A gas rig off the Taranaki Coast (Photo: Radio NZ)
A gas rig off the Taranaki Coast (Photo: Radio NZ)

BusinessJune 3, 2019

After the drill-rush, Taranaki pins hopes on an alternative energy future

A gas rig off the Taranaki Coast (Photo: Radio NZ)
A gas rig off the Taranaki Coast (Photo: Radio NZ)

Taranaki workers who once earned six-figure salaries are having to rethink their lives after the government axed future offshore oil and gas exploration. Could alternative energy prove their saviour, asks Robin Martin for this RNZ Insight report

Money never used to be an issue for geologist Gary Ammundsen. He was a “mudlogger” – responsible for analysing the content of drilling muds – and he pocketed a six figure salary.

“I was making about $110,000 to $120,000 a year for only working 180 days. The stewards out there, the people who made your beds, they started on $100,000 on the offshore rigs.

“People like welders, who are generally well paid, they were leaving the welding trade to come and make our beds and do the laundry for us out there.”

‘Mudlogger’ Gary Ammudsen with Billie, 9, right and Ricky. Photo: RNZ/ Robin Martin

But then the oil price went south and Ammundsen found himself out of a job. “I was working for the Australian branch of an international corporation after the New Zealand branch closed down. Then I was made redundant. I spent six months desperately looking for [oil and gas] work, but because 90% of the people in my profession worldwide were doing the same thing, there was none.”

Ammundsen is far from alone. He’s one of many Taranaki oil and gas workers who earned, or are still collecting, handsome salaries and are now facing a new reality after the government’s decision.

But do new technologies such as hydrogen and wave power offer hope for the energy sector in Taranaki?

Taranaki is New Zealand’s only oil and gas producing region and more than 20 fields – both on and offshore – are currently in production.

According to the region’s development agency Venture Taranaki, in 2013 the sector generated 11,000 jobs nationally, of which approximately 7000 were in Taranaki. About 4300 workers were directly employed in the oil and gas sector in Taranaki.

Unsurprisingly, oil and gas lobby group the Petroleum Exploration and Production Association of New Zealand (PEPANZ) has been fiercely critical of the exploration ban.

It commissioned a New Zealand Institute of Economic Research report which found the ban could cost the Taranaki economy $40 billion by 2050.

The report predicted annual household incomes in Taranaki would drop by $21,000 and the region would shed up to 6% of its jobs, many of them highly skilled.

Anecdotally, the number oil and gas jobs had dropped significantly before the government’s announcement, but that didn’t stop the chair of the Taranaki Mayoral Forum, Neil Holdom, describing the decision as a “kick in the guts” to the region’s economy.

The New Plymouth mayor reminded anyone who would listen that it was Taranaki gas that “kept the lights on” around the country, and he demanded to see a detailed plan of how the region would be supported in the transition to a carbon neutral economy.

The oil and gas sector contributes $1.5bn to Taranaki’s GDP and makes up 40% of the regional economy. Off the back of the sector, the province also boasts the second highest regional GDP per capita in the country at about $68,500 (behind only Wellington).

Company logos such as Todd Energy, OMV and Methanex are common place at Taranaki events such as the world music festival Womad or emblazoned on community facilities such as the New Plymouth aquatic centre.

Holdom, a former journalist and communications executive at lines company Powerco, is still smarting from the decision to end offshore exploration. “My view is that eventually we’ll go to a zero carbon economy, but at the moment for example, Fonterra has got coal-fired plants in the North Island making milk powder. Now if we converted every one of those to gas straightaway we could reduce our national emissions by four or five per cent.

“What the government has done is pick on a fuel, for whatever reasons they have, and now industry is going what other winners are you going to pick?

“My view is that you set a price for carbon and then leave your options open and you’ll choose the options that are most efficient, because the goal is to reduce the amount of carbon dioxide and methane going into the atmosphere, not to be picking individual industries and fuel types that are going to work best.”

The China Oil field Serivces jack up rig approaches the Pohokura platform off Taranaki coast. Photo: RNZ / Robin Martin

Holdom says if it was his decision he’d overturn the ban tomorrow – not that he is expecting the government to.

