Consortium Rejects Offer For Gas

Press, Volume CVI, Issue 31152, 31 August 1966, Page 14

Consortium Rejects Offer For Gas

(New Zealand Press Association)

WELLINGTON, August 30.

The Minister of Mines (Mr Shand) said tonight that the Shell-BP-Todd oil consortium which discovered the Kapuni natural gas field had rejected an offer made by the Government a month ago for the use of the gas as a premium fuel.

“They objected to the price we offered and claimed it would be an unreasonable price,” he said in Parliament.

Speaking during a debate on the estimates for the Mines Department and the State coal-mines, Mr Shand said the consortium had asked the Government to make an offer for the gas as a source of electric-power generation. Alternatively, the consortium had asked for a Government subsidy so the gas could be used as a premium fuel. Mr Shand said he had called for documentation of the consortium’s arguments. “We offered them a price which we believed to be a fair and reasonable price,” said the Minister. “But there are one or two matters which could be arguable. “I think there are possible contingent adjustments we could make—but I don’t think we could go much further than that,” he said.

The Deputy Leader of the Opposition (Mr Watt) said £li million in overseas exchange could be Saved annually if the Government developed the field and used the condensate for petrol. About 5000 barrels a day would be required to make Kapuni economic. Mr Shand said: "Nobody has regretted the delay more than I have.

“It was not until November, 1963, that the oil companies wrote to the Government offering untreated gas for power generation. “We decided it would be quite wrong to allow this valuable fuel to be burnt off for electricity generation until we had found out whether it could be used as a premium fuel,” he said. The Government’s consultant on the use of the gas did not report until August,

1964, and a second report from the consultant on the reserves of the gas field was not handed over to the Government until August the next year.

Mr Watt asked: “If an agreement cannot be reached with the oil companies for a price, will the Government consider using the gas for the production of electric power?” Mr Shand said the pipeline was expected to cost £6} million and the cleaning plant £2l million.

He .would be recommending to the Government that a small public authority owned by the Government be set up as the pipeline handling authority. Mr Shand said gas distribution authorities concerned, expected the conversion of existing appliances to cost £750,000. The total cost of additions and extensions, would be about £9,300,000 over 10 years. He said the Government had told the company it would not use the gas for electricity generation until it was satisfied the price was right. He had no doubt they would come to an agreement reasonably quickly.