New information suggests the dependability of New Zealand’s supply of natural gas is getting worse.
The warning comes in the latest publication from the industry regulator, the Gas Industry Company Ltd (GIC), which is required by law to give quarterly reports to Minister of Energy.
Its comments come nine months after the Ministry of Business Innovation and Employment (MBIE) issued its own advice, saying that reserves of natural gas would last for less than 10 years.
The new information suggests an even steeper decline.
"Gas supply is at the bottom of expected volumes this year," the GIC states bluntly.
"Insufficient gas is available to meet all contracted demand. As a result, industrial gas use has reduced."
The GIC produced a graph, with the green line illustrating last year’s comments from MBIE and the blue line based on actual production during 2023.
It says the graph is a forecast based on past production trends but it concedes these forecasts could change if a company were to suddenly invest in a new product.
Despite this caveat, the GIC is urging gas users with a soon-to-expire contract to get in fast and get a renewal before supply gets worse and prices get higher.
Along with this comment is a graph showing gas prices rising in the past five years.
In further information, 2023 natural gas production was only 146.5PJ, significantly below forecasts of 167.5PJ.
And in the first three months of 2024, natural gas production was expected to be 42.6PJ, but only 30.7PJ was produced.
No-one in the gas industry expects this shortage to affect householders using gas for their home cooker or hot water heater. The household sector uses just 2% of New Zealand’s gas. Cutting them off would generate a public outcry and waste the money spent on putting in pipes to the home.
The real impact would be on large gas users like Genesis Energy and the Taranaki methanol producer Methanex, and this has already started to happen.
Methanex, which employs 240 people, mothballed one of its three plants in 2021 because of a gas shortage, and repeated warnings in its most recent annual report that it had gas supply contracts in place only until 2029.
"The future operation of our New Zealand facilities depends on the ability of our contracted suppliers to meet their commitments and the success of ongoing exploration and development activities in the region," the report said.
"We cannot provide assurance that our contracted suppliers will be able to meet their commitments or that exploration and development activities in New Zealand will be successful to enable us to operate at capacity or at all.
"We cannot provide assurance that we will be able to secure additional natural gas on commercially acceptable terms. These factors could have an adverse impact on our results of operations and financial condition."
A similar problem affects the electricity company Genesis Energy. It operates the fossil fuel-powered generating plant at Huntly, which is used to produce electricity when the wind doesn’t blow and rain doesn’t fall. Genesis once vowed to end the burning of coal there by 2025. But in a statement to the Stock Exchange last month, it tried to delicately suggest that this policy might have to be rowed back.
Genesis has since gone further, and said it will need to bring in more coal from overseas for next year.
"The solid fuel level between biomass and coal that we maintain at Huntly is around 350,000 tonnes," its chief executive Malcolm Johns told RNZ.
"By the end of this winter we will have gone below that level, and so we will need to to that stockpile up ahead of next winter."
There have been complaints in the energy industry that some of these problems date back to the previous Government’s ban on offshore oil and gas exploration in 2018. The current Government plans to reverse that ban, and further work on this is due shortly.
But this process has become clouded over fears that a future Government could reinstate the ban and leave companies stuck with irrecoverable costs if they have to stop work half way through exploring a gasfield or actually starting to commence production.
A suggestion that energy companies could get some state insulation from these costs led to allegations of corporate welfare and counter claims that businesses need protection against electoral flipflops.
66 Comments
Any talk of slash, residue or waste wood is useless. For the wood volume needed, and to utilise the existing boiling infrastructure, you need to use whole logs and make pellets. It’s all possible but you need to pay a much much higher price for the wood. At the same time kinleth will not let that happen as they will be short - they supply all the packaging and trays for Dairy and kiwifruit plus Fonterra already consuming wood biomass.
As long as we are prepared to pay a lot more for this power all good. Welcome to the real world and choices we will have to make.
Without some type of bipartisan agreement to secure gas for our energy sector, NZ is headed for a problematic future, and our standard of living will suffer. No one is going to come here and invest billions in exploration with the risk of it all being shutdown with a change of Government.
Ironically natural gas was probably our best and cleanest way of transitioning away from fossil fuels but that opportunity is now gone, simply so that someone could have their 'nuclear free moment'.
Grid stabilisation and frequency keeping will be a challenge if renewables specially wind and solar are to cover baseload. See:https://static.transpower.co.nz/public/bulk-upload/documents/MO%20Lates…
peaker plants are already being replaced by battery banks , vector has them in auckland and they can be brought online much quicker and recharge when power is back within normal operating ranges, much neater solution as they can be closer to needed areas and not need the lines from transpower to bring up from down country
Future-proofing the network
We are adding batteries to our network. We have installed the first Tesla Powerpack battery in New Zealand being installed in our Glen Innes substation. These batteries will help us manage peak load on the network and strengthen the power supply.
