Contact strikes deal for supply of remaining Maui gas

1.00pm

Energy generator and retailer Contact Energy Ltd today said it had reached an agreement for the future delivery of remaining reserves of gas from the Maui field.

Contact said the companies involved in the extraction of Maui gas, Shell, OMV, and Todd Energy will undertake to deliver 367 petajoules (PJ) of gas to the Crown in the period between January 1 last year and June 30, 2009.

The companies had also agreed to provide "make up gas or liquidated damages" if the total agreed is not delivered.

Contact said 367PJ was the amount of economically recoverable gas estimated to be remaining in the field as at January 1, 2003 by an independent expert.

As at March 31 this year Contact held entitlements to 167PJ of the remaining economically recoverable Maui gas reserves.

"The remaining gas would be supplied in accordance with the aggregate demand profile of NGC and Contact, and the Maui Mining Companies have undertaken to seek to maximise the availability of Maui gas to meet these buyers' demand profile," Contact said in a statement.

Under the new agreement there would no longer be take or pay obligations on Contact and NGC, "although there will be obligations to provide weekly nominations as well as forecasts of future demand on a good faith basis".

Contact said that in addition to fixing remaining delivery obligations, "the new arrangements provide an incentive for the Maui Mining Companies to develop additional gas which may be contained in the Maui gas field".

"The new arrangements allow the Maui Mining Companies to sell the additional gas at a market determined price as it becomes potentially available."

Additional gas from the field could only be offered for sale if the Maui Mining Companies established there were reserves sufficient to meet residual supply obligations.

Of the additional gas volumes, 40PJ had been reserved for sale to Methanex.

A recent report indicated it was likely additional gas would be available for sale.

Contact and NGC have a right of first refusal on any other additional Maui gas for up to 61.36 per cent of volume by sales.

Contact chief executive Stephen Barrett said the new arrangements were a significant step forward.

"Contact now has a solid basis on which to plan the use of its remaining Maui gas reserves," he said.

"The new arrangements should also greatly strengthen the incentives to find and develop additional gas from within the Maui gas field".

Shell New Zealand described the deal as a breakthrough.

Shell NZ spokesman Ajit Bansal said: "While final reserves figures for the incremental gas to be extracted are yet to be determined, there is no doubt that this deal will ensure the maximum economic recovery from the Maui gas field, extending its life beyond 2007 and contributing to New Zealand's security of gas supply."

The Maui field is 83.75 per cent owned by Shell, with Todd Energy holding 6.25 per cent and OMV 10 per cent.

- NZPA