Network company tells Fonterra: Don't forget gas

As Fonterra and other major energy users aim to curtail their carbon emissions, network provider First Gas says gas should be considered as a quick way to reduce their footprint.

First Gas, which owns and operates all the high pressure gas networks and an assortment of low pressure distribution networks throughout the North Island, said gas gives off half the carbon emissions of coal, which Fonterra still uses in three of its North Island plants.

The company, which is owned by Australian pension fund First State, said Fonterra could cut its carbon emissions by 40 per cent to 56,221 tonnes at Waitoa - which at present is Fonterra's biggest coal user - by switching.

Approached for comment, a Fonterra said the co-op had looked at a number of options to reduce our usage of coal at the three North Island sites where we use it.

"Gas has been included in these investigations," a spokesperson for Fonterra said.

"We have a commitment to reduce our emissions to net zero by 2050 and this means our focus is on delivering the best value for money in regards to capital expenditure versus emission reduction," the spokesperson said.

Fonterra's plant at Waitoa is 100 per cent coal fired. Coal is also used at Hautapu and Te Awamutu.

Ben Gerritsen, First Gas's the company's general manager commercial and regulation, said that while talk was all about energy transition , de-carbonisation and a decentralised energy system, gas needed to be part of the conversation.

Gerritsen said the company's heavy investment in the sector reflected its view that gas has a future in New Zealand as an important part of the energy system.

The Government last year banned offshore oil exploration as a step towards transitioning to a zero-carbon economy.

The ban on new offshore oil and gas permits is effective immediately but does not affect existing permits.

Gerritsen said the sector suffered from the view that the country's gas supply would soon run out.

"Our view is that there is plenty of gas in New Zealand," he said.

"The headline numbers are that we have got 10 years' of gas left in New Zealand, but that has been the case for the last 15 years," he said.

"So the reality of the upstream sector is that the producers do understand their reserves a bit better as they do more work on their wells," he said.

"We are not particularly worried about that as a business," he said.

"We believe that geologically, there is plenty of gas there and that it is a sufficiently valuable fuel that it will be able to attract the necessary investment," he said.

There are "considerable resources" within existing permits, he said.

First Gas has been in conversation with Fonterra and others on the benefits of using gas rather than coal.

"We know that there is pressure on Fonterra and other companies to reduce their carbon emissions," he said.

Gas halves carbon emissions and it was "perplexing" that it is not looked at as near term fix, Gerritsen said.

"In most countries around the world that in itself is a compelling case for coal gas switching," he said.

"In terms of options to really bend the curve and get onto a downward trajectory for our emissions as a country and as a company, to me coal to gas conversion has got to be part of the conversation," he said.

First Gas, owned by infrastructure funds managed by Australia's Colonial First State, was formed in 2016 to acquire the Maui gas transmission system and the non-Auckland gas pipelines previously owned by Vector.

In 2017 December it agreed to buy Contact Energy's Ahuroa gas storage facility for $200 million and last year bought its Rockgas LPG business for $260m.

Fonterra, New Zealand's second-biggest coal user, said early this month that it would stop installing new coal boilers - 11 years ahead of its previously advised plan.

The dairy co-op said the move was part of a new commitment to reduce its reliance on coal, which is used extensively in the milk powder process.

This week, French food group Danone said it would spend $40 million on upgrading its Balclutha milk powder plant to make it carbon neutral.