Vector installs Asia Pacific’s first grid-connected Tesla Powerpack | Vector Limited
The Australian experience is that grid batteries do very little to support the grid when they have an underfrequency or over the evening peaks. They make their money by providing reserves. Wattclarity has looked into the market behaviour of them.
NZ generation has two peaks 5-8pm and 7 to 9am. If the batteries are used for the first peak, what is going to top them up for the second?
Tried both. You are right induction heats up faster. But, you can only use certain types of cookware, and, it’s not nearly as good as gas. Horses for course though. I also know many chefs, none use induction, none would touch it. Not so good for woks either if you like Asian cuisine.
I cook everything with induction apart from baked beans (they go in the microwave).
Induction heats up faster than gas, changes temperature faster than gas, is more accurately controllable than gas, easier to clean, no fumes and won't keep going once a pot is removed. The only advantage I can see for gas is when cooking barbecue style and you want the fat to drip into the flames to add that smoky flavour and if you want this then a charcoal bbq is superior.
No the world will not come crashing down but it will change - significantly. Your comment like that of a certain cohort on this site remind me that in generality, aeroplane pilots are open, clear eyed bouyant extroverts where as helicopter pilots are brooders, introspective anticipators of trouble. They know if something bad has not happened, it's about to.
I've been in both camps and this holds true. Which camp are you?
Absolutely no idea what you just said, something about aviation???
Anyway, yes things are going to change however my point being gas 'was' our best option for a transition. Not perfect but a good option and it's too late now but here's the thing......once the lights go out, people can't heat their homes, charge thier cell phones, check their socials and prices go through the roof on energy we do have, they could not care less where the energy comes from to go back to 'how it was'. Yes this should have/could have been sorted a long time ago...but it wasnt'.
But gas IS a fossil fuel and produces CO2 when burnt, just not as much as oil. That doesn’t make it good, or the future. Need to get wood pellet production cranked up (yes, emits CO2 also but no faster than the trees sequester it and therefore net zero, unlike burning oil or gas which releases millions of years of stored carbon as CO2)
Every old house I buy and every new house I build I go gas. Re old house once the HW cylinder craps out in goes gas approx same price. Tenants live it because mains pressure secondly in Christchurch for a few yrs after earthquake the shit they were putting in the water a cylinder would fail every 18 mths to two yrs HW cylinder suppliers wouldn't guarantee Christchurch area because of it. Thirdly leaks tenants don't seem to keep an eye out for leaks until the floor caves in. California outside no leaks inside yes you can put electric cylinder out side costs alot more. Just had power inspector at site 6 weeks ago and he said he perfers gas HWC than electric.
So climate change consideration doesn’t even enter your mind?? You’re actively doing the opposite (changing from renewable electricity to fossil fuelled water heating) to what any educated person knows is needed to mitigate disastrous climate change. Please reconsider.
We did about 24 months ago. Have access to a gasfitter and electrician in our family, so it was dirt cheap to put in.
Our old cylinder was taking up new kitchen space so rather than re-plumb a Mains Electric into another part of the house we went quick and easy. Figured if gas gets to the point where it's no longer economically viable, then we'd just swap out with something else (either Mains Solar/Electric boost or Heat Pump).
"There is no more gas in NZ."
Funny you should say that.
It gets said every 10 years or so.
Prices go up.
And then - almost like magic - they find some more.
But sure.
This time it will be different.
Eric reports: "It [GIC ] says the graph is a forecast based on past production trends but it concedes these forecasts could change if a company were to suddenly invest in a new product."
So just like last time? And the time before that? And before that?
All the big players packed up and left years ago. All major exploration stopped long before the "Captains call", and all test wells and seismic since then have come up with nothing. Most seismic carried out lately is solely to meet the terms of the various permits. Nothing is planned (and there hasn't been a vessel in port for a very long time)
So what do you know that the industry doesn't?
Let’s spell out what “Peak Oil” actually means.
It does not mean the wells run dry. It does not mean we can’t discover more.
What it does mean is the Return on Investment is getting closer to 1:1. No more easy access gushers like in Pennsylvania in 1900, no more putting a spade in the sands of Kuwait and having decades of supply like in the 1950s.
Now it’s about Unconventional sources like clathrates, tar sands and fracking, which is only viable when the price is high - but then we all complain petrol is unaffordable…
Until I see a chemical/thermal/physical analysis of Indonesian coal I'll reserve judgment on whether its dirty or not. Not that I don't support NZ coal but you can't switch a coal mine on at the drop of a hat and who owns our coal mines I have no idea and in particular Huntly. There's is also a matter of price.
I hope what he says comes to fruition on energy matters, mostly gas.
We don’t have gas to keep running Huntly, we have climate obligations to meet, we’d never find and commercialise new gas fields in time even if there was no climate issue, we have plenty of trees we don’t know what to do with now that China doesn’t want them, wood pellets are easy to make and Huntly has proven capable of running on them….it’s not rocket science so if the government can’t execute the obvious solution quickly they are not fit for purpose
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