As the Ardern government grapples with the housing crisis it inherited — and which it compounded in its 3 ½ years in office — it looks like it will have another on its hands in the energy sector.
When it sought the plaudits of the climate change warriors and other Greenies by placing a ban on exploration for natural gas, it did not appear to realise that supplies of natural gas already were running down fast.
Prime Minister Jacinda Ardern was quoted at the time as saying “I don’t think they (the petroleum exploration industry) was blindsided”.
She insisted the country knew the Labour Party wanted to move away from fossil fuels.
So what have been the consequences?
NZ imported more coal in 2020 than in 2017 and 2018 combined.
Methanex is closing down one of its two plants in Taranaki, producing methanol for export with a consequent loss of jobs and export revenue.
New Zealand Oil and Gas has relinquished its Toroa and Clipper permits – the last deep sea oil and gas exploration permits off the coast of the South Island. It had been working on developing the Barque prospect in the Clipper permit which it regarded as a potentially significant gas producer.
Genesis is bringing a 240 megawatt coal-fired unit out of storage at Huntly to provide backup electricity generation.
Energy and Resources Minister Megan Woods has asked for reports on whether NZ will soon need to import LNG.
NZ needs about $100m of investment each year in existing wells to sustain output but this has become harder to attract since the ban. Production at Pohokura, the biggest gas producer, has fallen by more than a quarter.
The Parliamentary Commissioner for the Environment says the ban on offshore gas exploration will impose massive costs on the economy but is unlikely to reduce domestic emissions.
The ACT party argues:
“The Prime Minister needs to show that her ‘nuclear-free moment’ wasn’t just a line in a speech by reversing the ban on exploration for natural gas so New Zealand can begin to make meaningful long-term reductions in our emissions.”
Energy industry experts contend NZ’s gas is a cleaner-burning fuel which could allow a transition away from coal.
Last year half of the gas produced in NZ was converted to methanol for export, mainly to China, earning the country more than $500m in foreign exchange.
The Green lobby doesn’t regard the drop in methanol exports as a result of the Methanex plant closure as an issue of any great significance, but it should be concerned. More methanol is produced and used in China than any other country, and much of it is made from coal: this emits nearly three times as much CO2 as methanol produced from gas.
Gas exported from NZ as methanol reduces global CO2 emissions and improves global environmental outcomes.
The Climate Change Commission has further confused the picture: it proposes methanol production in NZ should be shut down, a switch from coal, diesel and gas to electricity, and no further natural gas connections to the grid, or bottled LPG. At the same time it proposes phasing out imports of light internal combustion vehicles, presumably to replace them with vehicles powered by electricity.
Yet an expert tells us that if we are to continue with motoring as usual in NZ, the country will need to install extra capacity equal to 120% of total hydroelectricity usage today just to power transport!
And if that extra capacity isn’t built New Zealanders may find electricity will be in short supply and their power bills skyrocketing.
Given the government’s performance in tackling the housing crisis (the Minister of Housing is Megan Woods), can anyone be confident it will do better in the energy sector, where Woods is Minister of Energy and Resources – or, for that matter, on finding practical solutions on climate change?