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Origin Energy is well on its way to becoming a major integrated player in the New Zealand energy sector, says its new Kiwi country manager Chris Bush. By NEIL RITCHIE.
“As an integrated energy company in Australia, we take a discovery, develop it and produce it, and supply electricity, gas and LPG to our customers. We find opportunities across the energy supply chain and we create more value through realising the benefits of integration,” says the man previously responsible for Swift Energy’s Taranaki operations. “We plan to do the same in New Zealand – using the same business model, but adapting it to local business conditions.” Origin is one of the biggest integrated energy companies in Australia, focused on oil and gas exploration and production, power generation and energy retailing to industrial and domestic customers. It is involved in everything from wind power to hot rocks, the Aussie equivalent of our geothermal industry, and supplies electricity and gas to over three million people across Australia. Origin has built itself a formidable position in New Zealand since only entering this market early this decade. What started as a few petroleum exploration permits scattered around the country has now become a diversified range of integrated interests. More than four years ago, Origin took over from Genesis Energy as operator of the now $1.1 billion Kupe gas field development off south Taranaki. Later that same year, 2004, Origin also acquired a controlling (51.4 percent) stake in integrated energy firm Contact Energy, the country’s second largest listed company. Its oil and gas exploration licences now stretch from Northland to Taranaki and down to Canterbury, and it has built that exploration portfolio to become one of New Zealand’s largest explorers by acreage. Swift in its sightsOrigin’s latest acquisition, announced last December, sees it and Contact paying about US$87.8 million (about $112 million) for the New Zealand assets of United States independent Houston-headquartered Swift Energy. Those assets are: the onshore Taranaki Tariki, Ahuroa, Waihapa and Ngaere (Tawn) fields; the Waihapa production station; the more southern Rimu, Kauri and Manutahi fields; the Rimu production station; separate oil and gas pipelines from Waihapa to New Plymouth; and an inventory of equipment and supplies. Origin is also acquiring Swift’s 50 percent interests in the offshore licence PEP 38495, which contains the promising Kaheru prospect, and the southward extension PEP 381201 immediately offshore from the Rimu production facility and adjacent to the Kupe development. Government-owned Mighty River Power holds the other 50 percent in these licences and both areas offer considerable upside potential for the discovery of more oil and gas. Associate Energy Minister Harry Duynhoven says the Swift Energy buyout, which Origin expected to conclude in late May, will see Origin take a “much stronger position in the upstream sector in New Zealand”. Origin presently has about 14 permanent staff in New Zealand – excluding the 25 or so seconded to the Kupe project – but that number is likely to leap to about 80 once Origin’s acquisition of Swift Energy’s New Zealand assets is completed. “The Swift Energy signs are coming down and the Origin Energy signs and branding are replacing them”, says Bush, who was previously with Swift Energy in New Zealand and later Texas. Bush returned to Taranaki last September to head Origin while Swift was still mulling what to do with its New Zealand operations after several years of disappointing exploration, and frustration with our relatively low gas prices and complex geology. Investment climateBush says that the Kupe project, Origin’s biggest undertaking yet in New Zealand, will provide about 20 Petajoules of sales gas (about 11 percent of New Zealand’s needs), about 1.7 million barrels on condensate (light oil) and up to 90,000 tonnes per annum of liquefied petroleum gas (about half the country’s LPG needs). “And we need to keep this momentum going because it takes years, maybe even decades, from finding fields to bringing them onstream. There also needs to be the right investment climate,” he says. “At present there are some very mixed messages, with the Government saying it supports the oil and gas industry, and recognises its strategic importance to the country’s economy, but then bans new baseload gas fired power stations.” Bush says we have to get the right signals out to the international exploration and production community, encouraging and guiding investment. Only then can we ensure the country remains on international exploration radar screens, and can overcome the tyranny of distance New Zealand faces being so far from major exploration centres. “This in turn will ensure that more wells are drilled, which is the only way to increase our chances of more fields being discovered to sustain our domestic oil and gas industry. “Otherwise we will have to import a greater proportion of our oil, and perhaps even gas, in the form of liquefied natural gas, LNG, to the detriment of our current account, or balance of payments situation.” He cites the positive influences the offshore Taranaki Tui oil field is having on the economy, where the 2007 trade deficit was down from about $6 billion to about $4.8 billion, largely because of Tui boosting oil exports by almost 400 percent. Net cash flows from the first full year of production from the Tui and more southern Maari oil fields will each exceed $1.25 billion if world oil prices stay at or above the $US100 per barrel level. Bush adds that how New Zealand manages the transition to a new renewable energy economy, one less reliant on fossil fuels, will be critical. “Origin supports the Government and its Emissions Trading Scheme but there are other things that are also very important,” he warns. “We have some concerns about its implementation and whether that will send the right signals to consumers about how to use energy efficiently and wisely.” In particular, the ten year moratorium on gas power stations will not send a correct signal to the market about gas as the cleanest fossil fuel while New Zealand continues to burn coal at Huntly. “We also have some practical matters to iron out about things like where the ETS is actually applied in the gas supply chain,” he says. “There still needs to be a lot of debate between the Government and the energy industry about finding that right balance between lowering our carbon footprint and increasing our security of supply for both oil and gas.”
Energy NZ No.5 Winter 2008 |
Chris Bush took over the new role of general manager, Origin Energy NZ, towards the end of last year. Previously based in Houston with Swift Energy, the Wellington-born Bush is now back home and based in New Plymouth, responsible for managing Origin Energy’s upstream interests