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$80m Fund To Accelerate Gas Exploration Proposed

Contact And Mighty River Power Propose $80m Fund To Accelerate Gas Exploration

Contact Energy and Mighty River Power are promoting the establishment of a fund designed to accelerate gas exploration activity in New Zealand. Once established, the fund will invest in selected exploration opportunities that have the potential to produce significant quantities of gas in the near term.

The objectives of the fund are to broaden the range of gas supply options for New Zealand, and ensure that attractive opportunities that might not otherwise be exploited can be developed in a timely manner.

Establishment of the fund is dependent on sufficient parties stepping forward to ensure that it reaches critical mass. A fund of $80 million or more is targeted in order to create an effective fund. Contact and Mighty River Power have both pledged $20 million to the fund as anchor participants.

Several other major gas users have indicated their likely support for the initiative, but have yet to commit funding. Contact and Mighty River Power remain hopeful that other gas users will see the benefits accruing from collective investment, and will signal their commitment at an early stage.

Once sufficient commitment is gained, arrangements for the establishment of the fund will be formalised. The goal is to conclude these discussions by mid-2004, and commence consideration of prospective drilling opportunities as soon as possible. This should result in the first drilling activity supported by the fund being underway by the coming summer.

In return for providing capital to underpin drilling activity, the fund will seek a return in the form of farm-in rights, royalties or other similar mechanisms. Discussions with licence holders who are interested in partnering with the fund will be initiated once the funding parties have formalised their terms of engagement.

A major benefit of the fund is that it will facilitate a co-ordinated drilling programme across a range of prospects. This reduces mobilisation and demobilisation costs, and allows a larger programme to be undertaken for the same expenditure. It also helps to ensure that world class expertise can be employed to increase the probability of success.

With the rundown of the Maui gas field, New Zealand faces pressing energy challenges over the balance of this decade. Contact Energy and Mighty River Power believe that bold initiatives such as the drilling fund are required to address New Zealand’s energy requirements.

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