Several weeks ago Shell NZ said it had sold Kapuni Gas Contracts Ltd for an undisclosed sum to Natural Gas Corporation, leaving the Energy Gas Contracts unit as the last non-physical asset to be divested to meet Commerce Commission concerns regarding the 2001 Shell takeover of Fletcher Challenge Energy.
The sale of KGCL, which gives NGC the right to sell up to 14PJ of Kapuni gas a year to methanol manufacturer Methanex Corporation, was widely expected by the industry which saw NGC as the only realistic owner.
Shell has now asked the commission for an extension regarding the sale of EGCL, which may prove so difficult that the commission could finally be forced to waive this divestment requirement.
The sole purpose of FCGIL was to buy Maui Gas from Contact Energy and onsell that gas to the Taranaki Combined Cycle power station. This dated from the mid-1990s when Fletcher Challenge was a part-owner of the Stratford project.
The problem is that the Contact purchase contract is tied to Maui reserves but the supply contract to TCC is not. This means that any potential FCGIL buyer would have to take the risk that, if Maui has less than the originally contracted reserves (the issue at stake with the present redetermination being done by Netherland Sewell and Associates), it would have to fill in any gap between the end of Maui and the end of the TCC supply contract. Though this could be with gas from any other source, the additional costs and associated legal requirements could prove prohibitive.
"Frankly, I don't know anyone in their right mind who would want to take on this contract," said one commentator.
FCGIL was probably only offered in the first place as a smoke screen by Shell not to have to divest other assets. But once Shell had to offer more divestments to win commerce commission approval, FGCIL then became competitively insignificant.
"You can be sure no one has expressed any interest in acquiring this, nor do I expect anyone to, and most likely the commission will ultimately tell Shell it will waive this divestiture requirement," added the commentator.
