Ian Wilson, Gas Transport Manager 2004 NZ Petroleum Conference

1. Transportation Issues Ian Wilson, Gas Transport Manager 2004 NZ Petroleum Conference

2. March 04 Issues Paper Reduced Maui Flexibility + Maui Pipeline Open Access = Need to evolve NGC’s Transmission Access Regime • The theme is:

3. NGC’s “pipes” business NGC Transmission Pipelines Maui Pipeline (operated by NGC) NGC Distribution Networks

4. Maui Pipeline NGC Pipelines Distribution Networks Existing Balancing Very Flexible Supply adjusts to meet Demand Little Control over Demand • Pipelines operated synchronously • Shippers have little influence on balance • Parties co-operate to meet demand Future Balancing More Control over Demand Less Flexible Supply • Pipelines operated more independently • Shippers expected to actively balance • Parties operate to match supply and demand

5. How does a pipeline balance • Shippers can individually adjust their supply or demand • A “balancing (swing) gas supplier” can adjust its supply or demand • System Operator can adjust linepack (the inventory of gas in the pipeline) • System Operator can request curtailment of supply or demand

6. Maui RP (Oaonui) Maui DPs (Rotowaro, Pokaru etc) NPPS Methanex HPS NGC Contact Master Meter Reconciliation NGC Contact Retail Contact HPS Methanex Contact NPPS - Oaonui (Master meter) = Non–NGC purchases NGC purchases Monthly Maui Gas Balance NGC Wholesale purchases are calculated last since they balances the system. * For simplicity, linepack adjustments and compressor fuel are ignored.

7. System Balancing Proposal • Introduce adaily mismatch regime • NGCT to post daily mismatch buy and sell prices reflecting the cost of balancing gas on the day • Shippers can trade their mismatch positions • Information systems must be able to establish each shipper’s estimated mismatch on a daily basis • Introduce a daily nominations regime

8. Maui Open Access • Transport and reconciliation arrangements for non-Maui gas in the Maui pipeline will look quite different • Operational Balancing Agreements (OBA’s) will likely govern arrangements at interconnection points between the Maui pipeline and NGC pipelines • NGCT will pursue compatibility between Maui and NGC balancing arrangements

9. Services • Possible unbundling of: • Balancing service • providing swing gas and linepack to ensure that the system is in balance • System operation • Managing nominations, forecasts,swing gas supplies, linepack and compressors • Information and systems • collecting and publishing information required by shippers for injection/offtake decisions and gas trades • Allocation • undertaking downstream and upstream allocations • Settlement • ensuring the financial flows reflect the physical flows

10. Pricing Methodology • cost reflective and equitable • large fluctuations in charges from year-to-year are not consistent with equitable outcomes • delivery points that are geographically proximate should face similar charges • entry-exit model and $/GJ.km being considered • At this stage, NGCT is inclined to revisit the existing pricing methodology to determine how the issue of price volatility can be best addressed eg create pricing zones

11. Process • Responses - 2 April • Consultation - April – May • Position Paper – June • New contracts / prices etc – August • Changes effective – 1 October

12. Himatangi - February 2002

13. Pohangina River - February 2004