Commission conditionally approves joint selling of Pohokura gas

12.45pm

The Commerce Commission said today it had conditionally authorised three competitors to jointly market and sell gas produced from Taranaki's Pohokura gasfield.

Developers of the field, Shell Exploration and Todd Petroleum Mining, had already gained provisional approval from the commission to jointly sell the gas rather than sell it in competition with each other.

Commission acting chairwoman Paula Rebstock said the decision to authorise the anti-competitive arrangement reflected that in certain circumstances, the development of gas fields "may require a joint venture approach in order to make the gas available to the market as quickly as possible".

She said the commission preferred separate marketing because competition allowed purchasers of the gas may to negotiate lower prices, and better terms and conditions when they had a choice of supplier.

Ms Rebstock said the commission accepted that the joint marketing proposal could result in the earlier development of New Zealand's largest new gas field, and that early development of the field had public benefits.

Ms Rebstock said the main benefit from the decision would be earlier development of the field.

"If, as a result of joint marketing, the Pohokura field is developed earlier than otherwise would be the case, the commission estimates the benefits, which fall within the range of $47.8 million to $81.9 million, would outweigh the detriments," she said.

The three conditions that the commission has imposed are:

* the field must be fully operational by June 30, 2006

* if an owner sells its holding in the field, the new owner much apply for an authorisation from the commission

* the applicants must not prevent purchasers from onward reselling of gas to third parties.

Other industry parties should not automatically expect that joint marketing proposals would get similar approval, Ms Rebstock said.

She said the commission believed the decision would bring more certainty to bringing the field into production.

New Zealand's gas resources are rapidly dwindling with the giant Maui field due to be exhausted in 2007.

NGC, one of the likely purchasers of the Pohokura gas, claimed that the joint selling proposal would shrink competition to one or two suppliers from 2005 and push up prices.

- NZPA