The Government says having natural gas available in the first place is its main concern – not a controversial shutdown of New Zealand’s only spot market for gas.
For that reason, it is pressing ahead with plans to reverse the previous government’s ban on offshore exploration and leaving problems with the spot market to Transpower to sort out.
The spot market problem has arisen with Transpower’s decision to shut down its gas trading platform, emsTradepoint, which was set up in 2013 and had carbon offsets added to its inventory in 2020.
But over the years, gas supply contracts shifted inexorably away from multilateral market arrangements towards bilateral deals between suppliers and consumers.
Eventually, less than 5% of all gas deals were done on the spot market, so Transpower resolved to get out of the business. It tried to sell emsTradepoint, could not find a buyer, and so resolved to shut it down in September.
In a statement, Transpower said emsTradepoint had improved the liquidity of the gas market, but the operations were no longer considered core to Transpower’s business and its extensive electrification work program.
“Transpower has therefore decided that owning and operating the trading platform is no longer in its interests and it will commence a managed shutdown of the platform with closure effective 1 September 2024.”
The company adds it is still available for sale in the meantime.
The gas industry concedes that 95% of gas deals are bilateral, but says a spot market is still needed to fill in the gap and provide emergency supplies if a bilateral deal fails suddenly for technical or economic reasons.
Meanwhile, the Government says this is matter is in the hands of an arms-length State Owned Enterprise. The SOE Minister Paul Goldsmith says he has not been briefed on the matter. The Energy Minister, Simeon Brown, says he has been monitoring these developments, but says they are ultimately operational matters for Transpower to deal with, and are not the proper business of government ministers.
“They have been keeping me briefed on this particular issue, but the decision is one for Transpower to make as an independent SOE. A very small amount of gas was actually being traded on this platform anyway, so it wasn’t actually providing a significant market benefit.
“Ultimately, the wider issue here is we don’t have enough gas. And that’s why this government’s committed to repealing the ban on oil and gas exploration so we have actually got gas in the market for people to buy.”
Brown’s remarks follow reports three weeks ago and again last year detailing a shortage of natural gas for industry.
5 Comments
“Ultimately, the wider issue here is we don’t have enough gas. "
Yip, that is the issue.
And that’s why this government’s committed to repealing the ban on oil and gas exploration so we have actually got gas in the market for people to buy.
Nope, that is not the solution.
I am concerned our Minister thinks repealing the ban creates gas, maybe it is all the hot air out of parliament he is thinking of.
It doesn't matter how many times you dig up the beach, if the treasure is on a different island, you wont find it.
All surveys, exploration, and tests are coming back negative. Exploration had dropped off naturally well before the ban. The ban just acted as confirmation to all that the industry is done in NZ.
My issue with the Ban, was that it pleased a few greenies, but offered no meaningful solution on how we address our ongoing requirements.
Let the market sort it out. As local supplies diminish the price should rise, which will encourage people to move to alternatives. If the price goes high enough and demand is still there, eventually someone will invest in an import terminal. If not, well, the gas is no longer needed.
If anyone's made significant investment in anything that requires gas in the last decade they've had their head in the sand and will end up paying for their poor choice.
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