Friday 14th June 2019
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Contact Energy says it has bought a winter gas supply from OMV as part of a deal that will also give it access to future supplies from the Maui field.
The company, which started 2019 with only 4.9 petajoules contracted, says it will buy 40 terajoules a day from OMV this winter. Pricing is consistent with the firm’s expectations at the first-half result and at its investor day in November, it said.
Contact paid $6.10 per gigajoule for the 17PJ of gas it used at its power stations in the June 2018 financial year.
“The agreement, which is subject to customary approvals, also provides for the supply of Maui gas at the same price for 2020 to 2024, with volumes subject to field deliverability,” the company said today.
Contact shares rose 0.3 percent to $7.57, taking their gain this year to about 28 percent.
The country’s second-largest power and gas retailer has spent several years expanding its geothermal options and winding back its reliance on natural gas as part of a strategy to reduce its emissions.
It is planning a series of appraisal wells at its Tauhara geothermal field in August ahead of a final investment decision it expects to make on a new power station there in 2020. The company has also signalled it may not extend the life of its 377 MW Taranaki Combined Cycle plant beyond 2022.
Contact had been buying gas on relatively short terms to supplement supplies it had at the Ahuroa storage facility. But that proved problematic last year when production issues at the OMV-operated Maui and Pohokura fields cut supplies. Gas prices surged late last year when shutdowns coincided with rapidly declining hydro storage and a planned maintenance shut at the Kupe field.
In March, Contact arranged a short-term scheme to divert gas supplies from smaller, less efficient generators to help run TCC through until the end of June.
Today, chief generation and development officer James Kilty said the company was pleased to have secured sufficient gas for the winter. It is also looking forward to OMV’s progress extending the life of the 40-year-old Maui field.
“This transaction will support the ongoing transition of fossil-fuelled transport and industry to one of the lowest-carbon electricity systems in the world,” Kilty said.
“Our gas plant will play a key role in providing affordable and reliable electricity when weather dependent wind, solar, or hydro generation is not available. This agreement is a key enabler of that.”
OMV is New Zealand’s biggest gas producer since acquiring Shell’s stakes in Maui and Pohokura late last year.
In February, the firm announced a $500 million upgrade programme to extend production from the two fields. A five well side-track programme from the Maui-A platform could deliver additional gas by 2020, Gabriel Selischi, OMV’s senior vice president for Asia-Pacific, said at the time.
Contact had 18.4 PJ of contracted gas during 2018 – 6.5 PJ of which came from Maui.
It started 2019 with only 4.9 PJ contracted – virtually all of it from Kupe partner Genesis Energy. At that stage its only booked gas for 2020 – 4.5 PJ – was also from Genesis.
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