South Port downplays prospect of bonanza

South Port is downplaying the prospect that development of Southland's energy resources will produce a "bonanza".

The company, which runs port operations at Bluff and is 66.5 per cent-owned by Southland Regional Council, had received only limited inquiries from parties involved in offshore petroleum exploration, chairman John Harrington said today.

The promotion by Crown Minerals of exploration opportunities south of Bluff did not guarantee exploration activity would result.

Some exploration permits offered in other parts of New Zealand were not taken up in an earlier tender processes due to extremely tough permit conditions being imposed by the Government, he said.

The ability to carry out exploration was also becoming an option open only to very large oil and gas companies, with the cost of drilling estimated at between US$500,000 ($771,248) and US$800,000 a day.

"Another obstacle is that the Great South Basin -- and for that matter, New Zealand -- is so far away from the areas of major consumption, which means finding reserves at the commercial volumes required will be an enormous challenge," Mr Harrington said.

"It is therefore, sensible to adopt a realistic view on the likelihood of exploration taking place in the Great South Basin in the near term...the trend in international oil prices will dictate the level of interest..."

Meanwhile, South Port is to aim for higher dividend levels in future.

Under the new policy, unless money was needed for cargo-related capital expansion or investing in other businesses, dividend payments would be more closely linked to available cash flow," Mr Harrington said.

In the latest year, South Port is paying a total dividend of 7.75 cents per share.

That is the highest ordinary dividend payment made by the company in any year and is up from last year's 6.5cps.

It is being paid on a 26 per cent lift in net profit to $2.45 million in 2006.

A forecast for the 2007 year would be made on February 1 but the prediction was that the coming year's profit would be down on the 2006 period, Mr Harrington said.

But the free cash flow position, which dividends were based on, was expected to remain strong.

South Port shares were up 9c in early afternoon trading today to $1.65, equalling the year high hit in July, and 50c up on the low for the past year hit in September 2005.

- NZPA