NZ is running out of gas – literally

This country is collapsing

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

This is the fate that awaits all of us. And this is why we are being exterminated.

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.