Drop in gas production may cost $24M

Press, 12 August 1980, Page 26

Drop in gas production may cost $24M

PA Wellington A sharp drop in the production of condensate from the Maui and Kapuni gas fields is likely to cost New Zealand more than $24 million this year because it has to buy overseas crude oil to‘ replace the amount that would normally have been met from Taranaki . condewhile the sharp drop in condensate production upsets further balance of payments, it has also upset the three oil companies, Shell, B.P. and Todd, which are partners with the Goverment in the Maui development. They are not getting the cash flow they ex-

i pected on their multi-mil-lion dollar investment. The latest issue of the London-based “Petroleum Economist” reports that production of condensate from Kapuni and Maui in the first half of 1980 totalled 175,734 ; cubic metres, a drop of 28.5 per cent on the 245,829 cubic metres produced in the same period last year. Oil-industry sources in . Wellington said yesterday ' that the drop-off had occurred because the oil companies had been prevented i from burning off natural gas to get at the condensate which thus had had to stay in the ground. The price of the condensate is pegged to the contract price for Saudi Arabian light crude, which sold last year for $lB a barrel. There were indications yesterday that the price will rise to $3O a barrel later this month. The main user of natural gas at present is the Electricity Division, which fires its New Plymouth and Stratford thermal stations with it. Although generation- at both stations is up this year they have had to use the more expensive Maui, which contains , less condensate than Kapuni gas, The division has been bound to take Maui gas because of the nature of the take-it-or-pay contract it has with the Natural Gas Corporation. When development of the Maui- field was planned in 1973, its gas was earmarked exclusively for electricity generation. More thermal gas-burning stations were planned. But since then the rules of the game have changed, With gas for electricity generation seeming less than attractive. Instead, the Government has decided that natural gas must be available for methanol, synthetic fuel, and compressed natural gas use, all of which make more efficient use of the energy content of the gas. However, none of these is expected to come on stream until the mid-1980s, leaving the’ expensive Maui rig working at less than capacity and earning less money than expected. Some hope for the oil companies is however on the horizon: a cycling plant at Kapuni is working again after a breakdown of several months which will allow the companies to bring up Kapuni gas, strip out the propanes, butanes, and condensate, and return the gas under the ground for later use.

Although this will still not mean a full return on their investment, the oil companies can claim only a short-term loss on the deal. In the long term they will profit: as long as the condensate remains in the ground it will gain in value, ultimately . meaning a substantial return for the companies and New Zealand.