Earlier this week, AGL secured long-term gas supplies from the upstream PNG Gas Project and took a 10% stake in the project's upstream development, thus securing its first gas reserves. It is also a partner in the construction of the pipeline designed to carry the project's gas to Australia.
Once the agreements are completed, AGL will then have interests in the PNG project at every stage from wellhead to light switch – a vertically integrated energy company.
Importantly, AGL managing director Greg Martin stressed that his company was only investing in proved and probable (2P) reserves - not in upstream exploration plays as all of the New Zealand downstream participants have done.
All major NZ gas reticulation players - Methanex New Zealand, Contact Energy, Genesis Energy, NGC Holdings, and Mighty River Power – have become involved in upstream exploration in some way.
Even Ballance Agri-Nutrients - the owner/operator of New Zealand's sole ammonia urea plant at Kapuni -
bought into a gas exploration play.
These moves have been driven by the realisation that NZ's Maui gas field was rapidly depleting.
Genesis was the first to get involved when in 1999 it inherited ECNZ’s stake in Kupe after the former government electricity monopoly was split into Genesis, Meridian, MRP and Contact. Genesis later increased its stake before farming-down to current operator Origin Energy about two years ago.
NGC was next with its 2003 deal with Austral Pacific Energy for rights to some onshore Taranaki gas, including Kahili.
In June last year, Contact won an offshore Taranaki licence, PEP 39493, on the Western Platform.
Then last July, Genesis signed off an agreement with Austral and its partners regarding the funding of the Cardiff-2A well in PEP 38738 onshore Taranaki in return for the rights to any gas discovered.
That same month, methanol manufacturer Methanex signed an agreement with Bridge Petroleum and US company Westech Energy regarding funding the drilling of the Radnor-1 and 2 wells in PEP 38752 onshore Taranaki in return for rights to gas.
Ballance followed the companies upstream last November, signing an agreement with Swift Energy for shallow exploration in onshore Taranaki and most recently MRP also signed an agreement with Swift regarding deep gas exploration, also in onshore Taranaki.
Results so far have been mixed.
On the positive side - Contact and Genesis are pressing ahead with their respective work, with Austral about to production-test Cardiff-2A, while MRP and Swift are currently drilling the first of three wells, Tawa-1.
On the negative side - gas flows from the Kahili gas-condensate field have faltered, frustrating operator Austral and its Kahili partners, including NGC; and Ballance and Swift plugged and abandoned their first well, Karaka-A1, earlier this year.
Rumours aslo persist that Methanex is not getting as much Radnor gas as expected for its Waitara Valley plant due to the watering-out of the Radnor-1 well, although Bridge and Westech are planning up to seven more wells in the field through to 2009.
