As factories threaten closure and the government considers intervention, experts are warning the supply shortages have no easy fix, writes Catherine McGregor in today’s extract from The Bulletin.
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Gas squeeze prompts talk of rationing
Resources minister Shane Jones is weighing up whether the government should ration gas to keep some industries alive through New Zealand’s deepening energy crisis, BusinessDesk’s Ian Llewellyn reports (paywalled). Gas supply has almost halved in the past decade and reserves are falling sharply, with MBIE forecasting annual production to drop below 100 petajoules next year – four years sooner than expected. Jones told industry leaders there was a “clear call” for the Crown to ensure “gas flowed to those who have no other options”, rather than leaving it to the gentailers.
Electricity prices are too high for many firms to switch, he said, and “substantial deindustrialisation” could occur without government intervention. He says he’s in talks about squeezing more short-term supply from existing gas fields, while exploring whether current legislation allows him to set prices for large users who cannot afford retail rates.
Factories facing closure
The crisis is already forcing some businesses to the brink. Half of the gas consumers (31 of 66) in a new survey have already reduced operations, increased prices or cut staff due to rising gas costs or unreliable supply. Last week fertiliser maker Ballance Agri-Nutrients said it may shut its Kāpuni plant for four months from October after being outbid for its existing gas supply, RNZ reports. The company, which produces a third of the country’s urea, would keep paying its 120 workers during a hiatus, but warned that closing down even temporarily would have significant flow-on effects for farmers and the Taranaki economy.
Meanwhile Auckland’s Glucina Alloys, New Zealand’s only aluminium recycler, says it may have to close altogether, BusinessDesk’s Maria Slade reports (paywalled). The company’s gas contract runs out in 2026 and short-term deals will be pricier, if available at all; switching to electricity would cost over $800,000. Auckland Chamber of Commerce’s Simon Bridges said Glucina’s plight should serve as a warning about the declining future of heavy industry in New Zealand, “where we’ll be lucky if what we’ve got left is a few cows, some tourists, and possibly a bit of software”. He added: “I hope that Government ministers are thinking about the likes of Glucina Alloys every waking minute, because they should be.”
Repeal unlikely to fix shortfall
Last week’s repeal of Labour’s 2018 ban on new offshore oil and gas exploration has been hailed by the government as a much-needed correction to a law that hobbled the industry. But experts spoken to by RNZ’s Kirsty Johnston say it will do little to fix the current crisis. Global investment in new drilling has been in decline for a decade, and most major oil companies had left New Zealand before the ban. Investor confidence remains shaky, demand is falling as companies close or decarbonise, and New Zealand’s closed gas market means companies don’t get any export revenue to offset the cost of large projects.
Even if exploration did restart, it could take a decade for new fields to come online – and by then, as Consumer NZ’s Jon Duffy put it, “there will be nothing left to power”. While this year’s budget included $200m for co-investment in new gas fields, the government admits that recent drilling has failed to make significant new discoveries. “It’s more likely the money will be used to fossick around in our existing fields, trying to retrieve what’s left,” writes Johnston.
Households face rising costs
For domestic users, the crisis is more about high prices than running out, writes RNZ’s Susan Edmunds. Households consume only 4% of the country’s gas, and GasNZ says supply will last for years – especially if renewable biogas is developed. But as more customers disconnect, the cost of maintaining the network is spread over fewer people, pushing prices higher. Consumer NZ advises replacing gas appliances with electric ones when they reach the end of their life, and for those using gas only for cooking, bottled LPG – which remains plentiful – may be a cheaper option. Those staying with piped gas should brace themselves for prices to keep on climbing.
