Contact Energy Agrees to Buy Pohokura Gas from OMV

The first announced gas sale agreement from the undeveloped Pohokura offshore gas field close to New Plymouth has been made between one of the field partners OMV New Zealand Ltd and the large electricity generator and supplier Contact Energy Ltd.

Contact said that under the agreement it will buy the entire initial tranche of gas offered by OMV for its share of the first five years of the fields production from start-up at around 30 June, 2006.

A final decision whether to proceed with the project has yet to be made by the three partners who hold substantive interests in Pohokura: Shell Exploration / Shell Petroleum Mining Company NZ Ltd (48%); OMV New Zealand Ltd (26%), and Todd Pohokura Ltd (26%). Operator Shell Todd Oil Services Ltd holds a 0% interest.

Contact said the payment structure for Pohokura gas would be a mix of capacity fee based on the maximum daily entitlement, and a variable element based on the actual amount of gas lifted by Contact on any given day. This way of paying reflected OMVs desire for a high degree of revenue certainty before committing the substantial investment necessary for field development, and the physical characteristics of the gas reservoir.

Contact Energy's chief executive Stephen Barrett said the announcement was an important milestone for the company and the industry.