Methanex backs off Maui gas challenge

By CHRIS DANIELS

Canadian methanol maker Methanex has dropped its legal challenge to the reallocation of Maui gas.

Methanex, which has a plant in Taranaki and is New Zealand's biggest single user of natural gas, started legal action last month disputing what is known as the gas field "redetermination".

Maui gas, which is among the cheapest natural gas in the world, is predicted to run out two years earlier than expected - in 2007 rather than 2009.

This meant the big buyers of gas had to decide on a way the remaining gas reserves would be divided.

Methanex challenged the process, saying it had not been given enough information about the gas reserves by the field's owners, Shell and Todd Energy.

The other main buyers of Maui gas, electricity generator Contact Energy and gas retailer NGC, have opposed the Methanex action, saying they are comfortable with the information they have been given.

But NGC said yesterday that an independent expert would be appointed to decide how much gas was left in the Maui field and also whether Methanex had been given enough information during the redetermination process.

NGC chief executive Phil James said it was still possible for the parties involved to agree on the remaining reserves before a decision was made by the independent expert.

He said this would be expected within four months of the expert being appointed.

Methanex exports methanol worth around $800 million a year and employs 220 people in Taranaki. It needs large quantities of gas to keep its plant operating at capacity, while NGC and Contact prefer the security of long-term supplies.

The slow pace of new gas exploitation worries many in the industry.

The Pohokura field, developed by Shell, Todd Energy and German energy giant Preussag Energie, is likely to start production in 2005.

It is one third the size of Maui and expected to provide more expensive gas.

Meridian Energy chief executive Keith Turner yesterday told a Commerce Commission conference investigating power industry governance that the lack of long-term gas contracts was one factor that could cause a shortage of electricity.

Rival generator Contact Energy recently shelved plans for a gas-fired power station at Otahuhu, citing inability to secure "reasonably priced" gas.