Pohokura partners want to eat their cake as well

New Zealand energy analysts are perplexed by the Pohokura partners' pugilistic attitude to the Commerce Commission allowing them to jointly market and sell gas from their near-shore Taranaki field, albeit with some conditions.
Pohokura partners want to eat their cake as well Pohokura partners want to eat their cake as well Pohokura partners want to eat their cake as well Pohokura partners want to eat their cake as well Pohokura partners want to eat their cake as well

Last night the partners - Shell New Zealand, Todd Energy and OMV Petroleum - said they were disappointed and concerned by the commission's "strings attached" approval.

"The joint venture parties are firmly of the view that the decision is wrong and that the attaching of significant conditions may delay development of the Pohokura project and further put at risk the supply of much needed energy to the nation.

"The decision is contrary to the overwhelming weight of legal and economic evidence. The commission has imposed conditions where none were required or appropriate," said the partners' statement.

Analysts, however, are worried by this aggressive stance and wonder why the partners have reacted this way.

"I cannot recall a reaction like this against a fair, measured, rational and well documented outcome, which the commission foreshadowed well in advance," said one un-named commentator. "The partners have everything they need, what more do they want?"

Another said he was not sure what their complaint was, other than they didn't get the unconditional authorisation they wanted. "The only options open to them are to accept the decision, and move to market the gas and develop Pohokura, or appeal to the courts."

The commission yesterday authorised the three potential competitors to work together to jointly market and sell Pohokura gas, but imposed three conditions - that the partners only jointly market and sell gas after June 2006 if the Pohokura field is fully operational; that the commission clear any sale of any interest in the field: and that the partners allow reselling of gas to third parties.

The partners said these rulings set an unfortunate precedent for gas production and sale "to the further detriment of New Zealand's already difficult energy supply situation." They admitted they would be urgently considering all their options.

The commission's clear conditions said the partners could already jointly market and sell their gas, but that such activity would only allowed after June 2006 if the Pohokura field and facilities were operational and capable of producing at least 60 Petajoules of gas a year.

The Pohokura partners could jointly discuss and agree on all relevant terms and conditions, including price, quantity, rate, specification and liability, and negotiate and enter into contracts.

The commission also allowed for any delays caused by events beyond the partners' reasonable control, such as bad weather.

"For the avoidance of doubt, the arrangement to jointly market and sell gas from the Pohokura field is authorised until 30 June, 2006. The marketing and sale of gas by way of contracts, agreed before 30 June 2006 but which extend beyond that date, remains authorised notwithstanding that the Pohokura field and its associated equipment is not fully operational before 30 June 2006."

It is likely virtually all of the field's gas will be contracted well before the mid-2006 deadline and, even if the timeframe for full financial project approval slips by three months to next June, that would still allow two years for field development.

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