Commentators regard the ERL as an anachronism, a government impost applied before 1986 to help the then fledgling energy industry, yet one which could help this country through the looming gas supply crisis of the next few years.
As well, if foregoing the ERL means enough new gas, primarily from the faltering Maui field, can be "found", this may stop methanol manufacturer Methanex totally closing its New Zealand operations from 2006.
Some commentators say the government should have years ago stopped pocketing the ERL (of NZ45c per Gigajoule) it collects from Maui gas users and used that money to help explorers find and develop other gas resources. They cite the Netherlands government and its use of the offshore Groenigen field, saving much of that big field's reserves and using levy monies to help companies develop further fields, as proof that such a scheme is feasible.
"It makes no sense for the government to continue to impose such a tax on a production from a field such as Maui, when extra production could help the national economy and is a matter of national security," said one commentator, referring to the possibility of power cuts and gas shortages during any future cold, dry winters.
"The ERL effectively acts as a disincentive, adding to buyers' costs. It would be better if the government abolished this levy on all fields and used the money to help further exploration for gas, which is desperately needed right now," added another.
A more "hands-on" approach would involve the government still collecting the ERL, but directing the Maui partners to spend that money on exploration within the Maui licence. A more "free market" approach could involve the government doing away with the ERL on the 370PJ of gas "left", but then allowing the partners to increase their gas price by the same margin, thus providing an added incentive to explore for "less economic" gas.
However, commentators say there are problems with each scenario.
"The difficulty of an incentive rebate towards future exploration costs lies in MDL believing there is more economic gas worth going after. Neither the partners nor the government should throw away their own good dollars drilling prospects they don't actually believe in.
"The second option is more difficult but still possible. The government would never allow MDL to increase the gas price to them without an equivalent increase to the purchasers; this would be neutral if everyone agreed to raise their prices. But what guarantee would there be that MDL would explore or try to develop any additional reserves?" asked a third commentator.
Methanex NZ, which can use up to 40% of all Maui gas produced, pays an ERL of about $35-40 million per annum to the central government consolidated fund. The two other big users, Contact Energy and NGC Holdings, also pay the ERL as well as a government margin, taking the wellhead price of about $NZ1.65 per Gigajoule to their wholesale gas price to about $NZ2.75.
Earlier this month Maui adjudicator, Texas-based Netherland Sewell and Associates International, said there was only about 370 Petajoules of recoverable gas left in the field.
However, commentators say Energy Minister Pete Hodgson's use of the phrase "economically recoverable gas" and the NSAI term "at the Maui price", indicate there is more gas in the field, but that it will only be extracted at the right price.
As proof of this, commentators cite the sale and purchase agreement signed several years ago when then Maui partners Shell, Todd and Fletcher Challenge Energy drilled the Maui South-1 well. Unfortunately the well was plugged and abandoned, though everything was agreed, including price but not quantity. Methanex advisors Gaffney Cline now believe the well was drilled in the wrong place and did not go deep enough to access perhaps 400PJ of additional gas.
Additionally, it is known Methanex, NGC and Contact are all prepared to pay above the current contract price to access further Maui gas reserves.
Associate Energy Minister Harry Duynhoven says the idea of extracting more Maui gas outside the existing Maui gas sales contracts is "certainly an interesting issue'.
"We have yet to be approached specifically regarding the ERL, but it's an idea, like many others, that we could consider over the coming months," he told EnergyReview.Net.
