. It will pay a fully imputed dividend of NZ20.9cents per share.

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