Shell says Pohokura gas deal made in good faith

Energy giant Shell is defending itself against claims that it misled the Commerce Commission over its plans to sell gas from the Pohokura gasfield.

The commission is poised to revoke its decision to allow Shell, Todd Energy and European company OMV to jointly market and sell gas from the Taranaki offshore field.

The commission was told that unless permission was given, gas might not flow from the field until 2007, adding to the risk of blackouts.

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

Todd, OMV and Shell were unable to agree on ways to sell the gas, so the permission to fix prices granted to them by the commission was never used.

Gas buyers, including the big power companies Contact and Genesis, said there should be a competitive market for gas, so the price could not be kept high by price-fixing between the field's owners.

Commission chairwoman Paula Rebstock said that "based on what we know, we consider the Pohokura authorisation was granted on the basis of information that was false or misleading, or that there have been material changes in the circumstances since the authorisation was granted".

It will be only the second time the commission has revoked such a decision. In 1987, it granted permission to players in the kiwifruit exporting industry to make an arrangement between cool stores.

That was revoked 12 months later after the parties said they no longer needed it.

Central to the gasfield owners' case was the claim that selling the gas separately would mean a delay in bringing it into production. They said that it would mean gas would not start flowing until February 2007, a delay of one year.

But this delay never happened, despite the three parties going their separate ways and selling their share of the gasfield individually anyway.

Shell New Zealand spokesman Simon King said the company had always acted in good faith, and had genuinely believed that it was the best way to sell the gas.

"We believed absolutely at the time that the best, if not the only, way of selling the gas was jointly and we made the application to the commission in good faith."

He said the Pohokura field was the first "big chunk" of gas sold in New Zealand since the development of the Maui field decades before, so the market was untested.

Competition law specialist Lindsey Jones, a partner at law firm Chapman Tripp, said such applications to the commission for anti-competitive arrangements were rare.

"I imagine they might be a little bit miffed that they were put to all the time and effort and then to find that it wasn't necessary," he said. "Is it going to make it harder next time? I think the answer is: it probably will."