Exploration ban affects longterm gas supply

WELLINGTON: Banning new offshore gas exploration ‘‘has significant implications for longterm gas supply’’ says Methanex New Zealand, which uses around 40% of all natural gas produced in this country.

The Canadianowned company operates plants built during the early 1980s’ ‘‘Think Big’’ era of governmentled petrochemical industrial development, at Waitara and Motonui, using gas piped ashore from offshore Taranaki gas fields.

Those fields will continue to produce for as long as they are commercially viable, but official estimates of remaining reserves suggest New Zealand has only another 10 to 11 years of known gas reserves.

However, exploration and mining permits already issued and unaffected by this week’s announcements run through, in some cases, to the mid2040s.

Methanex echoed other major gas users, saying it was ‘‘disappointed over the government’s decision to end offshore block offers and the lack of consultation with industry that has gone into making this decision’’.

‘‘While the announcement does not affect production at our Taranaki sites in the short term, it has significant implications for longterm gas supply and electricity supply security in New Zealand,’’ Methanex said in a statement.

The company wound back production in the mid2000s when a shortage of natural gas was being foreshadowed.

But with new supplies becoming available and reduced demand for gas from the electricity industry, it recently ramped up production again.

In a note to clients, Woodward Partners energy analyst John Kidd said there was increasing speculation of a significant pending downgrade to Taranaki Basin gas reserves.

If that occurred, it could ‘‘materially impact the forward investment decisionmaking of gas market superheavyweight Methanex’’.

‘‘Central to that decisionmaking is forward gas availability and its take on development and exploration pipelines,’’ he said.

‘‘While we don’t expect the announcement to materially impact Methanex’s decisionmaking over its pending Waitara Valley turnaround, scheduled for late 2018, the next cycle of investment decisions in 202122 now likely face a higher hurdle.’’

In a separate statement, the Major Gas Users Group said: ‘‘The announcement has cast uncertainty over the prospects for gas as the government seeks to transition the economy to address climate change.’’

MGUG represents fertiliser manufacturer Ballance Agri-Nutrients, pulp and paper maker Oji Fibre Solutions, dairy cooperative Fonterra Cooperative Group, New Zealand Steel, and New Zealand Refining, which operates the Marsden Point oil refinery.

The group would be seeking ministerial meetings to detail the significance of the decision for major gas users ‘‘so that the importance of gas, including within regional and the wider national economy is clearly understood’’, a spokesman said. — SCOOP