EnergyReview.Net has obtained a copy of a restricted Commerce Commission report into the acquisition which confirms ERN's news report of last month, that Todd Energy intended purchasing significant additional equity in Pohokura from OMV.
ERN said that although Todd Energy decided against exercising its pre-emptive Pohokura rights when OMV announced its intention to buy German firm Preussag Energie earlier this year, Todd still planned to increase its interest from 16.14% to about 26%.
The commission report says the deal was expected to be concluded before the end of May and that new Pohokura equities would be Shell New Zealand 48%, Todd Energy 26% and OMV 26%. It does not, however, disclose any financial details of the deal.
Commission staff learned of Todd's intention to increase its participating interest in the Pohokura joint venture while working on the Pohokura gas marketing authorisation - a request from Shell, Todd and Preussag to jointly market and sell gas from the possible 1tcf field.
Commerce Commission staff were concerned that the acquisition might breach the commission's guidelines on "safe harbours" and might increase the likelihood of collusion between Shell and Todd.
However, after investigating the proposed deal, the commission recommended no further action be taken in regard to the Todd acquisition.
It said that, post acquisition, Todd's increased participating interest would allow it to vote with Shell to pass operating decisions. While this would increase the ability of Todd to delay development, the acquisition would not affect Shell's incentive to delay or develop the Pohokura field. Shell, through its veto right, could delay development with or without Todd's support.
As the likelihood and ability of Shell to delay development was not substantially affected by Todd's acquisition it did not appear there would be a substantial lessening of competition as a result of the acquisition, the commission added.
Also, it did not appear from the uncommitted gas figures, sunk cost investment in the field, and the likelihood of securing a cornerstone purchaser for the Pohokura field that there would be a compelling financial incentive for the two firms to co-operate to delay production of Pohokura.
Previously, development decisions required unanimous approval from all members of the joint venture and this would not change post-acquisition.
However, the increase in Todd's participating interest would alter the voting dynamics in the joint venture's operating committee, said the commission.
Earlier, any operating decision required the vote of two members of the operating committee having a combined 65% share in the joint venture. Pre-acquisition, Shell and Todd together held a 64% interest, meaning Todd and Shell voting together could not pass an operating decision without the support of Preussag. This effectively gave Preussag a veto right on operating decisions.
Shell, with its 48% interest, also held a veto right as Preussag and Todd could not pass an operating decision without Shell's support. Shell has maintained this veto right in operating decisions.
However, post-acquisition Shell and Todd would be able to pass an operating decision without support from OMV. OMV and Shell would also be able to act in concert to pass an operating decision without the support of Todd.
The commission said the major parties potentially affected by the acquisition did not feel the acquisition raised any serious competition issues. The four major gas purchasers - Contact Energy, Methanex, Genesis Power, and NGC - were more concerned about the possible effects of joint marketing and selling from the Pohokura field, as is being considered in the commission's joint marketing authorisation. The commission is to hold a three-day conference on this issue early next month.
OMV New Zealand spokesman (and former Preussag NZ vice-president) David Salisbury has declined to comment on the deal, while Todd's chief executive, Richard Tweedie, has neither confirmed nor denied any proposals.
