Pohokura gas field owners are heading back to court

A legal battle between owners of the Pohokura gas field is back in the High Court today, as global energy giant Shell faces the home-grown big shot, Todd Petroleum.

At issue is which company will operate the offshore natural gas field, which is due to start producing next year.

It is currently operated by Shell Todd Oil Services, a 50-50 joint venture that has been running oil and gas enterprises for the past 50 years.

The gas field off the Taranaki coast is owned by Shell (48 per cent), and Todd and the European energy company OMV (which each have 26 per cent).

Pohokura has an estimated 750 petajoules of gas - about half of New Zealand's known reserves - and is seen as crucial to the security of New Zealand's electricity supply.

Power companies Genesis and Contact hope to use Pohokura gas to fire their stations.

Shell, as owner of the biggest share, wants to take over as operator from the joint venture, running it according to its global systems.

The legal dispute has taken two tracks. One approach - the attempt to have Shell Todd Oil Services "resign" as operator, is still before the Court of Appeal.

Todd Petroleum obtained a High Court injunction stopping this resignation from being put to the joint venture's board. Shell petitioned the Court of Appeal and is waiting for a decision.

Today's case is another way of Shell and OMV achieving the same thing - terminating the the joint venture's operation of Pohokura. Todd is asking the court for an injunction to stop this happening.

The case, in the High Court at Wellington, is set down for two days, while the parties are still waiting for the Court of Appeal decision on the earlier injunction.

While Pohokura is due to come on stream soon, an onshore Taranaki field known as Cardiff is also being watched closely.

Operated by listed Austral Pacific and 40 per cent owned by Genesis, it is undergoing a series of tests.

If there is enough gas in Cardiff, Genesis plans to burn it in a new power station planned for the Kaipara Harbour in Northland.

It is not, however, the first time owners of the Pohokura field have run into difficulties.

They sought and received special Commerce Commission approval in 2003 to jointly market the gas. Opponents said that would be anti-competitive and make gas more expensive.

The three field owners were able to convince the commission that unless they were allowed to market the gas together, development of the field would be delayed, threatening New Zealand's energy supply.

They decided to go ahead and sell the gas separately anyway.

Central to the case was the claim that selling the gas separately would mean a delay until February 2007 in starting production.