Pohokura 'all for one' now 'free for all'

By CHRIS DANIELS energy writer

They spent the past two years saying they simply had to be allowed to sell Pohokura gas together.

Now oil and gas giants Shell and OMV say they will sell it separately and that Pohokura, New Zealand's biggest undeveloped field, will still come on stream in 2006.

It follows a breakdown with Todd Energy over how the gas would be sold, since the Commerce Commission last year allowed the three field owners to sell it jointly.

OMV and Shell are now individually offering the first tranches of gas to potential customers, which will include the big thermal electricity generators - state-owned Genesis and the NZX-listed Contact Energy. It should be flowing by mid-2006 - at least a year before the expected drying up of the Maui field.

Early access to the gas and the signing of contracts should bring more certainty to future electricity supplies. A more competitive sales process is also likely to mean cheaper gas and thus electricity prices.

Contact general manager of trading Steve Cross said the OMV/Shell announcement was welcome.

Contact needs gas for its power stations at Otahuhu and Stratford. A shortage of gas has already forced it to shelve plans for a new station at its Otahuhu site.

Shell, Todd and OMV asked the Commerce Commission for permission to jointly market the gas in December 2002. They said that without this deal, production from the field would be delayed. As it now turns out, production will not be delayed, despite individual marketing.

Pohokura has an estimated 750PJ of gas - around half of New Zealand's known gas reserves, with Shell owning 48 per cent, and OMV and Todd each owning 26 per cent.

Todd Energy managing director Richard Tweedie said that the company's "downstream commitments", which included power generation and retail gas sales, meant it had different priorities from the other Pohokura partners. Todd would still sell gas to third parties, but the other two owners of the field had different strategies.

"This allows each party to sell to the market they feel best able to sell to, so it's probably good for everyone."

An OMV spokesman said the company still believed that joint marketing was the best option.

Shell spokesman Simon King said there had been "divergent approaches" about how the gas should be marketed.

"We have been unable to reconcile those within what we deem is the time available, so ... we've decided to sell separately."