The agreements - coupled with a simultaneous announcement that Genesis is to buy McKee-Mangahewa gas from Todd from next year - almost certainly sound the death-knell for methanol producer Methanex in New Zealand.

Shell announced its deals late last Friday, after the New Zealand Stock Exchange had closed, and said the sales were a “major milestone” for the Pohokura project, which has yet to receive final financial approval. Genesis announced its Pohokura-McKee-Mangahewa deals with Todd this morning.

Shell NZ commercial manager Ajit Bansal said the sales were one of the key achievements to confirming that the Pohokura project was still “firmly on-track” to produce gas from mid-2006.

“Shell is pleased with the level of interest in our competitive bidding process. As a result, Shell has attained a diversified and robust portfolio of contracts, whilst contributing to the growth prospects of these three downstream companies.

"We can now proceed with more confidence towards our investment decision for Pohokura, expected to be taken in mid 2004,” Bansal added.

Genesis Power chief executive Murray Jackson said Shell would deliver its Pohokura gas from January 2007 to December 2016. Todd would start delivery of its Pohokura gas from January 2006 through to December 2011. Todd would deliver its Mangahewa-McKee gas to Genesis from next January to December 2008.

“The successful purchase of gas parcels from Todd Energy and Shell is a major milestone for Genesis. These new contracts, along with our existing Kupe gas contracts, mean Genesis’ wholesale generation and retail gas businesses can grow with confidence into the future.”

Jackson said the additional gas would, along with existing gas contracts from Maui and Rimu gas fields, be available for the new 48MW open-cycle gas plant now being commissioned at Huntly and brought Genesis one step closer to a final commitment to its proposed 385MW combined cycle gas turbine, also at Huntly.

Contact Energy said the new arrangements between it and Shell not only involved Pohokura gas but simplified existing gas contracts between them - providing much greater certainty for future gas supplies for Contact’s existing gas-fired power stations, and freeing up a substantial portion of generating capacity.

Contact chief executive Stephen Barrett said Contact and Shell had agreed to “reconstitute” the contracts associated with the development of the Taranaki Combined Cycle (TCC) station in the mid-1990s, which were developed by other parties but now held by Contact and Shell.

Shell was obliged to supply up to 20.4PJ per year of fuel to Contact, beginning from when Contact’s Maui entitlement was exhausted and running until mid-2010. Contact was, in turn, effectively obliged to manage its Maui entitlements in such a way as to defer the commencement date for the supply of “make-up” fuel from Shell. Any failure by Contact to honour this requirement would have undermined the obligation on Shell.

These arrangements created difficulties for both parties, as neither could plan with any certainty around a firm start date for the supply of make-up fuel, and the difficulties were magnified by the uncertainties surrounding Contact’s Maui gas entitlements - particularly in light of last year’s downward gas reserves redetermination.

The new arrangements provided for Contact’s Maui commitment to end by September 30, 2007, and for Shell to supply up to 20.4 PJ per year of gas to Contact from that date, probably with Pohokura gas until the termination of the original agreements in mid-2010.

Contact and Shell also agreed to terminate the 76MW long-term hedge contract associated with the TCC development, freeing-up capacity within Contact’s hedge book, and allowing Contact to offer some additional capacity into the market.

“This agreement has two major benefits for Contact. It provides access to an additional source of non-Maui gas and, equally importantly, provides a much more certain basis for Contact to plan the efficient use of its remaining Maui entitlements,” said Barrett.

Earlier this month OMV New Zealand announced Contact was buying all OMV’s 26% share of Pohokura gas for the first five years of production from mid-2006.