Last night, after the New Zealand Exchange had closed, Genesis announced it had finally stitched together a deal that will see Origin pay NZ$33 million for a half-share in the offshore Taranaki field and to contract its share of sales gas from the field to Genesis.
Genesis said that by selling down its interest it had secured a 250PJ gas contract to ensure its investment in high-efficiency, gas-fired generation stations and retail gas would continue to expand.
This was exactly what commentators had told EnergyReview.Net - that Genesis' prime concern would be to ensure acceptable terms and conditions for a significant proportion of Kupe gas.
Genesis chief executive Murray Jackson and Origin executive general manager (oil and gas production) John Piper said they were pleased with the agreement, which would enable the Kupe project to be fast-tracked.
"It is anticipated the Kupe oil and gas field will be brought into production in 2007."
The agreement will leave Genesis with a 31% interest in Kupe, following its recently acquired 11% stake from the government. Origin is to pay the NZ$55 million by instalments.
Jackson said Genesis had undertaken a rigorous process to ensure that it introduced a joint venture partner with significant upstream capability and experience with respect to gas field development and gas processing.
Independent analyst Peter Stachan said the deal was a good one for Origin. "Origin's purchase is at a very reasonable price of about NZ$1/bbl of oil equivalent. With contract gas prices at about NZ$5-6/Gj, this equates to about NZ$36/boe, using 6 Tj per BOE," he said.
The Kupe development would allow Genesis to invest in high-efficiency gas turbine technology. Genesis is planning to commission a new 385MW high efficiency combined cycle gas turbine at Huntly to complement its existing 1000MW gas-coal fired station there.
Piper said Origin Energy was pleased to have the opportunity to work with Genesis and to expand its operations in New Zealand. Origin Energy had a project team in place that could be readily utilised for the development of Kupe.
He said the deal represented a significant acquisition for Origin and "leverages the experience we have gained developing the Yolla field as part of the BassGas Project in Australia.
"Reserves in the Yolla and Kupe fields are similar, gas production rates will be essentially the same and there will be substantial liquids production from both fields.
"This investment is consistent with Origin's long term strategy of seeking oil and gas exploration and development opportunities close to established markets. It also complements our existing LPG supply and distribution interests in Rockgas, which is the largest distributor of LPG in New Zealand."
Origin already has significant exploration interests in New Zealand and was yesterday granted a new offshore Taranaki licence, PEP 38485, in association with Todd Energy and OMV Petroleum.
