Extra Maui gas fuel for optimism

The prospect of extra gas coming from the Maui field adds certainty to New Zealand's natural gas supply and could also reduce the need for new transmission lines into Auckland.

Auckland-based energy network company Vector, which now includes the former gas company NGC, is one of two companies with first rights of refusal for new natural gas that the Maui field owner says is now ready.

Confirmation of the extra gas will also provide a welcome breathing space for the energy sector and the Government, with concern growing about future fuel supplies for thermal power stations.

The rapid decline in gas from the Maui field - which is around 4000 petajoules (PJ) in size - has prompted a flurry of exploration, but few successful discoveries. The Pohokura field, which has 750PJ of gas, is set to begin production this year.

Maui's owners, known as the "Maui Partners" - Shell, Todd and European company OMV - last week said more than an additional 200 PJ would now be available from the field - around two years' national demand.

Vector gas division chief executive Michael Cummings said it was "great to see the Maui partners continuing their commitment to offshore drilling and pursuing the full development of the Maui field".

His optimism was mirrored by Electricity Commissioner Roy Hemmingway.

"It's a piece of good news in a landscape of not particularly good news lately, with respect to fuel supply," he said. "I hope it's just the beginning."

The commission did not plan new electricity generation, he said - this was left to the individual power companies - but its job of approving new transmission could be affected by more gas.

More gas-fired power generation could then be built, which also meant new power stations closer to demand, meaning less of a need to build transmission links to Auckland.

Mike Patrick, executive officer of the Petroleum Exploration and Production Association, said the price that oil and gas could be sold for was crucial in determining the size of a field like Maui.

Patrick said there was a general feeling that there was one, maybe two drilling seasons left to make a major gas discovery before LNG imports would be needed. Gas shortfalls were expected by some in 2009/2010.

But the price of gas had more than tripled in recent years.

"As the price goes up and the technology gets better we've got more gas there now that its economically recoverable than we had two years ago."

Taranaki's Kapuni field, despite being pumped for the past 30 years, had grown in size throughout its life. "It's actually getting bigger, because it's becoming more economic to pump more and more out of it,"said Patrick.

Shell spokeswoman Jackie Maitland said a decline in the amount of gas taken from the field in the past few years and two new production wells had meant extra gas had become available from Maui.

Greg Main, analyst at Forsyth Barr, said the Maui partners had an incentive not to destroy the market for the gas about to flow from their Pohokura field.

Pohokura gas is due to start flowing into the market later this year.

It was good news for Contact that the gas had become available before it had made a commitment to build an LNG terminal, or signed any long-term supply contracts for LNG. The issue of long-term gas supply was still not settled, but the additional Maui gas could give Contact some extra breathing room before an LNG commitment was needed.

State-owned Genesis Energy is the other major gas-burning power generator in New Zealand, but does not have the same rights to new Maui gas as Contact does.