by Neil Ritchie

Contact Energy wants the separation of New Zealand gas distributors and retailers, as well as the regulation of gas pipeline companies.

In a submission to the government's gas review, Contact Energy has also called for gas field owners to be required to divulge reserve data each year, in part to counter what it sees as the new "quasi-monopoly" situation that exists in the Kiwi gas sector.

Although it did not name the "quasi-monopoly", industry commentators say it is referring to Shell New Zealand, which now controls this country's significant gas fields, in association with long-time partner Todd Energy, or is about to control the acreage most likely to contain easily accessible new finds.

Contact said it was concerned that a lack of competition in the gas production sector would allow Shell to control gas prices in 10-15 years. Contact, which has rights to about 40% of the remaining Maui gas reserves, said gas distributors were monopolies in their local areas and were pricing on a "take it or leave it" basis.

Contact said issues such as pipeline access and monopoly pricing would not be resolved satisfactorily if players alone were left to find solutions. It said the government needed to set a clear timetable of its expectations, with "a credible threat" of government intervention if targets were not achieved.

The gas wholesaler and retailer also said the Commerce Commission should be given powers to regulate gas networks, consistent with the regulatory approach to the electricity industry. There would be a more competitve retail gas market if distribution were separated from retailing, said Contact.

The previous National government forced ownership separation of power generation and retailing, and electricity distribution.

Some gas companies have voluntarily split retailing and distribution, though this country's largest gas player, Natural Gas Corporation, has not. NGC remains the only player in transmission (through its high-pressure network), distribution and retailing.

Industry commentators agree with Contact's assessment of the likely shape of the future gas market. "Yes, all of Contact's claims are true, and the end of Maui is coming fast," said one commentator.

He said Maui could well run out in five years, which was scarcely enough time to find, appraise and develop new onshore finds, let alone any significant offshore discoveries.

Though Swift Energy had its Rimu-Kauri field on south Taranaki, it was unlikely to produce more than 10-15PJ of gas. Swift's recent acquisition of the former Fletcher Energy-controlled Tariki, Ahuroa, Waihapa and Ngaere licences would not help it either as Tawn gas production was scheduled to decline from about 2005. Flow rates from the Mangahewa field, which came onstream last year, was not large and would only last a few years.

That meant the recently discovered Pohokura and middle-aged Kapuni gas fields, both controlled by Shell-Todd, would be the dominant post-Maui sources.

Shell also held deep exploration rights for most of the existing onshore Taranaki fields, excluding the over-pressured McKee, as well as a possible 25% stake in the Swift Energy-controlled Rimu-Kauri permit.

The New Zealand government last November released an ACIL Consulting discussion paper, which recommended the government "encourage" NGC to separate its transmission and distribution businesses, as had NGC parent Australia Gas Light when it placed its transmission operations in a separate trust.