https://fasteddynz.substack.com/p/nz-is-running-out-of-gas-literally
The coalition government recently announced its plan to reverse a ban on new oil and gas exploration to deal with an energy security challenge brought on by rapidly declining natural gas reserves.
But this assumes, rather optimistically, that repealing the ban will prompt companies to invest in new gas fields.
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.
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.
A new gas field could take a decade or longer to find, develop and bring online. At the same time, if there are no new reserves (regardless of whether the government goes through with the repeal of the ban), we can expect gas supply to drop to half within six years, according to MBIE forecasts.
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.
Methanex exports are worth $800m a year and the company is a significant contributor to the economy. Source
Dairy steaming mad over energy fiasco
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
UPDATE:
"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
Soothing words from the PM however:
LNG is very expensive....
"New Zealand can have abundant abundant affordable energy if we clear away the blockages and unleash investment in solar wind geothermal natural gas and everything we need to keep New Zealand moving."
Similarly these are all very expensive...
Conclusion - High energy prices will continue in New Zealand crushing the economy and ultimately leading to collapse. Of course the IMF will at some point step in and put the country on life support (as was done in Lebanon) because allowing countries to crash and burn sends a distressing message out to the barnyard and circus animals.
Tough times ahead for the citizens of New Zealand.
Updates:
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.
Cooney said it was wrong to describe the prices as a “short-term issue”.
“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 confirms that the ban on new exploration is not a ban rather it is an attempt to make the public believe there is oil and gas to be found - when there is none.
New Zealand Panics
This is stagflation on steroids
https://fasteddynz.substack.com/p/new-zealand-panics
Engineers never get paid to make a bridge stand, they get paid to make a bridge just barely stand.
That could be one explanation for the refusal of parts of the industry to point out that there is risk in counting on oil and in particular gas, to always be there as "affordable, abundant, and clean" energy. A lot of the voices that assert this view are trade associations and research firms, not the operating companies. "Risk" has become a dirty word in the world of always higher stock prices, and "optimization" that removes all buffers against disaster if things don't work out exactly as planned. Years ago, engineers added "lagniappe" to their calculations to make sure their design was able to handle all the conditions that it was likely to operate in. As a result, some of these, a lot of these, installations are still running, and others only shut down because of economics. New facilities are planned to use just enough material to do what the owner says they wanted whether or not they really understood the range of operating conditions that could be possible. We've financially engineered ourselves a fragile physical world along with our stock market. But when things break it's "climate change", not houses that blow down in a strong wind.
FE will know . Copy/paste from OFW .
Wet My Beak says:
November 20, 2024 at 8:35 pm
Sad new zealand, a dying country, is somewhat well-known for its stance on nuclear power.
Its rotund prime minister at the time, David Lange, spoke at the Oxford Union against a nuclear future for new zealand. He was loudly praised at least in the local media.
This poor country has fallen even further behind as a result of this attitude.
The country will not even allow nuclear powered ships in its ports because they are allegedly dangerous. Yet 20% of its navy was sunk recently without a shot being fired. The nz navy is fully woke and the rainbow crew and captain drove a $US 100 million dollar vessel into a reef. Not only was the ship lost but the Samoan reef was badly damaged from diesel uncontained. One has to ask, ‘which ship was more dangerous?’
A nuclear powered vessel or a woke navy vessel crewed by diversity hires instead of real sailors.
https://www.rnz.co.nz/news/national/530302/at-the-scene-of-the-manawanui-sinking-you-could-smell-the-pungent-petrol-fumes
***
Recently, ethnic separatists congregated in the capital, Wellington. When asked why, none of the interviewed rebels could provide an answer. The MSM lauded their efforts.
https://www.rnz.co.nz/news/te-manu-korihi/534281/the-world-reacts-to-te-hikoi-mo-te-tiriti
These people are a stain on this dying country and cost every working individual a good part of their income in taxes and handouts.
Such is the price paid in the world’s wokest land.
RIP new zealand. You won’t be missed.
I am a fan of Tainter's work . Tainter says that island states are the most vulnerable to collapse because the ships that carry cargo in have no cargo to carry out { end of globalization} . NZ has no coal , nuclear and gas of its own . All energy must be shipped in but what is there to carry out ? A LNG carrier cannot carry meat and diary products and neither can a VLCC , The same goes for other island states like Madagascar , Mauritius , Sri Lanka [ already collapsed ] , Caribbean islands etc . NZ is at the end of the planet . Maybe they can get some LNG from Australia but to my best knowledge all LNG is pre sold to China . As a matter of fact power plants in Australia resort to load shedding because of shortage of NG . In the devolped world high risk are UK and Japan . EcoE becomes unaffordable and sustainability collapses . Easter Island , anyone ?
Funny how the credentialed class so advocates banning oil and gas, while their house is warm and bellies are full, lots of lectures and judgments. Until they aren't so warm. Comeuppance is a rather vengeful bitch. After years of being told I'm destroying the planet, keeping the dreaded rigs moving, it seems my services might actually be ok since their comfort is wobbling.
Cheers from the rather frozen North!
Typically electricity can out bid industrial as a gas consumer when things get tight. When conventional gas production finally peaked in the US, it collided with a gas fired power plant building boom in a newly deregulated electricity market. Back in 2001, I wrote a paper about the likely impact on industry for the Oil and Gas Journal. It was titled "Petrochemical Operations: Ethylene must compete with electricity for natural gas resources - Increased competition between the ethylene and electricity markets for natural gas is one reason North American natural gas prices will remain higher than in the recent past."
Methanol and ammonia are often the first 2 chemicals countries make when they have surplus gas. We also thought the gas surplus "bubble" would last forever back then. Shale saved the day then, but that was 20 years ago. And several ethylene plants closed down due to higher feedstock costs in the years in between.
Price will allocate the hydrocarbons we have when supply gets tight.
Fast Eddy,
Your tale is all too familiarI live in the UK and work for a German chemical producer. Europe is being systemacitcally hollowed out as sky high energy costs crucify every industry . The UK has already been de-industrialised and Germany is closely following. Renewables have become Ruinables as the true cost of wind and solar is felt by citizens and manufacturers.
Well paid jobs are being lost at an alarming rate, to be replaced with insecure low paid work. The green jobs bonanza has proven to be a myth. Tough times ahead.