A Kupe gas field rig in operation off the Taranaki coast. The dwindling supply of natural gas is the most serious and urgent energy issue facing New Zealand, writes Martin Gummer. Photo / Supplied
A Kupe gas field rig in operation off the Taranaki coast. The dwindling supply of natural gas is the most serious and urgent energy issue facing New Zealand, writes Martin Gummer. Photo / Supplied
Opinion by Martin Gummer
Martin Gummer is managing director of Optima Energy Management Solutions and the first chief executive of the Energy Efficiency and Conservation Authority.
THE FACTS
New Zealand’s gas reserves reduced by 27% in the year to January 1, 2025, according to the Ministry of Business, Innovation and Employment.
Annual gas production is now forecast to fall below 100 petajoules by 2026, three years earlier than previously expected.
The Government announced in Budget 2025 a $200 million commitment for new domestic gas field developments.
The time has surely come for responsible political parties to forge a consensus about the future of natural gas in New Zealand.
The dwindling supply of natural gas is the most serious and urgent energy issue facing New Zealand. Prices have increased dramatically in recent years, causingmajor headaches for industrial gas users and forcing up the price of electricity. Restricted supply is resulting in coal being used for electricity generation in place of gas, resulting in higher CO2 emissions. Excess demand for gas over supply could result in shortages for industrial users in the very near future. The situation is dire.
Without a stable environment for investment in getting gas out of the ground, many businesses are soon going to face some harsh and unpalatable choices – including partial or total closure. Some are already facing these.
Most people do not realise the extent gas plays a vital a role in commerce and public bodies. It’s used throughout the economy – for staple foods, food ingredients, beverages, packaging and building products; for horticultural growers, grain producers and primary produce processing; in hospitals and universities; in tertiary institutes and community facilities; and in hotels and retirement villages.
To prevent - or just alleviate – a major crisis may otherwise require taxpayer funds of more than a billion dollars – potentially several billion. This is to either accelerate new gas supply seriously and urgently; to invest in an expensive LNG terminal; to buy or force Methanex out of business; or to fund the extensive and costly co-investment needed for transition to alternative technologies – many of which are not yet commercially viable or even available. And then only where these can be practically achieved in time, if at all.
The problem is huge and not understood by most people – including some gas users. The Government’s $200 million for gas exploration is a welcome and positive step. But it is a bit like sticking a finger in a leaking dyke.
The main cause of the problem – as everyone in the energy industry knows – is potential investors in further gas development are afraid a future government will reimpose some form of ban on gas exploration and development. This is known as “increased sovereign risk”.
Most gas industry people believe there are sufficient resources available to make natural gas secure and affordable for industry for the foreseeable future. However, to achieve this requires much greater investment than is currently occurring.
There is a practical, lower-cost and less disruptive solution. That is, to reduce sovereign risk.
The only realistic way to do this is for mainstream political parties to develop a responsible, medium-term, non-negotiable bipartisan political consensus about the place of natural gas in our economy.
That consensus must include a moratorium on gas exploration bans until there is a realistic, long-term transition path to other fuels and technologies. This transition must be developed in partnership with industry. Paradoxically, it would probably also reduce CO2 emissions relative to the status quo. Political compromise is required given the changed situation and its serious effects.
A planned transition, with gas acting as a bridge to a more renewable energy future, would also result in more stable electricity generation and lower electricity prices for everyone – residential, commercial and industrial users. It would provide a realistic timeframe to ramp up renewable energy production, to develop alternative fuels such as biogas, and to enable industry to adjust.
Senior energy executives have made similar remarks publicly. But their comments have been buried so deep in media articles they are going largely unnoticed.
Without a sensible transition path, gas exploration bans are a reckless measure. They are a recipe for a very painful and messy de-industrialisation, with consequent negative impacts on upstream suppliers and downstream customers, not to mention on economic growth, employment, productivity, company tax, royalties, the finances of major public entities, unemployment benefits – and CO2 emissions. This is the path New Zealand is currently on.
In Budget 2025, Resources Minister Shane Jones announced a $200 million commitment for investment in new gas fields. Photo / Mike Scott
What political party wants this blood on its hands, especially in election year? It’s time for political parties to put their country’s overall interests first – quickly. Time to face up to reality. Time to reject airy assumptions and ideologically driven economic and environmental dogma. All parties must face up to the problem. The market is not solving, and will not solve, this problem by itself.
In many quarters there is almost a resigned, unquestioning acceptance that a gas exploration ban is part of a new orthodoxy. The view is this orthodoxy involves a blanket move away from gas as a fossil fuel as quickly as possible – without thought to the timing and consequences, without weighing the benefits against the costs – without even thinking through the negative effects on CO2 emissions.
This myopic view is imperilling many businesses and could soon put thousands of people out of work via an energy shock to the economy, in the words of one industry executive. Imported products in place of locally produced goods would likely have been made using more carbon-intensive energy than here. Shipping – whether of imported products or LNG – would also increase CO2 emissions.
It would be interesting to know which, if any, other countries are forcing such a precipitate transition from natural gas production and use – with no plan for that transition. Some countries are moving in the opposite direction. Australia, which produces about 40 times more natural gas than New Zealand, sees gas as a key alternative to coal. This under the re-elected Labour Government. In Germany, gas is viewed as a preferred alternative to recommissioning nuclear power generation.
There are no easy choices with energy, but those countries with their own resources are best placed to maintain security, affordability and downward pressure on CO2 emissions.
New Zealand is one of about 60 countries with its own commercially viable natural gas resources. Why turn our backs on this? Why turn our advantage into disadvantages? Surely this is folly.
The Minister of Resources, Shane Jones, seems to be the one political leader who understands the situation and is prepared to do something about it.
Is it too much to hope that, when other politicians better understand reality, they will be responsible enough to join him in choosing a better way forward?
