Shell bid for FCL Energy 'masks hidden agenda'

By Michele Simpson

Friday 1st September 2000

GAS: Subject of long-term strategy

There are fears Shell's bid to take over Fletcher Energy hides a secret agenda by the Dutch-owned oil company to manoeuvre its competitor, Methanex, offshore, as Shell grabs control of the country's gas supply.

In its application this month to the Commerce Commission to obtain clearance to buy the listed energy company, Shell said Maui Gas, in which it would have an 87.5% stake, was expected to meet gas demands until 2009.

Shell said it would not be worth developing the Pohokura field, of which it would have a 51.6% stake or Kupe (36.75%) before 2009, owing to an oversupply of Maui gas.

It argued a proposed acquisition would have little, if any, effect on gas production or on wholesale gas unless wholesale buyer Methanex operated its plant beyond 2005, when its gas supply contracts run out.

But Shell is also attempting to woo Vancouver-based Methanex to establish a Darwin-based plant supplied with Shell/Woodside gas.

Shell Development Australia chief executive Alan Parsley said this month Shell and Woodside had "together taken a leading role in persuading foreign industries, such as Methanex, to choose Australia as a location for new gas-based investments."

Shell has said the future of Methanex post-2005 is uncertain.

"If the Methanex plant remains in operation after its current entitlements expire in 2005, Methanex will need to seek significant quantities of uncommitted gas from that date," Shell said in its submission to the commission.

Methanex has said it wants to try to stay on in New Zealand provided it can get gas at the right price but expects it will have to negotiate hard to get the gas supply.

Top executives in companies linked to New Zealand gas-supply companies say if Shell tied up a deal with Methanex in Australia it could have implications for the future of Methanex here. Methanex accounts for 40-45% of New Zealand gas demand.

They say Shell is following its global scheme in the proposed Fletcher Energy purchase by trying to "strategically control reserves."

One source said: "There will no new competitive gas supply source to Maui. This increases the exposure of the country to Maui gas supply." He said there was only a 50% chance that reserves at Maui would go the distance until 2009 - putting pressure on developing Pohokura early as without it there would be price hikes.

Shell's application to the commission on the proposed purchase has centred on it divesting some Fletcher Energy assets including the stake in Kupe, which also has part-ownership by the Ministry of Energy, New Zealand Oil & Gas and Genesis.

Other divestments by Shell include Fletcher Energy's interest in Kapuni, Fletcher Gas Investments, the retail business Challenge! and Fletcher Energy's stake in the New Zealand Refining Company. A decision by the Commerce Commission was originally set down this week but has been delayed until September 18.

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