A Kiwi gesture

Have a guess at what are the three biggest contributors to greenhouse gas emissions in New Zealand – where the Ardern coalition government (Labor propped up by NZ First and the Greens) has just jumped on the gesture politics bandwagon and ended new area offshore petroleum exploration and most opportunities for onshore activity despite a parliamentary commissioner’s recent warning that the country will need gas for the next 30 years?

The move, says the government, will promote the Land of the Long White Cloud as “a leader in a new global economy based on renewable energy.”

PM Jacinda Ardern declares “we are protecting existing industry and protecting future generations from climate change.” And her climate change minister adds that the government intends to pursue a “high-tech, low-carbon” society, helped along by a $NZ1 billion “clean technology and infrastructure” fund.

This for a country that exports some high quality oil and uses the trade income to support importing three times as much, mostly as vehicle fuel, and also has 265,000 households and 15,000 businesses relying on its domestic gas supply, including the economically-vital dairy industry.

Twenty per cent of present NZ gas production is used for electricity generation (which, roughly, totals the same overall as Victoria’s) and 45 per cent by companies making petrochemicals, fertilisers, pulp and paper and methanol (which is part of NZ export trade).

The government receives about $NZ500 million a year in taxes and royalties from the upstream petroleum industry. It also gets revenue from NZ’s exports of coking coal to Asia for steelmaking, something about which little is known on this side of the ditch.

There’s an echo of Sir Humphrey’s “courageous” jibe from Yes Prime Minister in how leading consultancy Wood Mackenzie has greeted the Ardern announcement. It is “a bold step,” says research director Angus Rodger, “sending a clear message the country is prepared to leave oil and gas production behind and the tax revenues and jobs that go with it.”  It is “unclear,” he added, how investors will interpret the news. Really?

Canadian-owned Methanex, which uses a large portion of NZ gas to manufacture methanol there, says the decision has “significant implications for long-term security of gas and electricity supply.” To which the NZ Major Gas Users Group has added that gas imports may need to be considered in the longer term……..

Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, which has a number of member companies active in NZ, attacks the Ardern move for “being made with no public consultation or assessment of the environmental and economic consequences” – while federal Resources Minister Matt Canavan chirps that he will be happy to see petroleum investment attracted here if the Kiwis don’t want it and notes that the situation comes with the bonus that “we can export gas to them.”

One leading NZ media commentator adds that the new government has jumped without producing a convincing, facts-based review of a “major issue for our future: where New Zealand will source its energy in 10 years’ time.” She adds that 46 per cent of total NZ energy consumption comes from oil – and asks where is the plan to let go of this fossil fuel? And, she says, “putting a big not-really-open-for-business sign” out for petroleum investors is not likely to attract development in the areas where exploration is still permitted.

At present rates of use, New Zealand has about 11 years’ gas reserves – and the government has been quick to point out that there are “many more years” of gas resources in areas holding development permits, most notably a large (but yet to produce) field off South Island. An independent study last year said the Barque prospect was big enough to generate $NZ32 billion in government income over its life – but a major question now is surely whether the Greens and their allies would ever allow such development (their carrying on about activity in South Australia’s Great Australian Bight being a pointer).

Needless to say, one of the leading NZ green activist groups rushed to the media to declare this step to be “the beginning of the end for the fossil fuel industry here” which doesn’t sound like putting out the welcome mat for the Barque development.

I’m left wondering if the new PM and her cabinet read the International Energy Agency’s latest review of NZ energy – which was published last year before they came to office – ahead of taking this decision? My money is on “no.”

The IEA paper includes this salient point: “New Zealand’s geographical remoteness, low population density and isolation from the global energy markets supply chain mean that it must be robust against sudden changes in energy supply/demand which impact New Zealand’s economy and its globally competing energy-intensive industries (steel, aluminium and agriculture).”

And it also includes this reminder: “The main challenge for electricity security continues to be linked to the unavailability of water reserves during dry years. In the light of the further decline in the use of fossil fuels, notably in the power sector, and the climate and energy goals of New Zealand, the case for a strategic reserve could be made so as to back up hydro capacity.”

Now, regarding that question with which I kicked off this post: the agriculture sector is responsible for half NZ’s greenhouse gas emissions (with the dairy industry accounting for 17.3 per cent). The next two largest contributors are transportation fuel and forests converted to grassland. The contribution from all parts of the energy sector is 39.8 per cent and close to half of this is from road vehicles.

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