Indo-Pacific Energy chief executive Dave Bennett told EnergyReview.Net today that operator Indo-Pacific and its PEP 38736 partners had - at a joint venture meeting in Wellington on Wednesday - decided on negotiating further with one of several companies interested in taking gas from the Kahili-1A/B sidetrack well in central Taranaki.

"Since that Wednesday meeting we have entered second stage talks with this party and hope to have a draft contract signed within two months."

Bennett would not disclose the identity of the preferred candidate nor the other interested parties.

However, EnergyReview.Net understands that NGC Holdings is the preferred party regarding the gas supply contract and that NGC would onsell Kahili gas to power generator, wholesaler and retailer Contact Energy.

Wellington-headquartered Contact recently bought the nearby 374MW Taranaki Combined Cycle power plant from NGC, while NGC bought Energy Gas Contracts Ltd from Shell New Zealand and the sole purpose of EGCL is to supply gas to the TCC plant at Stratford.

Contact Energy also has the flexibility of transporting Kahili gas to its New Plymouth power station using an existing nearby pipeline, as can be done already with gas from the Tariki, Ahuroa, Waihapa and Ngaere (Tawn) fields. Owner Swift Energy New Zealand currently sells Tawn gas to Contact Energy.

It is believed Contact has the flexibility to take additional gas from more small onshore fields, such as Kahili, for use at its Stratford and New Plymouth plants, or even at its two Otahuhu stations in Auckland.

Bennett said there were several options available for the offtake of Kahili gas, LPGs and condensate. "And I am pretty optimistic the next flow test, as well as the next well, will increase previous flow rates and our estimates of recoverable reserves."

A second flow test of an extended interval at Kahili-1A/B was scheduled to start later this month, while a second well might be drilled before the end of the year.

Bennett said he believed Kahili-1A/B could flow more than 5 million standard cubic feet per day and a second well could bring total field production to over 10 MMScf/d. This would mean annual flows of about 10 Petajoules or more.

He said the smallish size of Kahili, and Swift Energy's Rimu-Kauri finds further south, essentially meant the different owners would not be competing in selling their gas as the relatively small New Zealand market could "absorb" such quantities, particularly in the growing thermal electricity sector.

Indo-Pacific holds 45% equity in licence PEP 38736, along with Aussie companies Tap Oil (30%) and Claire Energy (25%).