“I think they’ve got too much political capital invested in it and while it is not something I support, ie the policy, we’ve moved on from that. There’s no point in having the argument. They’re the government, you know, they’ve got the big G and what they say goes.

“We just have to work out, now that’s off the cards, what do we do now? We just have to work within the constraints that we’ve got and try and solve the problems that the whole world is trying to solve.”

Ammundsen says the decision to end offshore oil and gas exploration means his chances of working in the sector in New Zealand again are virtually zero.

“Overseas or in some other geology there’s a good possibility. Good as in at least 50%. In Taranaki, no. Why would anybody bother drilling in Taranaki now? The government has indicated its hostile to oil and gas, so as long as that’s there [the ban], the oil companies and the people with money to invest in oil are going to look elsewhere – where they’ve got open arms and deep pockets.”

Not everyone is so pessimistic about the future. Proponents of geothermal, hydrogen, wind and solar energy are all looking to help fill the void as gas supplies dwindle.

Many of them attended a glitzy $400-a-ticket Just Transitions Summit in New Plymouth this month,  which featured Hollywood A-listers James and Suzy Cameron and Australian rock royalty Peter Garrett as keynote speakers.

The summit’s aim was to help plot a way forward for Taranaki.

Jacinda Ardern at the Just Transition Summit Photo: RNZ /Robin Martin

Jacinda Ardern – who has described climate change as this generation’s nuclear free moment – reminded the more than 550 delegates that the offshore exploration ban was designed to help New Zealand meet its commitment to be carbon neutral by 2050 and achieve its target of 100% of electricity being generated from renewable energy sources by 2035.

Ardern acknowledged the transition would be challenging for Taranaki, but said the province wasn’t about to be thrown under a bus and the government was there to support it.

She went on to announce the latest instalment in that support – $27 million to establish a clean energy centre in Taranaki, and a further $20 million for clean energy research.

Ardern later told media the National New Energy Development centre would employ 45 people and help create new businesses from emerging energy technologies.

“The goal has to be – how do we turn those oil and gas jobs into jobs in hydrogen … jobs in wind energy, jobs in tidal? So what we are doing here is trying to commercialise some of those new opportunities and make sure we keep those high wage jobs.”

Speaking shortly after the announcement, Pepanz chief executive Cameron Madgwick – who attended the summit as a delegate – had to admit the clean energy centre was a positive initiative. “It’s good to see some funding come into the province. It’s obviously a relatively small amount compared to the contribution of natural gas to the province and New Zealand, but it’s a good start.”

Madgwick had one caveat. “We’d like the new energy centre to look at the uses of natural gas that can be lower emissions, because of course there are 400,000 New Zealanders who rely on that fuel.”

Holdom was even more upbeat. “It’s a really good start and it’s really good to hear the prime minister talking about building a partnership and wanting to support us as we look to maintain the standard of living … which is fundamentally what this is all about.”

Over the past 12 months the region has held a series of workshops designed to create a Taranaki 2050 Roadmap focusing on sectors key to its future, including energy, tourism, the Māori economy and food and fibre.

Justine Gilliland held the government-funded post of general manager for transitional economy in New Plymouth and is now chief executive of Venture Taranaki.

Gilliland says the Taranaki 2050 Roadmap and a parallel Hydrogen Roadmap are about the province taking control of its own destiny.

“It’s about thinking about the transition over 30 years … so we’re going on a journey here, nothing is going to shut down tomorrow. It’s about how we make that transition over time and there will be new forms of energy that we’ll be able to invest in and we’ve got amazing skills in depth in Taranaki that we can draw on to actually help New Zealand make that transition.”

One of those businesses looking to expand into clean energy is New Plymouth engineering company EHL Group.

It has a background in providing hydraulic systems to the transport and oil and gas sectors, and has developed a first-of-its-kind device which generates electricity from wave power.

Lead designer Derek Shotbolt has spent two years testing the device in Hawaii and is excited about returning to the islands to test a full-sized 15-metre high version, but first the company is waiting to find out if an application for $6 million from the Provincial Growth Fund has been successful.

