Pohukura partners argue for joint marketing

THE Pohokura partners are pleading with the New Zealand Commerce Commission that they should still be allowed the option of joint marketing and selling their gas, though they went their separate ways in securing “foundation volumes” sales.

The Wellington-based commission said in late February that it was considering revoking the Pohokura partners’ right to jointly market and sell gas on the basis of “false or misleading” information given or because of material changes in circumstances.

Now Shell Energy NZ, Todd Energy and OMV Petroleum – in probably their last submissions before the commission decides whether to revoke its joint authorisation – deny giving any “false or misleading” information to the commission.

They also say the time is not right to consider any revocation and that separate marketing and selling might still eventuate.

Todd Energy, in its submission, says: “The Joint Venture intended, and had the means, to jointly market and sell all the gas from the Pohokura field. Todd has not said that joint marketing was necessary to achieve early production from the field by the end of June 2006.”

Todd also warns it would be premature for the commission to reach the conclusions based on its draft determination – which was to revoke joint authorisation.

Shell’s submission says the commission should not exercise its discretionary powers to revoke as it has not yet undertaken an "appropriately robust" cost-benefit analysis of the impact of revocation.

“Such an analysis would reveal significant commercial risks attaching to revocation as compared with minimal competitive downside in the event the authorisation remains," Shell says. "Now is not an appropriate time for the commission to intervene.”

OMV says the key reason for moving to separate marketing was the “extreme difficulties in reaching agreement within the PJV on key items that affected the likelihood of meeting the targeted production date of June 2006.”

The public version of OMV’s submission has large sections deleted, including the reasons for being unable to reach agreements on several options for

field development or gas marketing/selling. But the company says “these options carried a significant degree of risk that the targeted date for first gas would not be met”.

Todd also says “there may yet be a reversion to joint arrangements in respect of tranche 1 gas” – referring to last year’s separate sales contracts for foundation volumes of Pohokura gas. Todd contracted to sell its share to Genesis Energy, OMV to Contact Energy, and Shell to Contact, Genesis, NGC and Multi Gas.

“There are likely to be joint arrangements in respect of other, as yet unsold, gas . . . revocation of the authorisation would create a risk of delay in achieving production from the field,” the company says.

Throughout its submission, OMV uses the phrase "going to the market separately" and says the commission’s draft determination - which was to revoke on the grounds that separate marketing and selling had already occurred - is wrong.

“Although OMV has gone to the market separately from the other PJV participants, the commission is wrong to conclude that this means that separate marketing is possible and/or will necessarily achieve an early (June 2006) production start.”

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