Develop offshore NZ fields quickly: Contact

Contact Energy boss Steve Barrett says it is imperative for the Pohokura and Kupe offshore gas fields to be developed as quickly as possible to help avert New Zealand's looming energy crisis.

Earlier this year Contact deferred its proposed third gas-fired power station at Otahuhu, Auckland, citing uncertainty over future gas supplies post-Maui.

Yesterday Barrett reiterated those concerns, saying Pohokura and Kupe were the only two known commercial undeveloped gas fields and needed to be brought onstream as soon as possible.

"Contact's preferred position remains to be a net generator and we have plans for incremental increases in generating capacity over the year next one or two years, but there is still insufficient certainty about the source and price of new energy supplies - whether gas or an alternative - to allow us to commit to the construction of substantial new generating plant at this time,' he said in the company's 2002 annual report released yesterday.

"This remains a key issue for the country, as we approach the rundown of the Maui field, which has provided a whole generation of New Zealanders with relatively cheap and easily accessed energy."

"Kupe and Pohokura are the only two known undeveloped gas resources of commercial size. Their timely development will help to close the gap created by the rundown of Maui, but further discoveries will be necessary to meet expected demands as we reach the end of this decade.

"It is time to get on with it," Barrett added.

However, New Zealand's relatively low energy prices, by world standards, were expected to continue, notwithstanding the rundown of Maui.

He thought that Contact had made excellent progress towards to the goal of creating a balanced portfolio of electricity generation and retail assets and now wanted to consolidate its position and seek new growth opportunities.

This balanced strategy was the key to Contact's strong performance for the year to September 30, 2002, when wholesale electricity prices averaged $41.60 per MWh, just over half the $82.70 per MWh average for the previous year, when a cold, dry winter threatened power shortages.

Contact recorded a $NZ107.0 million tax-paid profit for the 12 months to September 30, 2002, in a year when lower wholesale electricity prices were offset by continued strong growth in Contact's retail customer load.

The $NZ107.0 million result compared with $NZ130.7 million the previous year.

Contact Energy was now the country's largest energy retailer with a total of 449,000 electricity and 105,000 gas customers. This meant Contact had significantly increased its level of retail hedging to approximately 71%, compared with 56% in 2000/01.

Barrett said the balanced portfolio of generating and retail assets meant Contact's earnings were now less exposed to short term volatility in electricity spot prices. However, the looming capacity constraint on wholesale electricity and gas prices was already having a visible impact in the industry.

Barrett said Contact was continuing to explore opportunities for new growth, with New Zealand as the primary focus, followed by emerging opportunities in Australia.