Powercos in $80m gas hunt

By SIMON HENDERY

The dwindling state of the country's gas reserves has prompted Contact Energy and Mighty River Power to join forces as major backers of a planned $80 million-plus gas exploration fund.

The two power companies will each contribute $20 million to the fund, and say other major gas users have indicated they are likely to come on board, although none has yet made a commitment.

The depletion of the Maui gas field, which is expected to be run down by about 2007, has prompted fierce interest in finding alternative energy sources.

The fund proposed by Contact and Mighty River will "invest in selected exploration opportunities that have the potential to produce significant quantities of gas in the near term," the two companies said yesterday.

"The objectives of the fund are to broaden the range of gas-supply options for New Zealand, and ensure that attractive opportunities that might not otherwise be exploited can be developed in a timely manner."

Establishment of the fund would depend on other backers coming forward with sufficient investment to reach a "critical mass"- expected to be at least $80 million, enough to drill, for example, 10 deep onshore wells in the Taranaki Basin.

Contact spokesman Pattrick Smellie said the focus of the fund would be more onshore than offshore, and exploration would be in the Taranaki area.

At the same time, Contact and another major generator and retailer, Genesis Power - who both burn gas in their power stations to make electricity - are investigating importing liquefied natural gas (LNG) and the use of coal to cover the possible impending gas shortfall.

"It's all consistent with the fact that we're concerned that there is too much uncertainty about what fuel sources can viably be found to allow New Zealand to meet its energy - and specifically electricity - needs towards the end of this decade," Smellie said.

"In the case of LNG and coal we're turning over all the stones to have a look and in the case of the proposed drilling fund, we're sending a signal that we're prepared to help actively look for fuel in New Zealand as well," he said.

Contact and Mighty River say details of their proposed exploration fund will be formalised once sufficient funding from other investors is firmed up, hopefully by mid-year.

Drilling is then expected to begin next summer, with the fund allowing a wider co-ordinated drilling programme for less cost.