Agreement Signed On Kapuni Gas

Press, Volume CVI, Issue 31366, 11 May 1967, Page 1

Agreement Signed On Kapuni Gas

(New Zealand Press Association)

WELLINGTON, May 10. The Government and the oil consortium tonight signed the Kapuni natural gas agreement.

The price of the gas at the field will be 21d per million B.T.U. for the first five years.

The Minister of Mines (Mr Shand) said retail prices would vary according to local circumstances, but reasonable expectations were that prices would be reduced by at least 15 per cent and probably more.

Preparations will start immediately for delivery to customers late in 1969. The Government will set up a corporation to purchase and treat the gas and distribute it to Auckland, Hamilton, New Plymouth, Hawera, Wanganui, Palmerston North, Levin, Wellington, and the Hutt Valley. Draft contracts have been drawn up with the gas undertakings in these pla'ces. “All have indicated their intention to work actively to extend the areas they at present supply and to develop additional uses for gas,” Mr Shand said. The Mines Department is preparing recommendations to the Government for formation of a pipeline corporation. Mr J. B. Price, chairman of Shell, B.P. and Todd Oil Services, Ltd., who signed the agreement with the Minister, said: “I think the agreement that has been entered into is a very good one for New Zealand. We’re reasonably satisfied. We’re not elated or excited.” The agreement is subject to

ratification by the Government at the end of a short period in which final terms for the sale of gas to the gas distributors will be negotiated.

Mr Shand said there would be a uniform price of 54d per million B.T.U. at the city gate to all gas undertakings. “This is substantially less than half the present cost of manufacturing gas from coal, even after allowing for the subsidies which are now being paid,” he said. “It must be remembered, however, that the cost of distributing the gas, often as much as the manufacturing of it, will still have to be met, and may well be higher during the early years of use of natural gas.” TRUNK PIPELINES

The pipeline corporation will construct and run trunk pipelines to Auckland and Wellington and other smaller pipelines to other gas undertakings. At Kapuni it will construct a treatment plant to remove carbon dioxide and a com-

pressor station to boost delivery pressure.

The cost will be £9 million, of which Mr J. G. Shattuck, the Government’s adviser, estimates £4 million will be required from overseas.

To make the venture economic for both the pipeline corporation and the oil group a rapid build-up in gas consumption is necessary. This is planned to take place over the first five years to a level which will remain relatively constant for the remaining life of the field.

To achieve this it will be necessary to use some of the gas to replace oil for industrial purposes in addition to the domestic and commercial uses originally contemplated. Among the industrial users will be the new electricity generating station at Otara, and probably a similar one to he built in the Wellington area.

The amounts of gas used for electricity generating will decrease as the gas undertakings increase their sales.

“We will not sell any gas to the Electricity Department that can be sold to other users,” Mr Shand said. The generating stations will revert to oil as more beneficial uses for gas are developed.