Last Friday Contact announced it had agreed to sell land that lies over some of the existing geothermal resource in the Mokai region, north of Taupo, to MRP and the Maori Tuaropaki Trust.
Contact said it would receive $NZ27.25 million ($A23.44 million) as a result of selling the Mokai land and exchanging, with MRP, some rights in relation to natural gas development.
Contact chief executive David Baldwin said the small Mokai field was not a core part of the company's geothermal investment strategy, which was primarily focused on developing the nearby geothermal resources at Te Mihi and Tauhara.
Baldwin said a Contact development of the Mokai field would have required significant resources and arrangements with both MRP and the trust, whose interests include a jointly-owned 112MW power station and connecting transmission line at Mokai.
Therefore, MRP and the trust were better placed to fully exploit the field's potential.
Contact corporate communications manager Jonathan Hill said MRP could assist Contact in the future development of a storage option for Contact gas, that is, some form of geosequestration. But he declined to comment further.
However, it is known that Contact’s supply of cheap and flexible "367" Maui gas is running out and that its predominant source of gas is now the more northern offshore Taranaki Pohokura field. Only 367 gas is priced to include partial transmission costs and its supply is flexible. Other gas supplies are dearer and less flexible.
Contact is also entitled to 61.63% of 275PJ of Maui right of first refusal (ROFR) gas through to 2014, though it is known the tighter take-or-pay contracts for Pohokura gas cause it more concern than those relating to 367 or ROFR gas.
MRP entered the upstream sector about three years ago and has been building a diversified portfolio of exploration opportunities through joint ventures with Swift Energy and fellow US independent Plains Exploration & Production (which recently took over Pogo Producing Company) in Taranaki, and L&M Petroleum in Southland.
Therefore, it is likely that if Contact cannot use all of its gas in the future (it can onsell ROFR gas but not necessarily Pohokura gas) it may want to develop some sequestration facility, which would be the first of its kind in New Zealand.
It is also likely that it would want to use MRP to provide access to some disused onshore Taranaki gas wells, probably in association with Swift Energy, rather than with L&M, in Southland, or with Plains, which has only drilled one unsuccessful well off Taranaki.
Swift and MRP have drilled three deep (Eocene-aged) onshore Taranaki gas wells together, though none was successful. As well, Swift’s producing wells, again in onshore Taranaki, are all in decline and Swift is considering leaving the New Zealand E&P scene.
