John Kidd: Enerlytica Director on OMV staying in the country, the need for reinvestment in the gas industry

There’s uncertainty around whether a large gas supplier staying in New Zealand will benefit the sector in the long run. 

One of New Zealand's largest gas suppliers, OMV, will stay in the country. 

Its executive board's decided not to sell 100% of its shares. 

Enerlytica Director John Kidd told Heather du Plessis-Allan the sector needs continual re-investment. 

He says the real question is if they keep investing, given they tried not to be the owner of the assets. 

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Episode Transcript

Speaker 1 (00:00):
So we may have a little bit of good news
out of our beliegue at oil and Gas sector. Resources
Minister Shane Jones yesterday claimed in Parliament that OMV, one
of the country's largest gas suppliers, has announced it's not
going to leave New Zealand after all. Director and head
of research it in an analysticate, John Kidd is with
us Now morning.

Speaker 2 (00:16):
John, Good morning Heather.

Speaker 1 (00:19):
Now are you seeing some potential here like is this
them saying we want to stay in New Zealand or
is it more of a case that they're trying to
sell their stuff. They can't sell this stuff so they
have to stay put.

Speaker 2 (00:30):
I think it's more the latter of the two, owing
the has been known for the last couple of years
as having signaled to the market, it's been keen to
just to look at options to so New Zealand assets.
They tried just almost two years ago as part of
the bundled assets for the Asia pac business and they
weren't able to include New Zealand in that SSL, but
it didn't include everything else. And about a year ago

(00:52):
they announced that they were still keen to look at
options to sell their New Zealand business and of course,
the announcement last day or two is that that hasn't happened.
So I think it's more a case of having tried
to sell the business and having been able to in.

Speaker 1 (01:05):
Which case it's not actually a good news story at
all because it means they don't wanted nobody else wants
to know either.

Speaker 2 (01:11):
I think there's something to that. Yeah, yeah, it's you know,
it is what it is. They tried the market and
they settled on an outcome that is really just a
status quo. So it's in many respects it's just a
continuation of where we were and that will continue into
the future. The real question for the sector is, you know,
what does that mean? Because the sector is for each
fourth gas and it needs continual reinvestment into the sector

(01:34):
to be able to bring new guests to market. And
the question now for OMV and the rest of the
sector as well, is I only be able to do
that given that they had signal previously that they were
more keen to sell the business.

Speaker 1 (01:45):
Well, I would say then, based on this that Shane
Jones is probably getting nowhere is he convincing investors to
come back.

Speaker 2 (01:53):
Yeah, it's a really tough sell new Zealand, you know
the last five or six years. I mean, you've got
to think about OEMV and where they came in. They
actually the business from Shell in twenty and eighteen, literally
very very close to when the offshore oil and Gas
band was announced, and it hasn't many good news stories
since then. They have They have been a major investor
into the sector in the last four or five years
after having bought business that hasn't gone well. Gas is

(02:16):
where it is, and you know, the next chapter is
now upon us as to what happens. And as you say,
i ownv's now signal that they're going to be part
of a chapter going forward. The real question is are
they able to keep on reinvesting given the wouldn't say
they're a reluctant owner of the assets, but they tried
not to be the owner of those assets. So what
does that mean? Now?

Speaker 1 (02:33):
Hey, I see Graymouth Petroleum announced last week it's getting
pretty good gas flows out of that. Well, they just
sputtered near Stratford. Do you think that this is material?

Speaker 2 (02:43):
Well, any new gas is material. We've actually had a
reasonable flurry of half decent news out of the sector
in the last month or two OMV is actually drilling
a new well now, which is a bit of a
long burn. It'll come to mak probably in March next year,
which is going to bring this is the new part well,
very long well and will take quite some time to

(03:04):
make happen, and we've been waiting, frankly for years for it.
But that is now drilling. That should increase production by
maybe as much as ten percent just on that single
well across the entire sequel. So graham Mouth has had
some good news the scenes as well. There is now
some memourings out of the rest of the sector. If
there's another playings NJR Corporation a smaller player that had
some good news out of a well called Tariki about
two or three weeks ago. So you know, we're really

(03:26):
hoping that we're turning a corner really with Gaess Supply
we didn't into twenty five a bit of place what
we were.

Speaker 1 (03:31):
Yeah, John, can we say then, based on this that
all of those predictions that we have normal gas left
is actually not true?

Speaker 2 (03:38):
Well, it's never the case there's normal gas left. There
is always plenty of guests around. It's a matter of
being able to bring it to market. So what is
true is that you know, four or five years ago,
we had a market there was literally five hundred chero
drills a day. Today it's more like three hundred tera
duels a day. And when crunch time comes and low
hydro comes into the system, you need to fill it
with something else for that that gas just isn't there

(03:58):
anymore where in the guess, missiness, you're a constant in
the depletion business. You're winding down and you need to
keep you reinvesting to stand still. And we know that's
I guess the question out of the back of the
O m B. And now it is that investment that's required,
which is literally one hundreds of millions, probably into the
billions of dollars. Will that come now that the status
quo prevails and I m V is still in the sector.

Speaker 1 (04:20):
Brilliant John, Thanks for talking us through it. I'm very
hopeful with that good news. That's John kid, the director
in the head of research at Analystic.

Speaker 2 (04:26):
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