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Gas Shortage Charades need to come into the open

Gas Shortage Charades need to come into the open

"Gas availability data has become a farce of mismanagement, and by failing in it's duty of care for the public's interest in this national resource, the Government has led New Zealand into a crisis of confidence in the energy industry. This incompetence has been evident since Government officials suppressed DSIR advice on the gas reserves back in the mid 1980's." said John Blakeley, Convenor of the Sustainable Energy Forum.

"It is time for open debate on the energy options available for New Zealand.

"The Sustainable Energy Forum believes that there may be much more gas available from the Maui field but not at the present contract price. The real issue now is what decisions need to be taken now to stop further wastage of this valuable resource. If the rate of usage over the last two years is continued then we will further deplete the life time of the gas field. In the press release from the Minister of Energy on Friday 7 February, it was stated that, from 1 January 2003, approximately 370 petajoules(PJ) will be economically recoverable at the present Maui contract price. Earlier reporting of the release on Friday of the findings of a report by an independent expert suggested that the Maui field will run out in 2007 rather than in 2009 when the contract expires. But Shell had warned the government about 15 months ago that this was likely to be the case and the independent report was confirming that view. Later reporting on Friday included the Minister's statement that "The parties to the Maui contract will now settle on a lower rate of off-take for the field to make the best use of the remaining reserves. The reserves will be allocated across the remaining time until the Maui contract expires in 2009." Mr Blakeley said "What the government appears to want to do is to ensure that it gets the maximum amount of gas out of the field, by taking it out more slowly, until the cotract expires, that is to get as much access as possible to pre-paid gas". In the original Maui contract, there was provision for a redetermination of the reserves every two years. Instead there was no redetermination for 25 years (at least publically) until very recently. As the reserves diminish, the contract requires that the off-take quantities be reduced to a level that will deplete the reserves over the remaining term of the contract (i.e. spread out over the remaining years till 2009), but the contract also states ".....or at such higher level as may be agreed for a correspondingly shorter period. Mr Blakeley said "This appears to indicate that the remaining life of the Maui field is open to renegotiation between the parties, depending on the agreed rate of off-take over the next few years." Available figures indicate that the rate of off-take of Maui gas during 2001 and 2002 combined was nearly 400 PJ. With the "economically recoverable" reserves now stated by the Minister to be approximately 370 PJ, Mr Blakeley said that "If the off-take rate is similar in 2003 and 2004 combined, then all economically recoverable gas at the present contract price would be exhausted by the end of 2004. Admittedly the year 2001 included a dry winter electricity shortage when additional quantities of gas were taken for electricity generation to compensate for low hydro lake levels, but even so, at present off-take rates, it is possible that the Maui field might be exhausted of gas which is "economically recoverable at the Maui contract price" by the end of 2005, and not 2007 as stated recently. Mr Blakeley said "The key phrase here is 'economically recoverable' resources.The Forum believes that it is common knowledge both within the government and the oil industry that once these resources are exhausted, there will be a lot more gas available from Maui (and possibly as much as several hundred PJ) but at a considerably higher price to recover it." "The Forum believes that it is time for both the government and the oil industry to be more frank about this and for a reasoned public debate to take place about the best way to use the remaining Maui gas, both that which is economically recoverable and not economically recoverable at the present Maui contract price" Mr Blakeley said "and especially that it be used in the most sustainable possible way." A full debate needs to be had as to what is the most sustainable possible way. Mr Blakeley said "My own personal view is that I would like to see the gas off-take continued at approximately its present rate for the next three years or so and for most of that gas to be used to generate electricity in modern efficient combined-cycle gas turbine generating plants. The last thing I would want to see is large quantities of coal and oil being burnt between now and perhaps to 2009 in old inefficient power stations and producing over twice as much carbon dioxide per unit of electricity produced as that in modern plants, which would quite contrary to the spirit of the Kyoto Protocol, which the government is now committed to." "I would hope that a smooth transition could then be made (without a break) from the "economically recoverable gas at the present contract price" to the remaining gas in the Maui field at a higher price so that there is no discontinuity in gas supply for electricity generation before the new Pohokura gas field starts producing, probably about 2007" Mr Blakeley said. "However, this has been a timely warning that we must start URGENTLY moving away from providing for our increasing electricity demand with more thermal power stations towards building clean renewable forms of electricity generating facility, including wind, geothermal, hydro and forestry biomass. The Minister states in his press release of 7 February that these are likely to be the most cost-effective source for new electricity generation for the next two decades" Mr Blakeley said.

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