By Gavin Evans
Oct. 19 (BusinessDesk) - New Zealand First needs to halt the government’s planned ban on new offshore exploration before it can harm the country’s energy security and manufacturing sector, Greymouth Gas says.
Chairman Mark Dunphy said it was time for the party – Labour’s coalition partner – to “nail its colours to the mast” and halt legislation which he says will do nothing to reduce emissions and is more likely to raise energy costs for households and businesses.
“Ending oil and gas exploration doesn’t bring renewables any closer. Cutting off a strong revenue source only reduces New Zealand’s future options,” he told Parliament’s environment select committee yesterday.
“If New Zealand First really is for the businesses and households of New Zealand, its caucus is asked to demonstrate this by joining the call to send this bill to the bin.”
The committee has spent the past three days hearing submissions on legislation the government is rushing through Parliament to effect the ban it announced in April. It has heard dozens of submitters challenging the government’s belief that existing exploration acreage is sufficient to ensure long-term gas supplies as the country transitions to a net-zero economy by 2050.
Powerco, which distributes both electricity and gas, said the proposed ban posed an “unreasonable and unnecessary risk” given the Productivity Commission believes New Zealand needs about 3,000 PJ more gas out to 2050 – even allowing for the take-up of new lower-emitting technologies for transport and agriculture the commission modelled in its study on creating a low-carbon economy.
Current gas reserves are about 2000 PJ.
Greymouth produces about 10 percent of the country’s gas and is challenging the proposed ban in the High Court.
Dunphy noted that no new fields have been discovered since 2013, and he cited the current gas shortage in the North Island as an example of the stress on manufacturers and generators that could result without on-going exploration.
Renewable generation has fallen below 80 percent this week as Genesis Energy switched to full coal burning at its Huntly Rankine units to make up for the gas shortfall and dwindling South Island hydro storage. It has also ordered more coal from Indonesia.
The Houston-based International Association of Geophysical Contractors may also sue the government if the ban proceeds. It says it will seek to recover the $104 million its member seismic companies have invested gathering more than 75,000 square-kilometres of data for exploration since 2013.
Under the current regime those firms were granted a 15-year licence by the Crown to sell that data to potential explorers.
Minter Ellison partner Rachel Devine, submitting on behalf of the association today, said the abrupt law change – without any consultation – had harmed New Zealand’s reputation among international investors across all sectors.
She said it was surprising the government had thought changing laws overnight without consultation would go “unobserved around the world.” Some of her firm’s other international clients, such as IT companies, had noted the greater sovereign risk they perceived for investment in New Zealand.
The committee received more than 2,200 written submissions and scheduled about 100 oral submissions. Virtually all support the intent of the bill.
But critics say the ban ignores the role of gas as a lower-emission fuel for industry and an essential dry-year operation for the country’s electricity generators. It will increase electricity costs and may also increase emissions, they say.
Supporters cite the urgent need to reduce global emissions, and the lack of action by governments and industry to take effective action. But many also mistakenly connect the ban with a move away from local use of petrol vehicles, or believe that activities powered by gas at the moment can easily be switched to using wind and solar.
Genesis Energy chief executive Marc England told the committee yesterday his company believes the generation sector can get to about 90 percent renewable generation – from about 85 percent now – with existing technology.
But even getting to 95 percent becomes a stretch because of the weather risks posed by hydro and wind. Having access to gas is key during sustained dry periods and a core part of the company’s own strategy to end its coal use by 2030, he said.
Methanex New Zealand general manager Dean Richardson told the committee there seemed to be a mistaken belief that if the firm reduced its operations there would be more gas available for other users.
As the country’s biggest gas user, it has been able to under-write exploration by effectively agreeing to buy any gas that an explorer can deliver to market. Were it not doing that the gas would most likely “stay in the ground”, he said.
Stuart Dixon, general manager of Powerco’s gas business, said the country needed to be reducing emissions irrespective of their source. This bill would reduce those options and might limit the country’s ability to take advantage of rapidly changing technology, he said.
Green MP Gareth Hughes challenged that assertion. Powerco’s product was “cooking the planet” and the market should be able to deliver the next best and cheapest alternative, such as hydro, batteries or greater use of demand-response, he said.
Dixon said burning natural gas does release CO2, but that may not always be the case. And he said gas is one of the lowest-cost options for ensuring the reliable power supplies the country will need if it is to use electrification to reduce fossil fuel use in transport and industry.
“It’s all about maintaining as many options as you can,’ Dixon said. “This bill removes one of the least-cost options.”
He cited two large-scale projects underway in the UK where natural gas is converted to hydrogen and the residual CO2 doesn’t go into the atmosphere.
“So it’s not necessarily the case in the future that gas will cook the climate.”