Energy Minister Pete Hodgson announced the Kupe agreement, along with the transfer of some central North Island geothermal assets to another electricity generator, Mighty River Power, last night.

Hodgson said the sale of the Crown's 11% interest in the Kupe gas field, the price of which was still being negotiated, would smooth the development path for Kupe.

“The government does not intend to be commercially involved with the development of the field and a sale to Genesis will enable the company to move ahead with certainty over the ownership structure."

The widely anticipated government withdrawal from Kupe will leave Genesis with an 81% stake and New Zealand Oil and Gas 19% in the field, though Genesis is looking to farm out part of its share to a firm or consortium, which will then take over as operator of the formerly marginal field that was discovered by an NZOG-led consortium 17 years ago.

Genesis Power chief executive Murray Jackson told EnergyReview.Net today that he hoped requests for proposals for farming in to Kupe would be sent as soon as possible so Genesis could have a preferred partner by mid-2003.

Industry commentators say the likely sale price of the government’s stake in Kupe could vary greatly, given the rapidly changing New Zealand gas market that was once dominated by Maui. “Often with such farm-outs people try to get the gas for nothing, but now new gas almost commands a premium,” said one.

However, another said the government might, for the sake of the industry, still be prepared to virtually give the gas away to ensure Genesis could present as attractive a package as possible to prospective new partners and get first gas ashore by the scheduled late 2006-early 2007.

Kupe and the larger Pohokura field off north Taranaki are tipped to be partial replacements for the faltering Maui, which could all but be extinguished in three years. Jackson said another major discovery was urgent, “as we will need to bring onstream a third field after Pohokura and Kupe,” Jackson added.

The last disclosed price for a stake in Kupe was $US19.6 million when Fletcher Challenge Energy bought a 34% interest in the mining licence in 1997.

The government’s “free carry” is a relic from before Crown Minerals legislation, where the government took an 11% stake in an exploration licence at no cost to itself and only started contributing to costs if it decided to stay as a development partner.

Hodgson added that the transfer of a number of geothermal bores, particularly in the central North Island Kawerau geothermal field, to Mighty River Power would give the government-owned enterprise considerable potential for geothermal power development. The assets will be transferred to Mighty River Power at a price established with the advice of independent valuers.