The AGL-owned NGC has also bought, for an undisclosed sum, Kapuni Gas Contracts Ltd (KGCL) from Shell, which gives it the right to sell up to 14PJ of Kapuni gas a year to methanol manufacturer Methanex Corporation.

The Maui deal has delighted NGC chairman Greg Martin. "The return to NGC of the Maui gas entitlement represents an excellent outcome for NGC and substantially mitigates the impact of the loss of Maui gas to NGC from the redetermination."

He said the return of the Maui gas entitlements was unconditional and did not depend on the outcome of the redetermination, currently being done by Texas firm Netherland Sewell and Associates International.

Shell, on the other hand, is probably not as pleased, though it is unclear exactly what effect settlement of the almost infamous Gas Bank II contract will have on the major.

Shell may have already taken into account the loss of 79.8PJ of Maui gas when it conducted due diligence before buying Fletcher Challenge Energy almost two years ago. Therefore, the gas might already have no book value or Shell may have to write off a proportion of the cost of the gas, which cost Fletcher Challenge Ltd $NZ22 million 10 years ago.

However, industry commentators wonder from where it is going to find this gas, as all Maui gas is tied up in take-or-pay contracts.

The Gas Bank II deal was done a decade ago, when the Australian Gas Light company (AGL) was interested in taking over then Fletcher Challenge Ltd subsidiary NGC. AGL wanted to be compensated for any losses if Maui turned out to be not as big as the 4085PJ on which the gas supply contracts were based.

So, FCL executives agreed to compensate AGL (which subsequently bought a two-thirds stake in NGC) - on a Petajoule-for-Petajoule basis - if any redetermination showed Maui to be smaller.

Martin said its agreement with Shell involved the transfer to NGC, at no cost, entitlements to 79.8PJ of gas.

The original NGC-FCL agreement stated that if NGC's annual contract quantities were reduced, due to redetermination, FCL would, at no cost, transfer the entitlement back to NGC at a level equating to the amount by which NGC's contract quantities are reduced, up to a maximum of 79.8PJ.

The KGCL deal was one of the few remaining divestment obligations Shell had to satisfy Commerce Commission concerns regarding Shell's takeover of FCE. The two supply contracts represent potential sales of approximately 14PJ a year, although future supply will be subject to any decisions by Methanex regarding the future operations of its small Waitara Valley plant and the larger Motunui complex.

Shell New Zealand chairman Lloyd Taylor said the KGCL sale was, in effect, an entitlement to Maui prepaid gas and gas supply contracts relating to the purchase and on-sale of Kapuni gas.

Taylor said he hoped to announce the completion of the remaining divestments - the assets of Energy Gas Contracts Limited (EGCL) and, more significantly, a 10% interest in the Maui field within the next month or so.