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Unity needed for Kiwi continuity

As this country continues hurtling towards the serious gas supply shortages predicted for 2005-06, commentators are hoping and praying for a less fractious and fragmented year than 2003.

"I think the whole indecision thing regarding the re-allocation of remaining Maui reserves is appalling. Everyone is sitting in their corners post redetermination, with (Energy Minister) Pete Hodgson trying to get all the parties around the table and involved in constructive negotiations," one commentator told EnergyReview.Net recently.

"Also, people are playing their cards pretty close to their chest, with an assumption that someone might be trying to pull the wool over their eyes regarding remaining reserves."

Last February Texas-headquartered Netherland Sewell and Associates International delivered its damning final report on the remaining recoverable reserves from the formerly giant Maui field and concluded there was only about 370 Petajoules of gas left "at the Maui contract price".

Subsequently the government, Maui partners Shell New Zealand, Todd Energy and OMV Petroleum, and Methanex, NGC and Contact Energy started negotiations regarding the reallocation of those remaining reserves and new production profiles for the life of the field, perhaps even out to the contracted 2009.

The commentator said there needed to be a specialist group within Crown Minerals, or outside consultants employed by the Ministry of Economic Development, to properly and accurately advise Hodgson on "the very probalistic business of oil and gas reserves".

The Commerce Commission employed outside consultants when it was considering complex energy issues, such as the application by the Pohokura partners - Shell, Todd and OMV - to jointly market and sell gas from that near-shore Taranaki field. It is thought Crown Minerals should also employ consultants for complex sensitive issues such as the Maui wind down.

A second commentator said another critical issue was the prompt development of the 750 bcf Pohokura gas field as a partial replacement for Maui.

Operator Shell Todd Oil Services was progressing well with preliminary engineering, including such things as geotechnical surveys. However, there seemed to be inordinate delays in marketing Pohokura gas, something which was necessary before final financial project approval could be given.

"Prompt marketing of Pohokura gas is of national importance, to ensure continuity of gas supply in the critical wind down of Maui," he said.

It was public knowledge that the Energy Minister had lodged a Section 26 application with the Commerce Commission in support of the Pohokura joint venture application, based on consideration of the national interest.

However, it was also known the partners had told the energy ministry that Pohokura field development would be advanced, subject to commission approval, so as to avoid any discontinuity gas supply in the transition from Maui to Pohokura - even perhaps "substituting" Pohokura gas for contracted Maui gas.

The commerce commission authorised joint marketing in early September and there seems to have been very little progress in the four months since.

"I wonder how the minister's office and MED now feel about this, in view of what has, or more relevant, what has not come to pass since the commission's decision?" asked the second commentator.

"Does the commission now feel potentially misled about the statements and submissions, about the speed with which joint gas marketing would advance, which were made at the its public hearing in July?" he wondered.

"It will be interesting to see what happens with the government and the regulator if the joint venture continues to procrastinate, and in the process potentially compromises the national interest and competitive gas pricing," he concluded.

Last November ERN reported former Shell NZ chairman Lloyd Taylor as saying he hoped requests for proposals for the first tranche of Pohokura gas could be called before the end of the year to ensure most gas could be contracted before the final financial decision of mid-2004.

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