Big gas find sparks Auckland plans

Privately owned Greymouth Petroleum will push into the Auckland residential gas and electricity market after the confirmation of significant gas reserves at an onshore field it holds in Taranaki.

One estimate put the value of the gas and condensate at the Kowhai field close to $1 billion and it is among New Zealand's top eight fields. The company yesterday said tests revealed the field had proven and probable reserves of 134 petajoules and 3.2 million barrels of condensate.

Greymouth bought the field for an undisclosed sum in May last year and spokeswoman Lara Walker said reserves had exceeded expectations.

The 15-year mining permit over 68sq km was granted by Crown Minerals yesterday. Adjacent fields include Greymouth-owned Turangi, which also has large reserves of gas.

"We've got the green light. This demonstrates that sizeable and significant discoveries are still to be made on onshore Taranaki," said Walker.

Chief operating officer John Sturgess said: "Discovery of these onshore gas reserves increases the potential for further sizeable New Zealand gas finds in the near future and reduces the prospect that New Zealand will need to import highly priced gas from overseas."

Walker said Kowhai gas would give the company new opportunities.

For the past three years it had been supplying gas to commercial users, including the Ballance Agri-Nutrients fertiliser plant and firms in Auckland. The company could now expand into the Auckland residential market.

It was building a 3MW gas-fired power station in Papakura which could supply electricity to 4000 homes.

The power station should be commissioned by March, about the time Greymouth plans to push into the residential gas market.

"We've had some real success in the commercial and industrial market and we now plan to offer similar savings to the residential market," Walker said.

"It's an evolution really."

Pricing had not been fixed and the residential services would be more of a boutique offering, Walker said.

Greymouth was concerned about capacity constraints on the Vector gas pipeline north of Hamilton and residential distribution charges. "We're used to looking at commercial tariffs and we see residential tariffs are about three times what the commercial users pay. We're questioning that logic."

A Vector spokeswoman said at certain times of the year the gas transmission pipeline north of Rotowaro could reach peak operating limits caused by cold weather and generation demands. This occurred relatively rarely and Vector was working with the industry, Government and regulatory agencies on options.

Head of research at McDouall Stuart Securities John Kidd said Kowhai was surrounded by fields that had already had large discovered gas reserves or potential.

Although wholesale gas prices are kept tightly under wraps, the industry rule of thumb puts a petajoule of gas at around $7 million. "You do get to a revenue curve which is pretty attractive. It will be a low-cost field."

Greymouth was established in 2000 and had been a success story for the gas sector, Kidd said. "They've made a couple of very good finds which will do a lot to lift feeling around the security of gas for the next while."

THINKING BIG
* Greymouth Petroleum holds permits for several gas and oil fields in Taranaki and other exploration properties both onshore and offshore in the province. The company also holds permits in the Great South Basin.
* In Chile, Greymouth's Petromagallanes branch operation has large acreage in the Straits of Magellan and on Tierra del Fuego.
* The company's name stems from its founders' family links to the West Coast town.