Genesis Power & New Zealand O&G Reach Agreement for Kupe Gas

Genesis Power Limited and New Zealand Oil & Gas Limited have agreed key commercial terms for Genesis to purchase NZOG's share of gas from the Kupe field and fund up to NZ$40 million of NZOG's Kupe development costs.

NZOG owns 15% percent and Genesis currently owns 31% of the Kupe oil and gas field. NZOG owns 35.4 petajoules of Kupe gas reserves and 2.4 million barrels of oil.

On announcing the deal, NZOG Chief Executive Mr Tony Radford and Genesis Chief Executive Murray Jackson said the agreed terms represent another major step for the Kupe development.

“With the majority of the Kupe partners having reached agreement on their gas sales arrangements, the fast-track development of Kupe is on schedule to deliver gas in the first half of 2007” they said.

Mr. Radford said agreement with Genesis on the key commercial terms represented a major step for NZOG as a company.

"The price set for our gas reflects the current high levels of demand for this energy source, while securing of finance for NZOG's share of the development by this method will avoid the substantial costs often associated with this type of project finance from conventional banking sources."

Both parties have agreed to speedily conclude negotiation of a formal binding contract. NZOG will separately deal with its share of oil/condensate production.

Genesis Power, a New Zealand state owned enterprise, is a leading generator and retailer of electricity and gas in New Zealand, with assets valued at NZ$1.2 billion and revenue for the financial year ended 30 June 2003 of NZ$1.4 billion. Genesis owns seven power stations, including New Zealand's largest thermal plant, Huntly Power Station; and plans to build another major thermal power plant in the near future.

NZOG discovered the Kupe field in the late 1980's. The Kupe Field development was delayed due to low gas prices until last year when a major downwards revision of Maui gas reserves was announced, leading to a rapid and substantial increase in gas prices. A formal decision to develop Kupe is scheduled for June next year. In the meantime, the partners in the project are moving rapidly through the engineering and consenting process.

NZOG's General Manager Gordon Ward said “Kupe is set to deliver a substantial long-term revenue and cashflow stream for the company with first production targeted by 30 April 2007”.