Shell New Zealand and OMV Petroleum released statements yesterday afternooon saying they were going to market and sell their shares of Pohokura gas, leaving Todd Energy with no option but to follow suit.
Industry reaction to the surprise turnaround was swift.
“This was a marriage made in hell but I am still surprised. It’s an indication of the seriousness of the divisions within the joint venture,” said one commentator.
“This is Shell and OMV being pushed to the limit, being frustrated with the lack of progress over joint marketing, and finally having to say their commitment to the New Zealand energy industry overrides any internal squabbles,” said another.
Some are saying the breakdown of joint marketing and selling arrangements has turned last year’s Three Musketeers’ “one for all, all for one” stance to the Commerce Commission into a “free for all”.
Commentators are also wondering why the partners spent such time, effort, and money, probably over NZ$1 million, successfully wooing the commission, only to revert to the very conclusion they said would cause delays and damage the New Zealand economy.
EnergyReview.Net last Friday predicted that first gas from the field would be offered to the market soon, though it looked like the approved joint marketing approach would be used. “I don’t think anybody anticipated a split like this,” said one commentator.
Shell NZ exploration and production commercial manager Ajit Bansal said yesterday from Wellington that Shell would be separately marketing its share of the Pohokura gas.
“By going out to market in a timely manner, we are giving both the electricity generation industry, and New Zealand as a whole, certainty that Pohokura is still on track to help meet New Zealand’s energy needs.
“The marketing of the gas is one of the final steps towards making a final investment decision on Pohokura and maximising joint venture value. Shell remains committed to developing Pohokura as fast as possible,” Bansal added.
OMV also said separate marketing and selling Pohokura gas was now necessary.
"We are pleased to be out marketing the gas at this time as this should enable us to have Pohokura gas available for the market by winter 2006. Pohokura gas production in this timeframe is important for the New Zealand energy market to reduce uncertainty," said OMV New Zealand director David Salisbury.
Todd Energy managing director Richard Tweedie said his company's downstream commitments, including power generation and retail gas sales, meant it had different priorities from Shell and OMV.
“This was increasingly necessary given the divergent business models the partners had. Nothing was forced on us, it became clear to all that separate marketing was the only way to move the project forward on a timely basis,” Tweedie told ERN.
Contact Energy - which operates two Otahuhu, Auckland, thermal stations and the Taranaki Combined Cycle plant at Stratford - welcomed the announcements, saying they gave an important signal to major gas users that Pohokura gas would be available before Maui was depleted.
“Timely access to Pohokura gas will help major gas users such as Contact to plan for the operation of their existing plants,” said Contact trading manager Steve Cross.
