Energy price up in the air

Asset sales may change the Shell deal, GEOFF SENESCALL reports, but Fletcher expects that the offer will stand.

A question mark hangs over what Royal Dutch Shell will pay for Fletcher Energy after committing to further asset sales in a bid to appease Commerce Commission concerns.

Last night, Shell's New Zealand spokesman, Antonius Papaspiropoulos, refused to confirm whether the original $US3.34 a share offer for Fletcher Energy's oil and gas assets would stand.

He also declined to comment on Shell's second application, lodged with the Commerce Commission last Friday, just over a week after its initial bid was knocked back because of concerns of dominance in the New Zealand gas market.

Fletcher Challenge spokeswoman Ginny Radford said Shell had not given any indication so far that it intended altering the price.

"We have no knowledge of any change," she said.

"There was a deal subject to Commerce Commission approval. That Commerce Commission approval is going through its second phase at the moment.

"So the deal is still subject to Commerce Commission approval. So on that basis it seems to me that the deal still stands."

However, Ginny Radford noted that, given that Shell's bid was in US dollars, the final value to shareholders was subject to exchange rate fluctuations.

Meanwhile, the commission is expected to respond to Shell's second application by November 6.

Despite Shell having had discussions with the commission, there is no guarantee that the second application will assuage concerns.

The commission does not direct applicants on what assets should be on-sold.

The commission declined the initial application on the basis of Shell having dominance in the current gas production market, the market post-2009 and the LPG production market.

To overcome concerns about the current gas market, Shell has agreed to sell the McKee, Ngatoro and Tawn prospects. The Tawn sale includes infrastructure assets. As well, Shell has said it will divest 10 per cent of Maui. It has also said that in the post-2009 market, it will divest 3.6667 per cent of Pohokura so the merged entity will have 48 per cent.

As for LPG, Shell indicated that its sway over the market would be reduced by selling Fletcher's interest in the Tawn, McKee and Ngatoro fields plus the reduction of the interest in Pohokura.

Under its initial proposal, Shell would have sold Fletcher's stake in the undeveloped Kupe gas field but would have kept 93 per cent of Maui and 51.6 per cent of Pohokura.