Gas field alliance gains approval

By CHRIS DANIELS energy writer

Natural gas may start flowing more quickly from the new Pohokura field now the Commerce Commission has granted the owners conditional permission to join forces.

Gas from Pohokura will begin replacing that coming from the rapidly depleting Maui field.

It will be used mainly in power stations to generate electricity.

Potential buyers of the gas include the state-owned power company Genesis, which may use it to fire a new power station at Huntly, and Contact Energy, which has been looking for gas contracts to fuel its plans for a new station at Otahuhu.

The Commerce Commission application to jointly sell the gas was made by then-Pohokura owners Shell, Todd and the European company Preussag.

European oil and gas giant OMV last week bought Preussag's share of the field.

Agitation has been growing in the energy sector to bring Pohokura into production. But the field's development has been held up by the contested desire of its owners to jointly market the gas.

Gas buyers say there should be a competitive market for gas, so the price should not be kept artificially high by the owners fixing prices.

New Zealand law prohibits competitors agreeing to work together in a way that reduces competition unless it is authorised as providing greater public benefit.

The Commerce Commission's draft decision says that potentially the most substantial benefit from the arrangement will be the earlier development of Pohokura.

Because joint marketing will bring the gas on-stream a year earlier, the public will benefit to the tune of $29 million to $57 million.

Conditions imposed on the approval by the commission include limiting the time period of the authorisation to five years, and a requirement that the first Pohokura gas be available by February 2006, with full production by June 30 that year.

The commission is accepting submissions on its draft decision until June 9.

It will hold a conference from July 1 to July 3, before releasing a final decision on August 7.