Incentives call in gas search

By CHRIS DANIELS energy writer

The Government should offer financial incentives to encourage more exploration for natural gas, an Auckland energy conference has been told.

Eric Matthews, exploration manager for listed company New Zealand Oil and Gas, yesterday said the cheap price of Maui gas had suppressed enthusiasm for exploration.

Oil and gas companies around the world were now less interested in exploration, instead focusing on taking positions in established areas.

A shortage of gas to fuel thermal power stations has dominated proceedings at the Utilicon conference, with a rising chorus of calls for more exploration.

Matthews said the Kupe field was essential for electricity production but open access to the Maui pipeline, which would be used to take gas from Taranaki to Auckland, was needed.

The Maui pipeline is used to supply gas only to the three users who buy gas from the Crown: Contact Energy, Methanex and NGC.

He said the Kupe field has "sat there for 17 years", when it should have been developed more than 10 years ago.

State-owned power generator Genesis has a 70 per cent stake in the Kupe field, NZOG has 19 per cent and the Government owns the remaining 11 per cent.

Matthews explained that it was likely that Kupe was a pressure-depleting field, which means the gas pressure slowly drops as it is taken from the field.

This makes it easier to predict how much gas is in the field, as the pressure drops at a fairly steady rate.

The Maui field, which is now running down, is a water-driven reservoir, which means that water enters underneath the gas. While the pressure of the gas field is maintained, it is difficult to accurately predict when it might run out. The water entering the field may leave gas deposits isolated and unobtainable.

Matthew said there had been "negative publicity" about the Kupe field, which had "gone a bit stale on the shelf".

Delegates at the energy conference were also given an update on development of the Pohokura field, which is likely to provide the next big tranche of gas for the New Zealand electricity-generation industry.

Pohokura is owned by Shell, Todd and the European company Preussag.

Agitation to bring it into production has been common in the energy sector, with the field's development currently being held up by a contested desire of its owners to jointly market the gas.

David Salisbury, vice-president of Preussag New Zealand, told the conference that the separate selling of Pohokura gas was not feasible. He outlined some of the huge financial risks faced by the owners in bringing the gas onshore and ready for sale. Some estimates of the total cost of bringing Pohokura into production could be as high as $1.4 billion.

Salisbury said that as the owners' understanding of the field had increased, it had lead to a "downward trend" in the estimates of how much gas was actually in it.

If all goes to plan, gas may start flowing from the field in 2006.