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Todd talks with Maui pipeline partners heat up

By Michele Simpson

Friday 24th March 2000

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OIL STRIKE OIL STRIKE: But partners can't work together
Todd Energy is blocking the way for its joint partners Shell and Fletcher Challenge Energy to sell off the $300 million Maui pipeline.

The pipeline is owned by the three parties. Fletcher Energy holds the largest stake in the pipeline of 68.75%, Shell Petroleum Mining has 18.75% and Todd Petroleum Mining the remaining 12.5%. The joint venture has a contract with the Crown.

But the relationship has soured since Shell and Fletcher Energy made it clear they wanted to sell the pipeline.

Shell Petroleum managing director Thiys Koeling, who attended the New Zealand Petroleum Conference in Christchurch this week, said the matter was in the hands of legal advisers and was likely to go to arbitration next month.

Fletcher wants to concentrate on its core business of exploring for oil and gas reserves. It wants to divest its stake in the pipeline as well as its 14.2% share in New Zealand Refining Company to further invest in its resource exploration.

"We are keen to sell the pipeline because it doesn't fit with our core business of upstream exploration and production," Fletcher Challenge Energy general manager, commercial, Nicholas Hill, said.

Todd is contending the two controlling parties have to obtain its approval before selling the pipeline.

Fletcher bought the Maui pipeline through its buyout of Petrocorp, the then government-owned national petroleum company, in 1988.

A number of offshore investors have shown interest in buying the pipeline. Possible buyers include Australian Gas Light Company (AGL), which bought a 76% share of TransAlta from TransAlta Canada through its New Zealand company, Natural Gas Corporation (NGC).

AGL bought a third of Natural Gas Corporation from Fletcher Challenge Energy in 1999 for $113 million.

Todd is trying to hold on to its minority stake, which would effectively block the other parties selling out. One industry analyst said: "It would affect the sale price of the pipeline if Todd remained [a shareholder]."

While Fletcher and Shell are shedding non-core assets to concentrate on drilling or upstream activities, Todd has a more integrated approach.

It has interests in energy retailing, drilling and LPG and is a shareholder in the Maui Gas Contract with Shell and Fletcher. Todd managing director Richard Tweedie was adamant he did not want to sell Todd's share of the Maui pipeline. He said if it was sold to NGC there would be competition issues the Commerce Commission would have to investigate because NGC owns the Kapuni pipeline.

"I don't there will be any real value added [by selling the pipeline]," he said.

Fletcher commercial strategy manager David Salisbury warned the New Zealand Petroleum Conference in Christchurch on Monday the Crown's "unreal" prices from the Maui gas contract were deterring exploration companies from looking for alternative gas reserves here.

Maui supplies more than 70% of the country's gas and is in the last 10 years of its life. The "take or pay" provision by the Crown in the contract has meant the Crown, Contact and NGC hold large entitlements to pre-paid gas.

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