But Contact is unlikely to make any final investment decision on Otahuhu C, in south Auckland, until mid-2007 at the earliest.
Company spokesman Jonathan Hill confirmed to PetroleumNews.net today that Contact was firming up plans to build the $NZ300-400 million ($A260-350 million) new power station next to the existing Otahuhu B combined-cycle gas-fired plant.
“We are going to go to the markets for tenders and see what prices they come back with,” Hill said.
He added that Contact was part way through a comprehensive review of the company’s operations, including likely future gas supplies and available electricity generating capacity.
“This will be a significant review to set Contact’s future strategic direction,” Hill said.
“We hope to be able to share the results with shareholders early next year.”
Contact managing director David Baldwin hinted at plans to progress Otahuhu C at the company’s August annual results presentation.
He said Contact was already using some market-priced Maui right of first refusal gas and that it could use up to 40 petajoules a year in future. Contact is entitled to about 61% of the 200PJ-plus of additional gas the Maui partners – Shell, Todd Energy and OMV – offered to the market in April.
Baldwin added that if Contact could secure a good chunk of the second tranche of Pohokura gas that would help the case for Otahuhu C.
But it is known the Pohokura partners – Shell, Todd Energy and OMV – are unlikely to offer the second tranche to the markets until the six scheduled wells presently being drilled off north Taranaki have been completed and further reserves analysis has been done. This may not be until after mid-2007.
Contact has been considering another combined cycle plant at Otahuhu for years. It already has all the necessary resource consents for construction it estimates could take about three years.
Last year, Contact told the Electricity Commission it was working towards having Otahuhu C to market in 2009-11, though exact timing depended on progressing future gas supply strategies and conditions in the electricity market.
Contact’s existing combined cycle power stations – the 380MW Otahuhu B and 367MW Taranaki Combined Cycle (TCC) plants – each use about 20PJ of gas a year and Contact needs at least 10-12 years of proven gas supply before it will commit to any new gas-fired stations.
If approved, Otahuhu C would be as large as Genesis Energy's new 385MW e3p plant being built at Huntly and due for commissioning next April.
There is growing confidence in New Zealand’s short-term and mid-term gas supply situation.
Methanex recently restarted its Waitara Valley methanol plant in Taranaki and plans to run it at full capacity (20PJ per year) until at least the end of the year.
In addition, Todd Energy managing director Richard Tweedie has recently said more Pohokura gas could be extracted than the 700-750 billion cubic feet (Bcf) that the $NZ1 billion project development was based on. Early operator estimates of recoverable reserves were 900Bcf of gas and 50 million barrels of condensate.
