Despite the Clark Govt’s 10-year restriction on new fossil fuel base-load thermal generation above 10MW, Energy Minister David Parker says it’s not “doom and gloom” for the petroleum sector. Fossil fuels, especially gas, he insists, will have a critical role for some time to come. Contact Energy is intending to build a 200MW peaking plant at New Plymouth. E3P and other gas-fired plants have a continuing need for gas, and Huntly could use more.

Industrial demand has increased with Methanex bringing back into production one of Motunui’s production trains, and planning to ramp up production to 900,000 tonnes of methanol a year. Methanex will use about 34PJ of gas a year. Parker reckons the relative economics of gas against coal will improve under the emissions trading scheme. In the short to medium-term there are sufficient supplies of gas for NZ’s needs, as a result of Pohokura’s reserves being upgraded and Kupe coming into production sometime in 2009.

Parker believes sometime between midway in the next decade and 2025 more gas supplies will be needed. “The Govt’s current onshore Taranaki blocks offer is structured to maximise the chances of new gas being brought to market in a timely manner. I am advised the result of the blocks offer will be released shortly.” Parker says should new gas supplies be found outside the Taranaki basin, the issue will then become delivery or export infrastructure.

It seems likely gas will be found as a by-product of oil. “If found in quantity it remains to be seen whether it will be most profitably used in NZ, or whether in future it is exported by developers.” Given the moratorium on gas-fired base-load thermal stations, Origin Energy’s decision to drill a wildcat well 65km east of Dunedin is a spectacular $70m bet it can discover a Maui-size gas/oil field.
Aust-based Origin Energy (which owns 51% of Contact Energy) is spending the thick end of $1bn on developing the Kupe field and its commitment to drill an exploration well in the large Carrack/Caravel prospect is described in oil industry jargon as “elephant hunting.” It is seeking partners for “this high risk, but potentially high reward exploration opportunity.” One analyst says “we all will be saved if they are right.”

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