He told the Gas Industry Reform Conference in Wellington yesterday that it was vital the industry made a smooth transition to the post-Maui gas market.
The Maui-era market had been characterised by high-quality gas from the large offshore Taranaki field, with high operational flexibility.
Production could easily be ramped up to supply more fuel to the country’s gas-fired power stations at times of low hydro lake levels or other supply constraints. Long-term supply security was also high.
Upstream market power was low, as was the complexity of gas transportation and supply diversity.
But the post-Maui era would be characterised high upstream power, complexity of transportation and diversity of supply as different parties developed several smaller fields, such as Pohokura, Kupe and future onshore commercial finds.
There would be low long-term security of supply, low operational flexibility and lower gas quality consistency.
There would also be increased risks for NGC as a pipeline owner and operator, Cummings said.
There would be different risk profiles, different annual and peak demands, and operational balancing agreements, together with the “balancing” of two inter-connected pipeline systems – Maui and non-Maui.
The aim was for the implementation of the new regime to be as seamless as possible, particularly for the critical open access regime for non-Maui gas to the Taranaki-Huntly Maui pipeline.
There was “considerable industry concern” that at present only Todd Energy had interim access to the Maui pipeline for the transportation of its McKee-Mangahewa gas.
Cummings said industry anxiety was because of Todd’s considerable market power both upstream (Todd is involved in the Maui, Kapuni, Pohokura, McKee and Mangahewa fields) and downstream (through its Nova Gas, Auckland Gas and Bay of Plenty Electricity subsidiaries).
Todd had the ability to delay or frustrate other players’ access to the Maui pipeline, but it had promised its interim access arrangements were genuinely temporary, and that it would quickly move to the same regime other users would be under.
“I leave it to you to decide whether that assurance was effective,” Cummings told the conference delegates.
Todd Energy had recently applied for Commerce Commission authorisation for certain anti-competitive behaviour relating to the agreed open-access regime for the Maui pipeline and Cummings hoped that issue would be resolved in a matter of weeks, not months.
Cummings said the new agreed transmission arrangements provided the best outcome for the New Zealand gas industry and that NGC was well positioned to manage these processes for the benefit of the whole industry.
The gas conference was hosted by event organiser Conferenz.
