Relief for Taranaki as major gas user here to stay until at least 2029

Business

Methanex signs agreements with gas suppliers so it can keep producing methanol in NZ until at least 2029; Company says move provides energy security for NZ

18th Jul 18, 11:03am by Jenée Tibshraeny

Fears the Government’s oil and gas exploration ban will see New Zealand’s largest gas user pack up and leave, have been allayed for now.

The methanol producer, Methanex, has announced it has signed agreements with gas suppliers that are expected to enable it to operate at over half its capacity until 2029.

Using 41% of New Zealand’s gas supply in 2017, the Ministry of Business, Innovation and Employment (MBIE) had expected New Zealand’s depleting gas reserves, coupled with the oil and gas exploration ban, to see Methanex leave the market by 2026.

In addition to the economic impacts of this, particularly in Taranaki, MBIE was concerned that this would negatively impact the environment as methanol produced in New Zealand using gas, would likely be replaced by methanol produced in China using coal.

Methanex New Zealand managing director Dean Richardson says, “We’re delighted to secure these agreements which provide confidence in our operations in Taranaki through 2029.

“We continue to be disappointed over the Government’s surprise halting of off‐shore oil and gas exploration and if this policy remains in place it will eventually have a negative effect on our business and New Zealand’s economy.

“We see these agreements as an important step in supporting regional jobs and providing ongoing energy security for New Zealand.

“Gas, and the continued production of methanol in New Zealand, play a positive global role in the transition to a lower carbon future.”

According to a study commissioned by Methanex, the company contributed $834 million to New Zealand’s economy in 2017, which is equivalent to 0.3% of GDP. It employs 270 staff and 100 contractors.

Methanex hasn’t specified who it’s entered into new agreements with. Todd Energy is one of its main gas suppliers.

The Petroleum Exploration and Production Association of New Zealand describes Methanex's announcement as a "temporary reprieve," as the industry body still has "serious concerns" about New Zealand's long-term energy security.

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14 Comments

by NoFax | 18th Jul 18, 1:06pm 1531876012

At least it is something but still a very poor decision by the Government.

by Noncents | 18th Jul 18, 1:51pm 1531878683

The clock is ticking.Barring a substantial find in an already permitted area, the biggest user will be winding down in 2029. Most supply to then dry up within the following 4-5 years.

Hope the Govt have are working on a plan for 2035 now.

by Jenée Tibshraeny | 18th Jul 18, 1:58pm 1531879127

I dug into the issue of NZ's security of gas supply in this piece last month. It should provide a bit more context around Methanex's announcement today.

by kiwi_overseas | 18th Jul 18, 3:54pm 1531886064

The government is incompetent.
It should just let the carbon price determine if & when Methanex closes down.
Same for all fossil fuel exploration.

by powerdownkiwi | 18th Jul 18, 4:12pm 1531887172

K-o - interesting comment. Given that energy underwrites all money, there is indeed a point where the capex cannot be future-underwritten. In simple terms, an oil company goes to the bank with the next-best of the remaining extraction options. (remembering that you don't 'produce' oil, you merely extract it, starting with the best, first). They work out it will cost them $130 a barrel to extract. Society can't pay that - it's going further into debt even at $80, and even then it's avoiding real mitigation of it's activities. The ability to repay $130 from those future barrels by people doing work with them to charge for, isn't there. That shows up as an unworkable business plan - but it's really the fact that EROEI has dropped too far to maintain BAU. So the system will fail of its own accord.

But at this point we are over 350ppm, in danger territory. And there are other pending problems of the limits to growth kind. So a responsible Govt would be legislating in the direction of real sustainability, and by 2030 - not by the conveniently-distant 2050. This Govt fails that test in exactly the same way the Key one did.

by kiwi_overseas | 18th Jul 18, 5:08pm 1531890513

NZ emits about 0.2% of world total GHG. We don't count.
Being pragmatic on that basis its pointless limiting our economy any more than necessary. We should go with the international flow.

The carbon price will reflect the world commitment to reducing GHGs.

It could be the whole world decides we should be carbon neutral by 2030 or at the other extreme the world gives up & CO2 levels continue to rise. In the latter case even if NZ went carbon neutral it would make absolutely zero difference.

by powerdownkiwi | 18th Jul 18, 5:35pm 1531892104

Sounds silly to me. There won't be an economy to limit, if we continue. Indeed, for other reasons it's doomed anyway. The options are collapse, uncontrolled, or a staged move to sustainability - meaning to a regime which can be carried on for mre than the current generation.

by Noncents | 18th Jul 18, 8:22pm 1531902175

I agree, but it is a faked sustainability.

People need to understand renewable does not mean environmentally friendly, and environmentally friendly is not sustainable in the sense of a modern civilization.

So where does that leave us?

by linklater01 | 19th Jul 18, 7:57am 1531943858

Noncents,

Can you support your contention that "environmentally friendly is not sustainable in the sense of modern civilisation? That appears to mean that to be 'modern',e must simply accept that the environment must be trashed to support our lifestyle.
I certainly don't accept that.We are not separate from the environment,we are part of it. What I would accept is that our unrestrained consumerism cannot last-we will have to consume less and that includes our food.

by Advisor | 18th Jul 18, 10:10pm 1531908606

Achieving sustainable growth is one thing, but the government only cares about appearing sustainable to its voters.
They chose to ban hydrocarbon extraction that makes up a tiny fraction instead of the alternative solution - divert money from hydrocarbon royalties into alternative energy research and development.

The 3 billion dollars in royalties and taxes from the industry invested into green startups globally could potentially have a larger impact on global emissions than just a ban on domestic extraction, which could easily be replaced by imports.

by powerdownkiwi | 19th Jul 18, 2:50am 1531925440

There is no such thing as sustainable growth.

No matter how often it is chanted as mantra.

But we don't have time for R&D when we're past 350ppm, nor when we're so far down the EROEI scale. We need to go with existing tech, and w need to do it now. Alongside that, we need a discussion about triage.

by powerdownkiwi | 18th Jul 18, 3:59pm 1531886366

Gas may have less greenhouse impact than oil or coal, but it still has impact. And it's still finite, in any meaningful terms.
But think of all the gas cookers and BBQ's and califonts. What will the morph to?

A forward thinking Govt would be exploring charcoal - perhaps as a coppiced by-product of their tree programme. One of the few alternatives with enough EROEI to be useful.

by Alpeg | 18th Jul 18, 6:23pm 1531895000

Imagine what a gas strike off Otago would do for South Island industry. With this lot, we will never know, The inmates are running the asylum.

by powerdownkiwi | 19th Jul 18, 2:46am 1531925198

You can know what it would do for Otago industry - just what gold did for Macetown, Bendigo, Naseby, Cambrian, StBathans, Serpentine, the list goes on. It would go the way of North Sea oil, and Dunedin would look like a mothballed Aberdeen.

Or Dunedin industry - sadly without the heavy lifting that was Hillside - could be part of the new world. Electric trains city-to-city, fleets of electric bikes and or small cars, ready to be borrowed when they got there. Solar and windfarm construction (because we are so late in starting that even on a wartime footing, we'll be late. And they could look at ways to recycle fossil-fuel vehicles (maybe just parts?) into something more future-friendly.

There's more than enough work in transforming society infrastructure-wise, and we're dead if we don't. Or, of course, we could get a Government which hasn't advanced past the Nordmeyer stage and who will throw money at a new hospital and a pretty waterfront.