What happens to gas at Maui after 2008?

Press, 12 February 1986, Page 13

What happens to gas at Maui after 2008?

By

OLIVER RIDDELL

in Wellington

Any natural gas left in the Maui field after 2008, when the contract between the Government and the Shell BP Todd consortium ends, will be owned by the oil companies and not the people of New Zealand. This is a result of the contract signed between the consortium and the then Labour Government in 1973.

Asked recently how the Government could allocate or secure quantities of gas after 2009, the Oil and Gas Division of the Ministry of Energy gave four reasons why “a long drawn-out depletion profile” beyond 2009 might be unlikely:— ® The lower the depletion profile, the greater the dis-economies of scale and thus the higher the gas price. • Gas supply facilities have a finite lifespan and would need expensive regrading and replacement if used for a long time. • If, as now expected, a sizeable reserve remained after 2009, new baseload gas uses would become economically attractive. ® The Government could not force the Maui partners to manage the Maui field uneconomically. From this it is now clear there is a further and previously unrealised reason why no gas may be available for New Zealand from Maui after 2008. The argument has been

over the three options for using the hitherto unallocated portions of the Maui gas resource. These are — (a) export it; (b) use it for electricity; and (c) leave it in the ground. Fletcher-Challenge is the only organisation so far with a proposal to export the gas. The Minister of Energy, Mr Tizard, has been a strong advocate of using it for electricity because the State Coal Board may not be able to supply coal in sufficient quantity or cheaply enough to meet the needs of his Electricity' Division for cheap power.

Most public submissions to the Government, however, advocated leaving it in the ground. This would make it available for industrial and domestic use in the future, as required, and these are considered the most efficient uses in terms of least wastage of the product. Also increasing doubts have been voiced about the accuracy of area assessments of the Maui field reserves. This has strengthened the argument of those who want the gas left in the ground, even if the Government

has to pay the consortium to leave it there.

Now, however, it has

been realised that there is a finite term to access to the Maui gas. After 2008, ownership of the gas will revert to the consortium. Although that time is still more than 20 years away, it must influence what the Government decides to do about the gas reserves now, and strengthens the hand of Mr Tizard who wants it extracted for electricity generation. His hand was already a strong one. It would allow New Zealand’s biggest white elephant — the Marsden B power station at Whangarei — to be taken out of mothballs and used. It would also provide a buffer against shortages of electricity in the next 20 years if coal is unable to meet requirements.

Mr Tizard has been adamantly in favour of this option all along. He has always discounted the options of exporting L.N.G. (liquified natural gas) or leaving it in the ground. An energy commentator, Ms Molly Melhuish, said the details of the 1973 agreement in which control of the Maui field reverts to the oil companies explains why Government has been in favour of fast depletion of

the field. “Every major Government decision has favoured wasteful use — allocating gas for electricity, for chemicals mostly for export, or for synthetic fuels,” she said. The technically efficient direct use of reticulated gas, advocated over the years both by experts and ordinary people, had simply been ignored. The Government badly needed to maintain confidence in the chance of a new large gas field, since the Maui contract did not guarantee long-term supplies, Ms Melhuish said. That was why the Government had reacted so strongly in July last year to the statement by the Geological Survey of the D.S.I.R. that further large gas finds were unlikely unless new and probably uneconomic “concepts” were explored.

She also said she had heard doubts expressed by both officials in the Ministry of Energy and by members of Parliament whether the public really cared about the future of Maui gas. The big question now was, how did the Government propose to assure the gas industry of gas supplies after the Maui contract ended in 2008?