Govt warned of risk in halting gas permits
WELLINGTON: The Government was warned by officials that if not handled well, its plan for future oil and gas exploration could have a ‘‘chilling effect’’ on investment.
Energy and Resources Minister Megan Woods has released all of the Cabinet briefing papers and communications from officials, ministers and some industry players.
The papers said if the supply of natural gas was restricted, that could push up consumer prices, pose a ‘‘significant risk’’ to security of energy supply and have a detrimental impact on some regional economies.
Dr Woods said that was ‘‘free and frank advice’’ but she described it as ‘‘standing still’’ advice. However, she acknowledged the change in policy would have a direct effect on the energy industry.
‘‘We’ve got ourselves a window of time to put in place proper transition planning so we’re not leaving individuals without a future and without hope.’’
The documents warned that if all future gas exploration was halted, consequences could include a possible increase in global greenhouse emissions.
Methanex is the largest global supplier of methanol, and has two processing facilities in New Zealand.
Officials said Methanex needed a consistent supply of affordable gas, and new discoveries would be needed to keep it operating past 2021.
The amount of methanol produced in New Zealand was ‘‘significant’’ globally and supplies the Asia Pacific market.
If Methanex closed, or cut back on production, China would pick up the slack, the briefing papers said.
The official documents said according to permit holders’ annual summary reports ‘‘it appears as if there will be a significant decline in gas reserves as of 1 January 2018’’.
The change in government would not make that immediate situation any worse, Dr Woods said, because existing mining and exploration permits were being honoured.
The decision to hold a block offer restricted to onshore permits in Taranaki was ‘‘noted’’ by Cabinet as an oral item.
Ms Woods said that was an appropriate way to deal with a Block Offer, after taking advice.
She said the item also signalled there would be no future offshore permits, and that the Cabinet would receive further papers on the implementation of that.
She said the policy was discussed at Cabinet through the oral item and between the Government parties, and ‘‘I am confident a good process was followed.’’
The minister also ditched an initial plan to have the Interim Climate Committee investigate options for the future and then advise the Climate Commission in mid 2019, before any longterms decisions about exploration were made.
She said there were two reasons for not doing that: the first was the committee’s ability to do the work, and the second was it was not ‘‘tenable’’ to announce the 2018 Block Offer without giving a ‘‘longterm signal’’ about future plans.
The National Party said the documents released showed the ‘‘horror show’’ of the lack of process.
Energy and resources spokesman Jonathan Young said it had been handled in an unacceptable way.
‘‘Taking an oral item to Cabinet on a decision that affects thousands of jobs . . . right across the country is scandalous, and legally perilous.’’
He said the law set out a clear process to minimise the risk for investors and for the New Zealand Government. As it seemed the processes had not been followed, potential legal action against the Government was being prepared.
The Government had made a decision without consultation with the sector it affected, ‘‘without a costbenefit analysis from Treasury, without an understanding of whether domestic or global emissions will be reduced and without any appreciation of what a constrained gas market will do for prices’’. — RNZ