Contact warns industry to plan for tougher times

By CHRIS DANIELS energy writer

Contact Energy has a message for its big industrial gas customers: the times, they are a changin'.

Gas is moving from a buyer's to a seller's market, and into a world where natural gas supply is a more expensive and less reliable proposition.

To cope with a tight natural gas market, particularly in the next few years, the big commercial users are being told to plan for the inevitable - possibly investigating new dual-fuel systems.

The huge Maui gasfield, which has supplied New Zealand with some of the cheapest natural gas in the world for 20 years, is starting to run down. Recent equipment failure has put supply in jeopardy, prompting calls for more gas exploration and discovery.

Contact's general manager of sales and marketing, Stephen Cross, said he had been shocked at the extent to which some big commercial gas users had become reliant on a continuous supply of natural gas.

The capability to run factories on other fuels, such as diesel or coal, had been removed, leaving companies entirely dependent on gas.

In the next few years, as the Maui field ran down, the ability of Contact to guarantee supply would fall accordingly, said Cross. The firm had been making presentations about the changing gas situation to its biggest customers, including industries such as breweries and bakers.

"We are certainly saying prices are going to be moving. We want people to factor that in their forward planning now."

Contact itself had just announced it was converting its New Plymouth power station back to dual-fuel capacity, allowing it to run on fuel oil should the Maui gas supply fail.

"We're unsure of our ability to contract in the future. Our own wholesale supply position is changing. We're not making long-term commitments at the moment."

Even when new fields, such as Pohokura off the coast of Taranaki, came into production, supply could not be assumed to match Maui's, said Cross.

A combination of good geology and a big investment in facilities during the 1970s means Maui could be relied on to quickly ramp up production in times of need.

As Maui runs down - it is expected to have largely run dry by 2007 - a number of smaller fields are expected to replace it.

Cross said home and small business gas customers had no need to worry once Maui ran down, as they used such a small amount.

Contact's two biggest industrial customers used more gas than all its domestic users put together.