Oil and gas companies expect gas production to keep falling at a more rapid rate than previously expected, according to the ministry.
While the Māui field has long been known to be at the end of its life, it is now expected to stop production at the end of the year.
The Pohokura field is also expected to stop producing in 2033 – 10 years earlier than previously indicated.
On the upside, Mangahewa is expected to keep producing for two more years, to 2035.
The Organisation for Economic Co-operation and Development (OECD), in a report released last week, acknowledged the decline largely stemmed from mature fields underperforming expectations.
It said the situation was also impacted by the Labour-led Government banning the issuance of new exploration permits in 2018.
Despite this, it said more than $1 billion of “development investment” had still been made since 2020. But efforts to find commercial amounts of gas were largely unsuccessful.
The OECD noted gas shortages had pushed up wholesale electricity prices and risk premiums, with dry years triggering prolonged price spikes that were forcing energy-intensive industries to shut down.
“Policy and weak revenue uncertainty have stalled investment in new firming despite rising demand, leaving the system close to security limits even as renewables investment grows,” it said.
“Immediate action is needed to restore resilience and affordability.”
The OECD said establishing a terminal to enable New Zealand to import liquefied natural gas (LNG) would help restore security of supply, but this risked locking in fossil fuel dependence and should be “treated as a transition fuel only”.
MBIE is undergoing a procurement process to set up an import terminal.
The spike in the price of LNG globally, due to the Middle East conflict, isn’t deterring the Government from the billion-dollar plus project.
The OECD recommended the country’s partially state-owned electricity generators/retailers were paying disproportionately high dividends, rather than reinvesting sufficiently in generation.
It said the Government should invest in non-gas firming generation and “expand demand-side flexibility to break the gas–electricity price link”.
The OECD also said a “dedicated mandatory firming and flexibility market would improve access to firming services, lower barriers for independent generators, and reduce reliance on opaque bilateral deals”.
While the Government isn’t taking up these suggestions, Minister for Energy Simeon Brown recognised “falling gas supply is a real problem for Kiwi households and businesses”.
“Gas is used to generate the electricity that keeps the lights on when the sun’s not shining, the wind’s not blowing and the lakes are low. Without enough gas to back up renewable generation, power bills go up, factories shut down, and Kiwis lose their jobs,” he said.
In addition to setting up the LNG terminal, he noted the Government had reversed the exploration ban, was “backing new domestic gas with a $200 million Gas Security Fund”, and was “enabling carbon capture, utilisation and storage, a technology already used overseas that makes it easier and cheaper to keep producing domestic gas”.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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