Engineering company – EHL’s lead designer Derek Shotbolt, left, and co-owner Peter Jannings are focused generating energy through wave power Photo: RNZ / Robin Martin

EHL co-owner Peter Jannings says the company needs the money to match the contribution of its US joint venture partner.

He reckons wave power has the potential to create a lot of jobs for people in Taranaki.

“We have the skilled staff here now working in the petrochemical industry, the contracting businesses that are doing the engineering, the consultancy companies, the electrical design companies. They’re all here based in Taranaki so those companies can all play a big part in developing this product. We have a cable manufacturer here.

A joint venture in Taranaki is hoping to unlock the potential of hydrogen energy as a transport fuel in New Zealand while at the same time producing ammonia urea fertiliser with a zero-carbon footprint.

Fertiliser giant Ballance Agri-Nutrients has signed a $50 million deal with cleantech company Hiringa Energy which will drive the project.

Ballance Agri-Nutrients produces the bulk of its 260,000 tonnes of ammonia urea fertiliser at its South Taranaki plant.

As part of the process it strips hydrogen from methane gas, creating a massive 420,000 tonnes of carbon emissions in the process.

In what is being described as an industrial-scale trial, it’s planned to build up to four 160-metre-high wind turbines at Kapuni to begin tackling those emissions.

Co-founder of Hiringa Energy Andrew Clennett explained how.

“We’ll take that 16 megawatts of electricity and we’ll be able to run the plant for Ballance and we’ll also be making hydrogen – ‘green hydrogen’ – which we can then feed into that plant to make more of the product [ammonia urea], and also as we grow our transport market for hydrogen we’ll be able to divert that to help decarbonise say the heavy transport sector that we’ve been working on for a number of years now.”

“Green hydrogen” is created by using renewable electricity to split hydrogen from water using electrolysis. It can be used in industrial processes or in fuel cells used to power electric vehicles.

Site manager Glen Johnson said its 125 staff, whose jobs were threatened by dwindling gas resources, were feeling upbeat about the development.

“A project like this is really exciting because it leverages the existing skills and capabilities that we have and really extends those and brings some new skills into the province as well. So I think this is an exciting opportunity for my team but also an exciting opportunity for our community.”

Clennett said Ballance was the perfect partner for Hiringa because initially it would take all the hydrogen produced at Kapuni while the market for the fuel in heavy transport evolved.

It was also a natural transport hub, he said.

“Approximately 40 trucks come to this site  a day and we’re just a couple of kilometres from a major dairy factory that has 25 trucks coming and going everyday collecting milk and so immediately we are able to make fuel for the immediate transport market from renewable energy right here in South Taranaki.”

The project would initially generate enough “green hydrogen” to supply about 300 trucks or 6000 cars per year, said Clennett. Or to put it another way, reduce the equivalent amount of CO2 emission as taking 2600 cars off the roads.

Ballance chief executive Mark Wynne said the joint venture partners were taking a conservative approach.

“Well, initially it’s very small. It will produce the equivalent of about 7000 tonnes of urea. That’s about 1 percent of our total production, but the purpose is really to test the technology, prove the commercial model and open all the opportunities for commercial scale up from there.”

Wynne said Ballance was conscious of its carbon footprint and playing a long game.

“We believe that through regenerative energy coming from wind and hydrolysing the water we can get zero-carbon footprint hydrogen and that will set us up very well into the future when carbon taxes start to increasingly bite into our cost structure.”

At first the project will offset about 30,000 tonnes of carbon emissions or about 8 percent of the company’s current carbon footprint.

Hydrogen vehicles will have first dibs on fuel produced at Kapuni and it’s envisaged that eventually new production facilities will need to be built for Ballance to source the hydrogen it needs to produce zero-carbon fertiliser.

Hiringa Energy co-founder Kathy Clennett said the joint venture was an example of what the future could look like.

“This project is a great example of retaining jobs and transitioning jobs. This new technology that we’re introducing here is the seed of an energy hub at Kapuni and also a transport hub at Kapuni that’s powered by zero-emission energy.”

It’s hoped the hydrogen production facility at Kapuni – which could employ up to 100 people during construction – will  be operational in 2021.

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