‘Great risk’ with Maui venture

Press, Volume CXIII, Issue 33382, 14 November 1973, Page 18

‘Great risk’ with Maui venture

(N.Z. Press Association) WELLINGTON, November 13. The Government was taking: a great risk with the Maui gas venture, said a former Minister of Electricity, Mr L. W.; Gandar (Nat., Ruahine), in Parliament tonight. Speaking during the second: : reading debate on the Minis-; 1 try of Energy Resources i .Amendment Bill, he said he hoped the gas field would i perform well but there was a .risk it could under-perform. TAX FACTORS Mr Gandar said the Minister of Energy Resources (Mr Freer) had said the Gov-: ernment’s payment for its share in the company being formed bv the agreement' would not be taxed. “The Government gave it. awav tax free,” he said. The Inland Revenue Department had advised the’ Government last year that; the payment would be taxable. “If in fact it was taxable,: ,one is entitled to ask the.

value of the sale at a taxable figure, and the answer is $44m,” Mr Gandar said. “That is the reason we are critical of the buy-in price.” The Shell-BP-Todd consortium had offered the National (Government a s4Bra tax-free ’buy-in price, a gas price of 132 c. and full escalation. None of these was acceptable to the National Government and none was acceptable to the present Govern;ment with the exception of ’the gas price, Mr Gandar [said. “FULL COMMITTAL” The agreement reached with the consortium also precluded the Electricity Department from using a cheaper fuel supply if one was developed. No other country had committed all its gas to the generation of electricity. The field was said to have a 30-year life, at the end of which it would be empty. Unless another gas field was found there would be power stations requiring an alternative fuel supply, Mr Gandar said. Mr Freer said the Government had decided on a time limit for negotiations if there was to be a target date for gas delivery. If the Maui field were not developed New Zealand;

would need to use oil, andperhaps nuclear fuels, to gen-! erate electricity to meet the I established demand. COST OF DELAY For every' year the develop-! ment of the Maui field was! delayed after 1975, slsmi would have to be spent on ■ additional supplies of oil. . Mr Freer said the National’ ’Party had had three years in ■which to complete ‘ negotiations with the consortium and, I had thus delayed by three. ! years the use of a rich source I of material. Mr Gandar said it was only in July. 1972, that the National Government had offered to enter into a joint venture with the consortium. Some aspects were already agreed when Mr Freer became Minister. The Minister of Electricity! (Mr McGuigan) said the; “buy-in” price, the gas price, | and the escalation aspect had been the main issues which, the National Government had not negotiated. He agreed that the Labour Government had said agreement would be reached in three months, and conceded that it had taken four. I “It took us four months to, do what the National Party, couldn’t do in three years,”! the Minister said. i

The agreement meant! Kapuni gas could be used ini : the New Plymouth power! I station much earlier than expected. A local product : could be used instead of im-! : ported oil. ALTERNATIVES SOUGHT Mr McGuigan agreed that electricity generation was! perhaps not the most! advantageous use to which : the gas could be put. But the j ! Electricity Department was The only body that could posisibly use all the gas. Mr Freer and his advisers■ were working intensively on alternative, uses, he said. The Deputy Leader of the Opposition (Mr Muldoon) said it was stupid of Mr Freer to enter negotiations with a I time limit. All the other side had to do was stand firm i until the Government agreed. Last year the Inland Revenue Department had said that the “buy-in” price must be taxable. How could the Labour Government decide it was not taxable without changing the law? Mr Muldoon suggested that the Labour Government had misled the people by signing an agreement on! October 1 requiring gas to be delivered to a proposed; power station at Te Atatu when a prior decision had,

been made not to build the ! station there. Mr Freer replied saying, ! the agreement was signed on ’April 3 and additional documents were signed on' (October 1. Although the, White Paper referred to gas; being provided for Te Atatu it also talked of “other’ points of delivery that may be specified." He also said that the Leader of the Opposition (Mr Marshall) in government had said that National intended to use Maui for electricity generation. I Had the National Government not sold the country’s interest in B.P. “we would have had a foot in the consortium without having to pay for it.” ESTIMATE RAISED Mr Freer gave a revised estimate of the return to 1 New Zealand from the' : development of the field over 1 30 years. Earlier this year he said that the return would be more than S2ooom. "Officials have since informed me that the return over 30 years will be in excess of $2800m.” The return to the consortium from the contract .would be about sBoom. The bill was given a second reading. i