The agreements include the settlement of a gas supply indemnity arrangement dating from 1992, initially between NGC and Fletcher Challenge Energy, and subsequently with Shell following its acquisition of FCE in 2001.

NGC will purchase Pohokura gas under a mixture of firm and conditional commitments from the mid-2006 commissioning of field production facilities, until 2010. Purchases of Kapuni gas from Shell will be from 2005 to 2013.

The exact volume of Pohokura gas to be purchased by NGC will depend on the Pohokura joint venture (Shell, OMV and Todd Energy) obtaining a petroleum mining permit, the start of post-commissioning production, the amount of gas actually produced and supply to higher-priority customers.

The amount of Kapuni gas purchased from Shell will depend on the level of Pohokura gas deliveries.

The gas purchase price under the agreements is confidential, but includes commodity and nominated capacity charges and will be paid monthly on a price per Gigajoule basis.

NGC chief executive Phil James said the agreements together represented an important and positive event for NGC and the Kiwi gas industry. NGC was particularly happy to now have clarity around the delivery of gas under the indemnity agreement.

“While discussions around final delivery arrangements for remaining Maui gas reserves have yet to be completed, it has been very pleasing to work closely with Shell to resolve the historic indemnity issue and to facilitate the delivery of Pohokura gas to the market at the earliest possible time.”

The agreements would strengthen NGC’s ability to supply customers in the post-Maui period, James added.

NGC spokesman Keith FitzPatrick said the gas indemnity arrangement related to any challenge to NGC’s right to take Kapuni gas. Following Todd Energy’s successful legal challenge to that several years ago, NGC had exercised its option to purchase up to 70PJ of gas from Shell.

The NGC sales followed Shell’s announcement last Friday that it had sold Pohokura gas to three other companies - Contact Energy, Genesis Power, and Multigas, said Shell NZ commercial manager Ajit Bansal.

“With this further sale of Pohokura gas to NGC, Shell has now essentially concluded its marketing campaign targeting foundation customers in the lead up to the investment decision for the Pohokura development, slated for mid-2004,” Bansal added.

Commentators say almost 300PJ of Pohokura gas has now been contracted by Shell, OMV and Todd and that subsequent tranches will be offered to the market as the Pohokura project progresses.