Contact and Vector announced the successful conclusion of the right of first refusal (ROFR) negotiations last Friday, with Contact securing a further 170PJ of gas and Vector another 105PJ.
In April, Maui Development Limited (MDL) – as agent for the Maui partners Shell New Zealand, Todd Energy and Austria’s OMV – said it was offering in excess of 200PJ of ROFR gas, with Contact having the right to acquire up to 61.63% of any gas offered and Vector subsidiary, NGC, the rest.
Contact Energy chief executive David Baldwin on Friday said the new contracts confirmed Contact’s increased confidence in its short-to-medium term gas outlook.
About 42% of the gas would come from the Maui field’s 1P (proved) gas volumes, with the remainder coming from the field’s 2P (proved and probable) reserves, depending on those volumes later being confirmed as 1P reserves.
Baldwin also said Contact had arranged to sell about 7PJ per annum to “a large wholesale gas customer” from next October until mid-2010.
“I’m happy to confirm that Ballance is the customer and that this gas will ensure the continued operation of our Kapuni ammonia urea plant for at least another three years,” Ballance Agri-Nutrients Kapuni plant general manager Len Houwers told PetroleumNews.nett this morning.
Last November, Ballance signed a 15-month gas supply contract with NGC for the supply about 7PJpa of gas to the ammonia-urea plant until next September.
Baldwin said Contact had also agreed to a short-term sale to another wholesale customer but, again, did not specify the company involved.
He said Contact was reasonably confident that most, if not all, of its rights to 2P ROFR gas would be realised.
“This additional gas is a significant volume, which will go a long way towards securing a stable fuel supply for our existing natural gas-fired assets into the middle of next decade,” Baldwin said.
Vector said it had exercised its option to acquire 38.37% of ROFR gas offered, with the entitlements to 105PJ of gas starting next April and running until December 2014.
Vector chief executive Mark Franklin said the ROFR contracts significantly improved the flexibility and longevity of Vector’s gas portfolio.
“It is the largest single acquisition of gas by Vector since the initial purchase arrangements for gas from the Kapuni and Maui fields,” he said.
“The contracts both underpin gas sales to our customers beyond 2010 and strengthen our key position in the industrial and commercial sector of the market.
“This extension of our base entitlements has allowed us to optimise our supply and demand balance while retaining the flexibility to pursue future acquisitions from new discoveries as they occur.”
About 60PJ of the Vector entitlement depended on those reserves being confirmed as economically recoverable.
Although the commercial terms of the contracts were confidential, Franklin noted the base price profile would increase over the term of the contracts and be linked to the Producer Price Index.
The contracts also contained annual take-or-pay obligations, which would be offset by Vector’s downstream supply arrangements with industrial and commercial customers, as well as significant new supply agreements concluded with electricity generators Mighty River Power and Genesis Energy.
Franklin added that the ROFR gas took Vector’s total gas portfolio to over 290PJ.
ROFR gas is Maui gas over and above the 367PJ determined as being available by independent appraisal expert Netherland Sewell and Associates in 2003. Methanol manufacturer Methanex has already used its 40PJ allocation, with Vector and Contact having rights to purchase the rest at current market prices. Both companies have already accessed incremental ROFR gas on a spot or short-term basis.
