Contact Looks at Opportunities for Exploration Partnerships

Integrated Energy and major gas user Contact Energy, says it is assessing opportunities to become involved in exploration with other parties.

In Contact's report for the nine months to 30 June 2005, the company says it is actively pursuing upstream and new business development opportunities as part of its focus on securing its longer term gas position. Contact's majority shareholder is Australian-based Origin Energy Ltd.

Contact's report says farm-in arrangements, undertaken within appropriate risk parameters, offer a means to ensure that prospective areas offshore Taranaki are explored in a timely and commercially advantageous fashion.

The company's first preference is to secure local supplies of gas and has tjerefore advanced plans for seismic work in its offshore Taranaki petroleum exploration permit area.

Should local gas supplies prove insufficient to achieve security of gas supply, Contact says it will need to be prepared with backup options such as importing liquefied natural gas.

Contact also disclosed that it is investigating, in parallel, another option of importing compressed natural gas (CNG). "Whilst the CNG technology is not yet fully commercialized, it offers the prospect of connecting New Zealand to the Eastern Australian gas market with relatively low volume commitments. An Australian CNG supply would also offer potential for a regional solution within a more stable pricing environment."

Contact Energy's chief executive Steve Barrett says the company continues to see gas fired thermal capacity as a key contributor to New Zealand's growing energy needs, particularly to provide balance and back-up as more renewable generation is added to the national electricity system.

"Renewable generation sources such as wind and water are inherently less flexible than thermal generation sources because of their dependence on weather conditions," Mr. Barrett says.

Gas-fired thermal generation would continue to be necessary to provide much-needed flexibility and electricity system security.

Contact's attention was now turning to its planned development of its gas-fired Otahuhu-C power station in Auckland, which would be a companion plant to the 380MW Otahuhu-B station. The company already holds resource consents for Otahuhu-C.

Underlying electricity cost increases being faced by electricity generators, including higher transmission and regulatory costs, are an unavoidable fact in the emerging post-Maui energy environment in which all new generation options come at a higher cost than past options.

"Even with this structural change in the New Zealand energy market, electricity prices in this country remain relatively low compared to most other First World countries," Mr. Barrett says.

Contact Energy made a net surplus of $138.2 million for the nine month period to June 30, 2005, $37.6 million above the same period last financial year.