$236M for Petrocorp in share take-over

Press, 9 December 1988, Page 3

$236M for Petrocorp in share take-over

By

BRENDON BURNS,

political reporter

The Government is paying Petrocorp $236 million to take over its 75 per cent share in the synthetic petrol plant in Taranaki.

In a complex deal announced yesterday Petrocorp will also purchase the Crown’s position as buyer and on-seller of Maui gas. The Deputy Minister of Finance, Mr Caygill, said the Government was well satisfied with the outcome of negotiations. Petrocorp, the Stateowned oil and gas company until sold in March to Fletcher Challenge, paid $585 million for the rights to sell Maui gas. But this figure is offset against what the Government negotiated as the price it would pay to quit itself of the loss-making synfuels plant. Over all, taxpayers end up receiving $349 million. Mr Caygill said this money would be used to retire overseas debt. But the deal does not include the Government’s responsibility for $1250 million in debt owned by the Synfuel plant. The taxpayer will still have to pay these loans. Some protection is provided in the event of another surge in world oil prices.

Mr Caygill said the memorandum of understanding with Petrocorp included a requirement that “windfall” profits made by Synfuel would be paid back to the Crown.

The threshold at which profits begin to return to the taxpayers is SUSIB.SO a barrel.

The Minister of Energy, Mr Butcher, noted that the original funding basis of financing the Synfuel plant was calculated on an oil price in 1980 of SUS2B.OO.

As a consequence the plant has lost money heavily since. Last year, the Government’s loss including debt servicing was $329 million.

However, Petrocorp’s managing director, Mr Bill Falconer, said his company expected to make a profit on the plant in the medium term future. “The removal of the debt by the Government makes quite a bit of difference,” he said. Petrocorp, which owns the Waitara methanol plant, intends using the Synfuel plant to further

process mathanol

Mr Falconer said he was due to begin negotiations with the plant’s 25 per cent shareholding partner, Mobil, last evening.

He was also to hold talks with the Shell-BP-Todd consortium which holds the remaining 50 per cent share in the Maui field. Petrocorp held the other half of the shares before yesterday’s annnouncement that it was buying the Government’s position as buyer and on-seller of the gas produced. A second platform to extract gas from the field has long been suggested.

A central issue in any decision has been whether the Synfuel plant continued to run. Mr Falconer said with uncertainties now removed, a decision on the Maui B platform could proceed without external influences.

There are still some issues to be resolved, however.

Mr Caygill said Commerce Commission approval was required for the Synfuel/Maui gas con-

tracts deal announced yesterday. Some consideration is likely to be given to whether a monopoly has been created. Petrocorp already owns half the Maui field’s production. The Natural Gas Corporation which reticulates gas, is a subsidiary. It also has interests in oil exploration and production. Another hurdle is whether the other Maui field parters will accept having to deal only with Petrocorp in selling bulk gas supplies. Mr Caygill has foreshadowed the possibility of forming a consortium.

He defended the lack of any tender called for.the sale of the Maui gas rights and Synfuel. Petrocorp was in the unique position, he said. It was a Maui partner with the commercial incentive to ensure the gas industry developed rationally and had knowledge of owning a plant similar to Synfuels. Mr Caygill suggested Petrocorp had paid significantly more than other possible buyers would have paid.