Contact chief executive Steve Barrett today told the 2004 New Zealand Petroleum Conference in Auckland that, once established, the fund would invest in selected exploration opportunities that had the potential to produce significant quantities of gas in the near term.

“The objectives of the fund are to broaden the range of gas supply options for New Zealand, and ensure that attractive opportunities that might not otherwise be exploited can be developed in a timely manner.”

However, establishment of the fund is dependent on sufficient parties stepping forward to ensure that it reaches critical mass. A fund of NZ$80 million or more is targeted in order to create an effective fund. Contact and Mighty River Power have both pledged NZ$20 million to the fund as anchor participants.

Several other major gas users have indicated their likely support for the initiative, but have yet to commit funding, while Contact and Mighty River remain hopeful that other gas users will see the benefits accruing from collective investment, and will signal their commitment at an early stage.

Barrett said once there was sufficient commitment, arrangements for the establishment of the fund would be formalised. “The goal is to conclude these discussions by mid-2004, and commence consideration of prospective drilling opportunities as soon as possible.

“This should result in the first drilling activity supported by the fund being underway by the coming summer.”

It is believed this initiative is targeted towards relatively cheap gas left in Taranaki, primarily onshore.

In return for providing capital to underpin drilling activity, the fund will seek a return in the form of farm-in rights, royalties or other similar mechanisms. Discussions with licence holders interested in partnering with the fund will be initiated once the funding parties have formalised their terms of engagement.

A major benefit of the fund is that it will facilitate a co-ordinated drilling programme across a range of prospects, which would reduce mobilisation and demobilisation costs, and allow a larger programme to be undertaken for the same expenditure. It would also help ensure that world class expertise could be employed to increase the probability of success.

“With the rundown of the Maui gas field, New Zealand faces pressing energy challenges over the balance of this decade. Contact Energy and Mighty River Power believe that bold initiatives such as the drilling fund are required to address New Zealand’s energy requirements,” concluded Barrett.

NGC Holdings welcomed the initiative of Contact and Mighty River to accelerate indigenous gas exploration and production.

Chief executive Phil James said NGC had yet to evaluate whether it would participate in the fund, but had already taken separate initiatives to foster the early development of new gas reserves in Taranaki and to facilitate greater deliveries of retail specification gas to the market.

These initiatives, representing a commitment of about NZ$25 million in the past 12 months, include the return of NGC’s Kapuni gas treatment plant to full gas processing capability; NGC’s participation in developing separation and delivery infrastructure associated with the Kahili field: a prepayment to Austral Pacific to assist that company’s exploration and production activities, and arrangements with Westech Energy that have accelerated gas deliveries from the Surrey field.

“Contact and Mighty River Power are to be congratulated for an initiative that will provide much-needed impetus to the search for new gas reserves to take the New Zealand gas market into the post-Maui supply era. NGC is happy to look at what else we might be able to do to support their efforts.

“At the moment, ownership of gas reserves is concentrated in the hands of a relatively small number of companies. With its potential to diversify future reserves ownership and production sources, this initiative could lead to increased supply competition to the benefit of gas consumers generally,” added James.

Also Crown Minerals today revealed that the 'mystery' block J new onshore Taranaki permit has been awarded to Greymouth Petroleum, as predicted by ERN last month.