Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Gas sector predicted to remain stable until 2025

Gas sector predicted to remain stable until 2025

First published in Energy and Environment on August 15 2019.

A gas supply and demand study forecasts gas supply, demand and price are likely to stay at similar levels until the middle of the next decade, but the future of Methanex and policy variables will have a major impact on this.

Commissioned by the Gas Industry Company from Concept Consulting the 2019 Gas Supply and Demand study outlines a number of scenarios. These are driven by some of the largest gas fields coming to end of life in the next 10 to 15 years, and the economic factors and policy settings driving possible development of new fields.

These in turn will be driven by climate change policies including; altered oil & gas exploration policy settings, carbon pricing, emissions reductions and renewable electricity generations goals.

Working around these variables the study looks at the cost of gas supply, changes in demand and the impact of alternative fuels including at what point the importing of LNG becomes cost effective.

Across most scenarios the major driver of the cost and availability of gas are the decisions of the petrochemical sector (mainly Methanex) and the price it is willing to pay. These issues and the future of Methanex are looked at in another article in E and E this week.

In the mid-range scenario petrochemical production continues at current levels until the middle of the next decade, at which point the sector progressively exits NZ over the course of the following fifteen years due to the remaining offshore gas fields reaching the end of their life (Pohokura, Maui and Kupe) and price rationing to postpone the time when higher-cost LNG imports would be required.

Baseload gas-fired power generation exits within the next five years due to displacement by new, cheaper renewable power generation. Some peaking generation which performs seasonal/dry-year balancing is also progressively displaced over the subsequent 15 years. However, “Peaking generation is much less sensitive to carbon price, with a rump of gas-fired peaking generation that is used infrequently during dry winters being the highest value use of gas in NZ. Even in the high carbon price scenario, our modelling indicates it would not be economic to go above 98% renewable generation by 2050,” says Concept.

Industrial process heat and residential & commercial heating demand exhibits some slight decline due to some carbon-price-driven fuel-switching.

Demand for Industrial process heat and space & water heating for residential & commercial consumers is sensitive to carbon prices above $80-$100/tCO2. If carbon prices are below these levels, industrial process heat gas demand is likely to remain flat, while residential & commercial demand is likely to grow. In the high carbon price scenario, gas demand for these segments drops to less than 10% of current levels by 2050.

In terms of wholesale gas pricing, as long as petrochemical production continues to operate, medium to long-term wholesale gas prices are likely to be similar to those experienced up until early 2018 – i.e. driven by Methanex’s willingness-to-pay.

Concept considers recent high gas prices are strongly driven by a short-term issue of electricity generation capacity and gas deliverability shortfalls, rather than any structural change in the gas market. It believes these issues are likely to be substantially addressed over the next couple of years by investment in both renewable generation capacity and upstream deliverability.

After petrochemical plant has exited from NZ, wholesale gas prices will be driven by the willingness-to-pay of the marginal (in a long-run economic sense) of industrial process heat demand

The greatest long-term price uncertainty facing the likes of industrial gas consumers relates to carbon price, not gas price. If carbon price remains at current levels it would not be cost-effective to switch to low-carbon alternatives. However, the whole-of-economy modelling indicates this would mean NZ would not meet its net-zero-by-2050 target.

Further, non-price factors are significantly greater drivers of mass-market consumer decisions. It is likely that a future with greater climate-change sensitivity will see many consumers increasingly basing their fuel choices on environmental factors as well as economic factors.

First published in Energy and Environment on August 15 2019.

© Scoop Media

 
 
 
Top Scoops Headlines

 

Analysis: Dotcom Appeal For Surveillance Data Dismissed

Kim Dotcom’s Appeal against the decision allowing the GSCB to withold information as to communications illegally intercepted by them has been dismissed by the Court of Appeal of New Zealand. More>>

ALSO:

Gordon Campbell: On China’s Bad Week

Even before the local body election results came in from Hong Kong, China had been having a p.r. nightmare this week. First, the ICIJ released a trove of leaked cables about the mass concentration camp system that China has built to control and to “re-educate” over a million people from its Uighur minority... More>>

Julie Webb-Pullman: Jacinda, THAT Tweet, And Gaza

The MFAT tweet condemning rocket fire from Gaza while failing to condemn the Israeli extrajudicial assassinations and civilian killings that generated Islamic Jihad’s rocket-fire in defensive response, reveals the hypocrisy at the heart of New Zealand’s so-called “even-handed” foreign policy and practice towards Palestine. More>>

Hope For Nature: A New Deal For The Commons

Joseph Cederwall on The Dig: To fully understand the biodiversity crisis and explore what comes next, it is necessary to address this mind-virus at the heart of our modern civilisation – the dominion worldview. More>>

ALSO: