Wilson said there were three main issues to be considered – the legal framework, pipeline capacity, and gas balancing issues.

There were no pre-contractual rights for new users of New Zealand’s largest pipeline, the Maui pipeline from Oaonui to Huntly, with possible conflicts of interest between the Maui pipeline and the other high-pressure networks owned and operated by Vector.

Each pipeline system had three operators – systems, technical and commercial – and Vector was the operator in all except Maui.

Vector, which acquired NGC about two years ago, was also a significant gas wholesaler and retailer. This represented possible conflicts of interest, according to Wilson.

The legal framework was a muddle, with several different codes, including the Maui Pipeline Operating Code (MPOC) and the voluntary New Zealand Pipeline Access Code, he said.

There was a need to develop a common, more transparent policy framework regarding pipeline access and operating conditions.

“We need to fix possible conflicts of interest, take a pragmatic approach and do some analysis before implementing new rules and codes,” he said.

While some shippers were unhappy with short-term capacity and usage on Vector pipelines, others were unhappy about long-term capacity and usage issues on the Maui pipeline, and there were concerns about “capacity hoarding”.

Vector needed to develop its short-term capacity products and better define its interruptible supply services, while problems with Maui needed to be addressed through changes to the MPOC, he said.

Vector’s daily pricing levels tended to be 10 times those relating to annual usage, while charges for authorised or unauthorised capacity were about eight times the annual prices.

“Vector’s view of the world is quite legitimate,” he said.

“But there are few passengers on the pipeline bus and they do not really like each other and do not like trading with each other,” he added, referring to the lack of trading on any secondary market.

In addition, pipeline operators had to be able to pass on the costs of “balancing” – maintaining line pack gas within acceptable limits – or they might struggle to be “reasonable and prudent” with their charges, he argued.

The Gas Industry Company (GIC) was now reviewing the regulation of and competition within the New Zealand gas pipeline industry.

Consulting economist John Small said the New Zealand upstream market was fairly concentrated at present, with a few players controlling most of the country’s gas production.

This meant that for now upstream players had more bargaining power than gas buyers.

Gas supply contracts needed to be more transparent and there was a need for a secondary market to trade the “unders and overs” caused by differing offtake rates and take-or-pay provisions.

The Maui Oaonui production station, and both the Shell-Todd production station and adjacent Vector facilities at Kapuni were all under-used.

It was important third parties were able to use this significant spare production capacity and not be hindered by the owners trying to impose excessive access and pricing terms and conditions.

There were also potential serious bottlenecks in both gas transmission and distribution because of the limited market and investment opportunities, according to Small.

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