GAS

"Politics", legal matter to dominate NZ energy industry

"Politics", legal wranglings about words, their meaning and intent, is likely to dominate New Zea...

Top of the list will be the Methanex-initiated legal proceedings against the damning findings of the Maui Independent Expert, Netherland Sewell and Associates International.

There is also the Indo-Pacific Energy versus Greymouth Petroleum litigation about the operation of the small onshore Taranaki Goldie oil field. Both sides are scheduled to present their cases regarding the definition of "sole risk" ventures and associated "best oil field practices" to the High Court in Wellington next month.

As well, there will be the "background, behind the scenes" politics by players wrestling for their preferred future gas or power prices, which will in turn affect the likely mix of energy resources in the fast approaching post-Maui age.

Earlier this month Netherland Sewell reported that only 370 Petajoules of recoverable gas remained in the Maui field and NGC Holdings said Methanex had used 77PJ more than it should have.

Today Methanex Asia-Pacific vice-president Bruce Aitken told EnergyReview.Net that his corporation had asked for an urgent hearing of its claim against Netherland Sewell and the other parties to the Maui gas contracts.

"We have not disputed the findings of the independent expert, but the process he has used to reach his conclusions. Our experts (Gaffney Cline and Associates) are still coming up with different numbers from the independent expert.

"We believe it is in everybody's interests, in fact in the national interest, to ensure our views are taken into account."

The High Court at Auckland had yet to set a date for the Methanex case, though Aitken said he hoped the matter would be heard be within the next few months.

Methanex last week filed High Court proceedings against the recently released final adjudicator's report on remaining recoverable reserves in the Mai gas field.

Netherland Sewell is named as the first defendant, with field owner Maui Development Ltd, the government, together with Contact Energy and NGC, named as second defendants.

Though Aitken declined to comment further, commentators say price is a key determinant in this whole Maui matter.

"Fields don't run out of gas or oil, it simply becomes uneconomic to recover more hydrocarbons from them and the owners then shut the fields in," said one commentator.

"The Netherland Sewell use of the phrase "at the Maui price" is an indication that there is actually more gas there, but that it will only ever be extracted if the price is right," said another.

And Energy Minister Pete Hodgson's statement, that 370PJ of "economically recoverable" gas still exists in the field, implies that more gas can be extracted at the right price.

It is known Methanex, NGC and Contact are all prepared to pay over the current contract price to access further gas reserves. This could be done through a renegotiation of the existing Maui contracts and would increase ultimate hydrocarbon recovery from the field.

However, there is little incentive for the Maui partners to invest more money in a field where the real price of gas actually decreases over time. Price hikes are currently limited to about half the rate of inflation.

Commentators also wonder why MDL: would approve capex for operator Shell Todd Oil Services to last year have a major four-dimensional seismic survey done if it (MDL) had no intention of spending more money on a field it already believed only ever contained 3800PJ of gas and not the 4085PJ on which the Maui sales contracts were based.

The Nordic Explorer spent about two months on the survey, essentially covering the same ground as the $35 million 3D survey STOS had done in 1991, which covered most of PML 381012.

STOS said last March that it hoped any previously bypassed pockets of gas identified by could be drilled if considered worthwhile. The surveys would also give some idea of any subsurface changes in the 11 years and aid with future reservoir management of the field.

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