What happens when the gas is all gone?

New Zealand's investment bankers dream of the fees from floating Todd Energy, the foundation stone of the Todd family fortune.

But most recognise that is a remote possibility.

Quite apart from the family's desire for privacy, Todd Energy has little need for capital, at least for the moment, as its position in New Zealand's energy markets is strong.

The company has a stake in fields representing more than 80 per cent of New Zealand's in-production gas reserves. It has similarly dominant positions in oil production and holds licences to drill in regions that offer the shortest odds on a discovery. It also has an extensive energy retailing network, including the Whakatane-based Bay of Plenty Electricity and a third share of King Country Energy.

Over the past five years, the company has delivered a return of 30 per cent a year on shareholder funds, according to managing director Richard Tweedie.

Two independent analysts who did not want to be named have estimated the business to be worth about $2.1 billion.

"With the assets they have and the needs of the market in New Zealand, they are going to remain a big player for some time," says McDouall Stuart energy analyst Chris Stone.

However, its current strength is not assured.

The future of energy companies in New Zealand is dominated by one question: what happens if no oil or gas is found to replace the Maui field, due to drop dramatically next year?

If Maui is replaced by new discoveries, Todd should retain its strong position. If not, major gas users and Government could push for the importation of liquefied natural gas.

The necessary LNG infrastructure is expensive - around $1 billion for an average-sized importation terminal - and would have to be underwritten by long-term contracts. Such a development would shrink demand for gas.

The next year could be critical. If no discoveries are made over this period, major gas users Genesis and Contact might be too far down the path planning for imports.

Meanwhile, Todd's long-running partnership with Shell is dissolving.

In exchange for a share in what would later become the Kapuni and Maui gas fields, Todd in 1955 negotiated an agreement that guaranteed each a right of first refusal to participate in the other's oil and gas exploration activities in New Zealand.

The venture, which gave Todd access to the international oil giant's huge reserves of capital and expertise, has enabled Todd to punch far above its weight. Indeed, some say its ascendancy in New Zealand is thanks largely to this contract.

The joint venture was on shaky ground when Shell indicated in 2003 that it would focus on its existing New Zealand fields. But the death blow may have been dealt just before Christmas, when the High Court agreed to Shell's request to remove the duo's joint venture, Shell Todd Oil Services, as the operator of the Pohokura field.

Tweedie is a vociferous critic of the drive for LNG, claiming New Zealand may have reserves sufficient to see it through until 2030.

"Domestic gas will always be cheaper. Once we are on an LNG bandwagon we are locking in very expensive energy, which has significant problems for the New Zealand economy."

Among the alternatives he is mooting is the importation of compressed natural gas. While it is likely to be more expensive, it could be piped straight into the national grid, avoiding the need for long-term contracts.

But in any case he and analysts say the company would still be able to undercut gas importers with its much cheaper domestic gas.

Tweedie has already said Todd will build gas-fired power stations in Auckland, if Contact and Genesis push ahead with their plans.

John Todd is confident the situation will be resolved. The corporation plans 10 years ahead, and he notes it has recently increased its investment in property.

"Within that corporate plan we provide for continuous exploration. We anticipate exploration will produce something. If it does not then the gas business will slowly wind down," he says, adding that it has other activities to fall back on.