Electricity utilities Contact Energy and Genesis Energy – the country’s two biggest gas users now that methanol manufacturer Methanex is running only one of its two Taranaki plants intermittently – are pressing ahead with plans to import LNG from early next decade if indigenous gas supplies fail to meet market demand.

Contact chief executive David Hunt said that with the Maui field depleting rapidly, major new finds were needed in order to secure the country's long-term future energy supply.

“We continue to expect we will need to bring on new gas supplies by early next decade, whether indigenous gas or imported LNG, though the company's first preference is to secure local supplies of gas,” Hunt told EnergyReview.net

Hunt said he was not deterred by the rather dismal discoveries of last year. Not one large field was found.

A near record 32 exploration, appraisal and development oil and gas wells were drilled in New Zealand during 2005. Though explorers hit paydirt with the Cheal oil and Cardiff, Piakau North and Supplejack gas-condensate wells, none was large enough to change New Zealand’s energy economics significantly.

At present explorers plan only about 18 wells, eight of those wildcats, for 2006.

But it is almost certain they will use the Ensign International Energy Services (formerly OD&E) Rig 41 to test several onshore deep-gas prospects once it has finished drilling the deviated onshore-offshore Pohokura production wells.

In addition, it is likely other joint ventures will want to use the Ensco jack-up Rig 56 once it has finished drilling the offshore Pohokura wells later this year. As well, the semi-submersible Ocean Patriot is scheduled to drill four Tui Area development wells, plus five or more wildcat wells off Taranaki and Canterbury.

Hunt added that Contact had secured its gas position to 2010, mainly through its Pohokura purchases, “and is now focused on securing the longer term gas position”.

Contact’s initial Pohokura gas purchase (from 26% equity partner OMV) was roughly equivalent to that used by Contact’s 380MW Otahuhu B power station in Auckland (about 20 petajoules per year). But it was not enough for Contact to commit itself to any new gas-fired power stations at Otahuhu or Stratford, Taranaki.

As New Zealand’s gas supply crisis has loomed larger, all of the country’s significant downstream gas users have moved upstream into exploration.

Genesis was one of the first to move – taking 31% equity in the offshore south Taranaki Kupe oil and gas field and a 40% stake in the onshore Cardiff deep gas prospect that is still being tested to determine the economically recoverable reserves.

Genesis chief executive Murray Jackson said the Kupe partners, headed by operator Origin Energy, were making good progress towards a final investment decision, which could possibly be made as early as March-April.

Despite initial disappointing flows from the McKee sands, the main producing zone at Cardiff, Jackson remains optimistic that the prospect will prove useful for Genesis.

Contact moved upstream later and its sole position so far is 100% equity in offshore Taranaki exploration licence PEP 38493.

Earlier this year the Pacific Titan seismic vessel shot over 850 km of 2D seismic for Contact over the licence and Hunt said Contact would determine what next once the results were known.

Options included involving other parties, through farm-in arrangements, “to ensure prospective areas in offshore Taranaki are explored in a timely and commercially advantageous fashion.

“Contact is focusing its exploration efforts offshore, where we feel there is the best chance of making a discovery of sufficient size to make a significant contribution to the New Zealand market,” said.

But Jackson warned that finding and developing local fields might be no cheaper than importing LNG.

“The cynics say LNG will mean the end of domestic gas and the domestic gas exploration industry, but who knows what the cost of developing the next major gas field will be?” Jackson said.

“It could be astronomical, given what’s happening worldwide with exploration and rig rates and the like.”

During the past two years, semi-submersible rig rates have rocketed from about US$100,000 per day to about US$400,000 or more.

Higher development costs could see domestic gas priced about the same as imported LNG – NZ$6.50-7.50 per gigajoule or even higher by the turn of the decade, according to Jackson.

Present remaining gas reserves could last to 2010, or perhaps 2012 if more gas was discovered in the faltering Maui field and the second tranche of Pohokura gas was brought quickly to the market.

But that would still mean a tight timetable for LNG – only four to six years – from applying for the necessary resource consents to the completion of project development.

Even then, international LNG supplies may soon all be contracted if New Zealand companies don’t move quickly.

“Shell’s recent comment that the next significant tranches of Aussie LNG may not be available until 2012 should be a big wake-up call for New Zealand,” Jackson said.

He warns the next 18 months will be critical to New Zealand.

“What happens with local gas exploration until mid-2007 will largely determine what happens with LNG. We would love to know when and where the next big gas strike will be.”