Shell Sells Remaining Initial Pohokura Gas to NGC

Shell New Zealand has sold two further parcels of gas from its 48% share of Pohokura gas to NGC Holdings Ltd.

This essentially concludes Shell's gas sales agreements before the final investment decision is made in mid-2004 on development of the Pohokura offshore gas-condensate field, Shell's commercial manager Ajit Bansal said.

Earlier Dr Bansal announced sales of Pohokura gas to three other companies - Contact Energy Ltd, Genesis Power Ltd, and Multigas (NZ) Ltd.

The sales to NGC are a mixture of firm and conditional commitments running from commencement of field production expected in mid 2006 through to 2010.

The deal with NGC also encompasses supply of gas from the Kapuni field in settlement of an indemnity arrangement, which originated with Fletcher Challenge Energy (FCE) dating from 1992. Shell New Zealand inherited this issue when it acquired FCE.

NGC said the purchase agreements were for approximately 105 petajoules (PJ) of gas from the Pohokura and Kapuni fields. NGC had exercised an option under the indemnity to purchase up to 70PJ of gas from Shell, and the parties had been negotiating a detailed contract. Purchases of Kapuni gas from Shell will be in the period 2005 to 2013.

NGC said the exact volume of Pohokura gas to be purchased will depend on the Pohokura joint venture obtaining a field 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.

Gas purchase price under the agreements have not been disclosed but include commodity and nominated capacity charges.

NGC chief executive Phil James said the agreements together represented an important and positive event for the company and for the New Zealand gas industry, while Dr Bansal described the negotiations as proactive and constructive on both sides.

All three Pohokura partners have now made agreements for the initial few years of gas. OMV New Zealand Ltd which holds a 26% interest in the field has sold its entire initial five year tranche of gas to Contact Energy Ltd. Todd Energy (also 26% interest) has also made a five year sale of gas to Genesis Power.