But the partners were still maintaining that joint marketng and selling was the best option.
Late last week the commission said it was considering revoking the partners’ right to jointly market and sell gas from their Taranaki field on the basis of “false or misleading” information given or because of material changes in circumstances.
The commission’s draft determination on the matter said the commission would not have authorised the proposed joint arrangement in September 2003 if it had known separate marketing and sale would still make a final investment decision achievable by June 2004 (only three months later than the original proposed FID).
“The evidence indicates that the parties did not need to engage in the authorised behavior to achieve the early final investment date and hence production at an early date,” said the commission’s draft report.
“Taking these factors into account, the commission considers that having established that OMV, Shell and Todd are now marketing and selling gas separately, to a timetable largely consistent with the timetable the commission found would only be achievable if the parties marketed and sold gas jointly, it is appropriate to revoke the authorisation.”
Ballance Agri-Nutrients (Kapuni) said it favoured revocation of joint marketing and selling.
“Subsequent behaviour has demonstrated the false premise on which the decision was based and that the detriments of joint marketing now outweigh the benefits”, the ammonia urea producer’s submission to the commission said.
But the partners argued market circumstances have not changed since the authorisation and that joint marketing and sale was still the best option to deal with “commissioning gas, peaking gas, and the sale of subsequent tranches of gas”.
Their submission said the joint venture might still have to revert to joint marketing if gas balancing arrangements cannot be negotiated, if separate marketing results in significant un-utilised capacity or other inefficiencies, and when further investment becomes necessary to recover residual gas.
“The absence of the ability to jointly market and sell might still cause a delay in the commencement of production,” said OMV, Shell and Todd.
In granting its authorisation, the commission said it accepted the “substantial” benefits, estimated at between $NZ47.8 million and $NZ81.9 million, arising from early development of the field outweighed the “large overall detriment” of joint marketing.
The commission has called for further submissions by 23 March, but cautioned that “If the commission’s preliminary conclusions are confirmed after its consideration of submissions on this draft determination, the commission proposes to revoke the authorisation”.
