Contact Energy acquires offshore Taranaki permit

Jun 28, 2004 02:00 AM

Contact Energy, New Zealand's largest publicly traded energy company, acquired its first ever exploration permit in a bid to accelerate its search for new gas reserves as the country's supply wanes.
The permit lies about 50 miles northwest of New Plymouth on New Zealand's Taranaki coast, next to two permits held by Shell, OMV and Todd Energy, Wellington-based Contact said. An exploration well may be drilled in 2007.

Contact, which operates three of New Zealand's biggest gas-fired power plants, and rival Genesis Power are investing in exploration amid concern about dwindling reserves at Maui, the country's largest gas field. Contact is in talks about long-term fuel supplies and is working with Mighty River Power to set up an NZ$ 80 mm ($ 51 mm) fund to encourage exploration.
"This (exploration) hasn't been part of their core business," said Simon Botherway, who holds Contact among the equivalent of $ 414 mm he helps manage for Brook Asset management in Auckland. "The generators are clearly having to resort to activities that they would preferred to have avoided."

Maui holds less gas than expected and may run out by 2007 unless owner Shell commits to further drilling. Contact has agreed to buy gas from the Pohokura field being developed by Shell and OMV, though its total entitlements fall sharply from 2010. Contact said it has been working with several parties to try and encourage the amount of drilling necessary to ensure the country has enough domestic gas supplies.
"While those discussions have been encouraging, Contact is concerned that relying solely on existing explorers may not result in a sufficient level of activity," CEO Steve Barrett said.

The permit Contact has acquired, PEP38493, covers an area of about 2,053 square miles. The investment shows how concerned New Zealand's generators are about waning supplies after the rundown of Maui, Botherway said.
Government-owned Genesis owns 31 % of the offshore Kupe gas field, after selling Origin Energy, Australia's second-largest energy company, an operating 50 % interest to get it developed by 2007. In April, Genesis agreed to fund drilling of a deep onshore gas well being drilled by Australia Pacific Energy.

Source: Bloomberg
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