Fletcher deal 'dire' for Taranaki

Venture Taranaki chief executive Stuart Trundle and industry commentators say the proposed Shell-Apache takeover of Fletcher Challenge Energy (FCE) may have dire consequences for Taranaki.

The Fletcher Challenge board recommended on Tuesday that shareholders accept a Royal Dutch Shell offer to pay $US1.03 billion ($2.5 billion) for the New Zealand and Bruneian assets of Fletcher Challenge Energy, and an Apache Corp offer of $US600 million for FCE's Canadian and Argentine assets. FCE shareholders are likely to vote on the takeover offer in January.

"While the FCL board recommendation may be good for Fletcher Energy shareholders, there are some real concerns," Mr Trundle said.

"I wonder if this will be good for other energy companies? Will this be good for Taranaki?

"The issues of most importance for Taranaki are ongoing gas supplies for the Taranaki Methanex plants and the associated $250 million development or deferral of the Pohokura gas field.

"Pohokura is an exciting economic opportunity for this region, particularly for the under-utilised engineering sector, and I would have serious concerns about any delay."

FCE has said it sees Pohokura as playing a large role in keeping the Methanex Motunui and Waitara Valley methanol plants operating to 2010 or beyond.

The plants employ about 250 people and contribute about $40 million annually to the Taranaki economy. FCE wants the Pohokura partners, including Shell, to spend up to $250 million over the next two years to bring the Pohokura project onstream.

Shell, however, in its August application to the Commerce Commission to take over FCE's New Zealand assets, said Pohokura should not be needed until 2009 or later if the Taranaki Methanex plants are gone.

Several industry commentators see this as Shell trying to force Methanex to relocate to Australia, where Shell is involved in the $2.8 billion Sunrise Gas project off the Northern Territory.

Mr Trundle was also concerned about the possibility of Shell controlling virtually all of Taranaki's onshore energy infrastructure, including both the Paritutu and Omata tank farms, and thus effectively controlling access to Port Taranaki - the only way of exporting petroleum products.

An industry commentator, who declined to be named, said the prospect of Shell controlling virtually all uncommitted gas in New Zealand, together with the onshore infrastructure, was frightening.

"This would discourage other explorers, particularly in Taranaki, from developing new fields. It will always be easier to use existing production stations, pipelines or port facilities than build new ones."

Another commentator said Shell already had clearly defined plans, which would involve significant redundancies for Fletcher Energy, including shutting FCE's Auckland head office and merging operations and production in Taranaki with Maui and Kapuni operator Shell Todd Oil Services, which is 50 per cent owned by Shell NZ.

There could be up to 150 redundancies out of a total of 185 FCE staff, with perhaps 50 or so well-paid Taranaki Fletcher's staff losing their jobs, which would take several million dollars a year out of the regional economy.

A successful Shell bid for FCE would see it end up with an 87.5 per cent interest in Maui, this country's largest gas resource, a 53.6 per cent share in the third-largest gas field, Pohokura, and 100 per cent of FCE's onshore McKee oil-gas field. This is in addition to its existing 50 per cent stake in Kapuni, the second-largest gas field, and its 49 per cent interest in the yet-to-be-developed offshore Maari-Pike oil field.

The size of the Pohokura discovery appears to be much larger than first thought, says the Ministry of Economic Development's Crown Minerals unit.

"Laboratory work and reservoir evaluation in the months following the discovery suggest that the Pohokura reserves will grow by roughly 30 per cent on the current mean estimate of 750 billion cubic feet of gas and 40 million barrels of condensate," Crown Minerals said in its newsletter, NZ Petroleum News.

"Considerable work has yet to be done to appraise the northern and southern limits of the field which has the potential to substantially lift reserves."

- NZPA