Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Upstream gas investment needed for renewables back-up

Upstream gas investment needed for renewables back-up

New gas-based businesses may need to be developed to ensure the country has sufficient flexible fuel resources to back up its growing fleet of renewable generation, the Gas Industry Company says.

Use of gas in power generation and for petrochemical production is expected to fall during the next 30 years, and by 2050 the country’s electricity supply could be 98 percent renewable, GIC chief executive Andrew Knight says.

However, long-term scenarios developed for the gas regulator by Concept Consulting show that gas-fired generation will still play a critical seasonal and dry-year back-up role, he noted.

But filling that role will only be possible if there is sufficient investment by the upstream sector to keep bringing that gas to market, Knight told delegates at the New Zealand Petroleum Conference in Queenstown yesterday.

Gas can provide that generation support “when the wind does not blow, the sun does not shine and the rain does not fall,” he said. There are gas resources to do that, but investment by producers will be required to develop them and then to supply the infrastructure to ensure they can be delivered in the volumes required when they are needed.

Knight said there needs to be a much deeper discussion between generators and the gas sector to establish commercial frameworks to ensure that investment can occur. Even then, development of new gas-based projects, such as 8 Rivers’ proposed Pouakai project – a combined generation, urea-and carbon capture development - may be required to ensure there is sufficient load to maintain a viable and efficient gas industry.

“Without additional load in the market, you don’t have sufficient incentives for gas to continue to be developed,” Knight said.

“The renewable electricity market will need to have that gas available for peaking.

“If we have a market where the only use for gas is a bit of residential and peaking electricity, there is no incentive for the upstream to invest.”

The government last year banned new offshore exploration, which historically has produced the large, long-lived fields that have underpinned long-term industrial or generation developments. It has so far also refused to confirm that new onshore exploration permits will be available beyond 2020.

To date it has also resisted funding research into carbon capture and storage, which would reduce emissions from many gas-based activities and keep them in the market pending development of new emission-free technologies.

Gas currently meets about a fifth of the country’s primary energy needs, but that is expected to decline over time as heavy industry starts replacing coal and gas with biomass and electricity.

But gas supplies were already tightening before the ban, which has spooked investors and risks curtailing supplies earlier than alternative technologies are affordable.

OMV, the country’s biggest gas producer, is investing more than $500 million to eke more fuel from the offshore Maui and Pohokura fields it operates. Todd Energy plans a round of drilling at its onshore Kapuni field in early 2021 and First Gas is expanding the daily injection and extraction capacity of the Ahuroa gas storage facility following long-term commitments from Nova Energy and Contact Energy.

Knight said the redevelopment at Ahuroa will help, but “much more” upstream investment will still be required.

The industry’s capacity buffer – the margin of daily maximum supply over daily peak gas demand – has fallen from 35 percent to 25 percent in just three years, he said.

“The trend for price volatility and future security of supply is very concerning.”

Knight said that upstream investment will ultimately have to be recovered from investors in renewable generation or their consumers, but neither generators nor producers are ready to commit.

If generators and gas producers don’t start engaging “in a constructive way” to develop mutually beneficial commercial arrangements for the future, they risk the sort of government intervention seen in Australia.

“If the gas industry doesn’t sort itself out in building its relationships with the generation sector and developing a commercial framework which allows the two to co-exist and allows gas to support renewables, you will see a regulatory response,” he said.


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

$7.5 Billion Surplus: Government Accounts "Show Strong Economy"

“The surplus and low levels of debt show the economy is in good shape. This allows the Government to spend more on infrastructure and make record investments in health and education,” Grant Robertson says. More>>

ALSO:

New OIO Application Trumps Judicial Review: OceanaGold Cleared To Buy Land For Waihi Tailings Expansion

In a surprise turnaround, the government has given OceanaGold a greenlight to buy land to expand its Waihi mine after the application was previously turned down by Land Information Minister Eugenie Sage. More>>

ALSO:

Christchurch Rebuild: Fletcher Sued For $7.5m Over Justice Precinct

Fletcher Building is being sued for $7.5 million by utilities contractor Electrix, one of the subcontractors on the Christchurch Justice and Emergency Services Precinct. More>>

Three New Drugs: PHARMAC Signs Bundle Deal For More Cancer Medicines

420 New Zealanders with lung cancer, breast cancer, multiple sclerosis and respiratory disease will benefit each year from a bundle deal PHARMAC has finalised with a medicine supplier. More>>

ALSO:

"Levels Playing Field": Government Responds To Electricity Price Review

The changes announced today include: • Supporting new and independent retailers by requiring the big power companies to sell into the wholesale market at affordable rates. • Extending discount rates to all customers • A pilot scheme to help customers who have not switched power providers before to shop around for better deals... More>>

ALSO: