New Zealand is running out of gas – literally

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But this assumes, rather optimistically, that repealing the ban will prompt companies to invest in new gas fields.

As an island nation, New Zealand can't easily import more gas from overseas. There is no pipeline to Australia, and liquefied natural gas terminals are expensive to build.

Macroeconomics tells us that when a resource becomes scarce in a closed market, the following things happen.

First, with a fixed amount of gas to go around, its use has to be prioritised. This means some users might miss out. As it happens, the government has been struggling to renew a contract to supply schools, prisons and hospitals with gas.

Second, when a resource becomes scarce, its price tends to rise. This tracks with the experience of Pan Pac, a forestry owner and processor in Hawke's Bay which reported a three-fold increase in gas costs, from $3m a year to potentially $9m at current prices.

Now, some would say the cure for high prices is exactly that: high prices. A gas crunch could ultimately shift demand to other sources such as heat pumps for home and industry. Some of this was subsidised through the previous administration's Government Investment in Decarbonising Industry Fund.

But until the switch happens, resource scarcity means you can't produce as many goods, and this could have an effect on GDP. Methanex, a major exporter of methanol produced from natural gas, is a key concern here. Less methanol would mean fewer exports and, potentially, job losses.

Methanex is already operating at reduced capacity, and it recently initiated high court proceedings against Nova Energy, which uses natural gas to produce electricity. Nova cut gas supply to Methanex and the companies disagree on whether their contract allows for this.

This means there might not be enough gas to simultaneously maintain synthetic (ammonia-based) fertiliser production, peak electricity generation and methanol exports. What should get prioritised?

Ammonia is essential to the farming sector and food production.

Open Country Dairy CEO Mark de Lautour describes surging energy costs as the light of a big train in a dark tunnel heading for the dairy processing industry, and New Zealand as a nation.

While Open Country Dairy (OCD) is insulated from the rapid rises at present thanks to contracts already in place, he said he and his executive team are fully aware of what is coming once those contracts end.

And, rather than simply being the result of volatile hydro lake levels, he said, there are much bigger issues at play impacting the energy market and costs.

“As coal and fossil fuels became unacceptable, NZ moved away to electricity and gas, or switched from coal to electricity as we have done.

“But the increased demand for gas and increased demand for electricity is what has caused this, not just what’s in the hydro lakes. Demand has increased and NZ has not got alternative sources in place.” Source

"New Zealand needs abundant, affordable energy. That's why the Coalition Government is taking a series of immediate actions to restore confidence to our energy sector and remove regulatory barriers that have stopped firms generating electricity or bringing in the fuel that Kiwis need."

Regulatory barriers will be removed for the construction of facilities to import Liquefied Natural Gas (LNG). LNG is used widely overseas to provide flexible and scalable energy supply, and Cabinet has now agreed to legislation consents for an LNG terminal. Source

What went wrong in the NZ electricity market and why it will get worse before it gets better

New Zealand has endured a winter of de-industrialisation.Winstone Pulp and Paper shut two central North Island mills at a cost of 230 jobs, Oji Fibre Solutions closed a Penrose mill at a cost of 75 jobs, and Methanex will indefinitely shutter one of its plants at the cost of an unknown number of jobs. The scale of this destruction shouldn’t be underestimated. In towns where these plants were the most significant employer, industrial closures will likely take many other jobs with them and destroy property prices, destroying the savings of hundreds of households.

Every industrial closure has its own story: sometimes the price of whatever it manufactures has crashed, sometimes the plant is poorly run, but common to most of the closures seen this year is the complaint that electricity costs are far, far too high.

“We won’t have any business left in New Zealand,” she said of a future with prices that reflected the current futures price.

“It’s a really systemic economic issue,” she said.  Read More

“No new oil and gas fields are likely to be discovered in the next 10 years.” NZ Oil and Gas Minister 

Fears mill closures could create ‘ghost towns’ in New Zealand

Manager Brenda Burnard said the tight-knit community was reeling from the shock of losing its largest employer.

“It really does feel like a car crash happening in slow motion,” she said.

Many of the childcare centre’s families were being forced to move away to find jobs or were being split up, with one parent having to live elsewhere to work.

“We’re going to be the ones to pick up pieces and that’s sad. I’m not crying about it this week. I just feel sad now, it’s been done to us and it needn’t have happened,” Burnard said.

Her husband lost his job at the mill, along with the partners of four of her staff members.

“Our region is losing skilled workers, our enrolments will drop — at the end of the day that’s viability and sustainability for our centre,” she said.

Burnard said it was hard to get the rest of New Zealand — and the Government — to fully appreciate their situation.

“The No 1 thing that people from around the country don’t understand is it’s not 230 workers and it’s not even the flow-on effects from those workers — the impact would be less if we were based near a city and we could travel to work to another major employer,” she said.

Many residents fear Raetihi will turn into a ghost town as the ripple effect from the mill closure creeps into households.

The true impact is hard to quantify because several businesses connected to the mill are also losing workers or laying them off. RNZ understands a local logging truck company has had to let dozens of drivers go, and Napier Port and KiwiRail are also planning job cuts.

In Raetihi, Darren Dempsey has owned his bus company for 35 years, providing daily transport for mill workers during that time.

“It’s not easy and in the long term we don’t know how it’s going to go really, it’s still early on.”

The town has had an increase in houses going on the market as workers leave for Australia or other regions, and Dempsey believed many more people would be forced to move, hurting local businesses even more.

“There’s been a huge flow-on effect already and I’d say it’s going to get worse before it gets better,” he said.

Down the road, Raetihi’s Coach Cafe and Takeaways, too, is taking a hit. Owner Angie Robson told RNZ it was down about $800 a day compared with a year ago, as people tightened their belts or moved away.

“I’ve laid off my husband of all people, but it meant I could keep my part-time staff, so he’s gone back to his old job,” she said.

“It could get worse, but we’re in for the long haul, hopefully.” Source

Oil and gas lobby asks government to underwrite fossil fuel exploration, minister 'considering options'

The oil and gas lobby has asked the government to underwrite the risk of fossil fuel exploration, with the taxpayer potentially taking "some or all" of the risk if new gas supplies fail to eventuate.

Resources Minister Shane Jones says he is considering options to support gas exploration, but "no decisions have been made either way".

On 8 July, the body representing oil and gas producers, Energy Resources Aotearoa, wrote to Energy Minister Simeon Brown saying the industry was unlikely to invest in exploring for new gas without "government support to help manage risk".

It said the government should consider whether the taxpayer should take on "part (or all) of the risk if natural gas should not be produced" by exploration efforts.

The letter - which was released to RNZ under the Official Information Act - said any costs to the government from underwriting, hedging or guaranteeing oil and gas exploration would "fairly and most efficiently" reflect the risk created by Labour's now-reversed 2018 ban on issuing new permits for offshore oil and gas exploration.

The government has also blamed Labour's ban for declining gas supplies, saying it worsened the investment environment for companies that might have wanted to explore.  https://www.msn.com/en-nz/news/national/oil-and-gas-lobby-asks-government-to-underwite-fossil-fuel-exploration-govt-considering-options/ar-AA1v4Npf

What has changed is that all the extra drilling hasn't turned up much extra gas in the past few years. This is despite record amounts spent on new wells - nearly $1.3 billion between 2020 and 2024. Energy companies now think there's less gas than previously thought.  Source