Gas price to soar as Maui dies

As Maui ends, so will the petrochemical industry. CHRIS DANIELS reports.

Gas will increase in price - up to threefold - once the mighty Maui gas field moves into old age, bringing with it the death of the local petrochemicals industry.

Latest computer projections have revealed that Maui gas will run out two years earlier than expected, in 2007 rather than 2009.

What happens after that is exercising the top minds in New Zealand's oil and gas industry, gathered in Auckland for the biennial New Zealand Petroleum Conference.

In what was considered something of a coup for conference organisers, yesterday's keynote speaker was Opec secretary-general Dr Ali Rodriguez-Araque.

Dr Rodriguez-Araque, who is the highest-ranking Opec official to visit New Zealand, told the conference the oil cartel's role would become more important to the world's economy.

Opec countries are predicted to produce 42 per cent of all global supply in 2010, rising to more than 50 per cent in 2020.

More than three-quarters of the world's oil reserves are in Opec member countries.

He later told a press conference that New Zealand, with its small but expanding oil production, must play its part along with other smaller nations, in helping to keep the price of oil stable.

Elsewhere at the conference, discussion centred on the impact of Maui gas running out.

The manager of the Energy Markets and Information Services group at the Ministry of Economic Development, Andrew Smith, said that despite the early running down of the Maui field, there were enough reserves of gas to supply the commercial and residential reticulated market for at least the next 20 years.

"This does not mean a shortfall or a supply gap," he said. "Just that the cost will increase."

The petrochemical industry, however, which uses around 40 per cent of all gas production, would not be able to continue.

There was plenty of gas available for the high-value reticulated market, and significant amounts for electricity generation, Mr Smith said.

But the move away from one big gas field to a number of smaller fields, such as the new Pohokura field, did carry risks.

During last year's dry, cold winter, when thermal power stations were running at full capacity to make up for the lack of electricity coming from the South Island hydro dams, the operators of the Maui field were able to "open up the tap"and increase production by up to 30 per cent.

This would not be possible with the new, smaller fields that will supply the power stations in the future.

A need for a sustained increase in the price of natural gas was also endorsed by Malcolm Alexander, of M-Co, the company that manages the wholesale electricity market.

Mr Alexander said the increased gas price would have a flow-on effect to the electricity market.

"It would mean even higher prices [of electricity] if gas was no longer available for generation," he said.

Shell took the opportunity yesterday, while the big companies in the oil and gas industry were in one place, to announce the sale of its interests in the Taranaki Kaimiro oil and gas field to Greymouth Petroleum.

These interests, previously owned by Fletcher Challenge Energy, were part of the divestment forced on Shell by the Commerce Commission when it bought FCE last year.

Greymouth Petroleum was a member of the Peak Petroleum consortium that made a late run to buy Fletcher Energy last year, eventually forcing Shell to increase the price it paid Fletcher shareholders for the company.