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Maui Royalties Dispute Settled

Associate Minister of Energy Paul Swain announced today that a long-standing dispute between the Maui joint venture partners and the Government over royalty payments on production from the Maui gas and condensate field has been settled.

“I am very pleased that this long-standing dispute has been settled," Paul Swain said.

"The agreed new set of rules should help prevent similar disputes arising in future in relation to the Maui field," he said.

The agreement will result in additional royalty payments by the Maui joint venturers estimated by the Government at approximately $70 million over the life of the field, depending on reservoir performance. The additional payment includes arrears of $15 million.

The dispute arose because the 1973 Maui mining licence set a royalty rate of 5 percent of the value of gas and condensate at the wellhead but did not specify how that value was to be calculated. The Government initiated legal action on the issue in 1988 but withdrew it in 1995.

The Government and Maui joint venturers have now agreed to use a set of rules for calculating wellhead value based on a UK royalty regime introduced in the early 1980s for North Sea oil and gas.

The settlement will result in total royalties from the Maui field of approximately $450 million on the basis of currently expected field performance and a conservative estimate of future oil prices.

In addition to royalties the Crown receives around $65-$90 million a year from an energy resources levy on gas and LPG produced from the Maui field.

Note: The Maui Joint Venturers are Energy Exploration NZ Limited and Fletcher Challenge Petroleum Investments Limited which are owned by Fletcher Challenge Energy (68.75%), Shell (Petroleum Mining) Company Limited (18.75%) and Todd Petroleum Mining Company Limited (12.5%). Shell is currently in the process of acquiring Fletcher Challenge Energy's holdings in the field.

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