Thursday 18th October 2018
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The government’s proposed exploration ban is a “selfish and rich world” approach that ignores the country’s responsibility to help deliver low-carbon energy in the broader Pacific region, MPs heard yesterday.
New Zealand’s exclusive economic zone is the ninth-largest in the world and that brings with it a special responsibility, Elemental Group managing director Brett Rogers said.
Banning further exploration of the EEZ’s 18 prospective basins is “throwing away” a huge opportunity to help developing Pacific basin nations – like India - meet their rising energy needs without resorting to coal.
The sedimentary basins that New Zealand has explored to date have proven to be gas-prone. That taonga is both a huge opportunity and a huge responsibility in order to develop the resource and deal with the emissions from it, he told Parliament’s environment select committee yesterday.
“New Zealand is part of the international community and should be contributing,” Rogers said.
“Not doing our part in sustaining humanity’s needs including energy - while reducing the carbon content of energy - is in our view a selfish and rich world approach that we shouldn’t be associated with.”
The committee is hearing submissions on legislation the government needs to effect its proposed ban on new offshore exploration.
On Tuesday the committee heard that New Zealand is already approaching a gas supply gap and that the 30-year transition period the government believes it is allowing is illusory. Some investment – including in planned emission reduction projects - has already stopped since the April 12 announcement and much of the existing exploration acreage may be surrendered during the next seven years.
Yesterday the committee heard that the rigid ban would increase electricity prices and that that impost would fall disproportionately on low-income households. Engineers and workers are already starting to leave Taranaki.
The International Energy Agency has urged member countries to accelerate work on carbon capture and storage. It doesn’t believe global emission targets can be met without it, alongside heavy investment in wind, solar, hydro and nuclear generation.
Rogers told the committee that there is now real opportunity for “cradle to the grave” handling of carbon dioxide (CO2). Twenty-two large-scale projects are operating globally and have so far sequestered 220 million tonnes of CO2.
He said New Zealand’s depleted reservoirs have capacity to store 450 million tonnes of carbon – equivalent to about eight years of New Zealand's net emissions.
Gas reinjection undertaken at Pohokura and Kapuni shows it is feasible in New Zealand reservoirs and more offshore exploration would open up a “golden opportunity” to use low-emission gas and put more CO2 back into the ground. That could also provide a competitive advantage for New Zealand emitters like makers of steel, cement and methanol.
While the cost of sequestration is currently high, Rogers said that gap will narrow and it can be a viable part of the country’s emissions response.
“We can have our cake and eat it and be better off as a result.”
Yesterday, Todd Corp, owner of the onshore Kapuni and Mangahewa fields, told the committee restricting gas supplies will increase energy costs and likely increase global emissions as gas is either imported, or coal is used for longer, or manufacturers shut and relocate to higher-emitting jurisdictions offshore.
Chris Hall, the firm’s vice-president for growth businesses, said the ban is the biggest change for the sector since oil and gas resources were nationalised in 1937, yet it is being imposed with little discussion and at great risk to the economy.
He said the ban should be deferred until the government’s other work on the emissions trading scheme has been completed and the Independent Climate Change Committee can consider it.
“The right fix is always better than a quick fix,” he said.
“This has not been well thought out.”
Supporters of the bill resisted any idea that New Zealand needs domestic gas supplies for industry and for winter and dry-year supply security in the hydro-dominated generation market. Using gas as a transition fuel was simply too late, they argued.
The International Energy Agency is forecasting a 45 percent increase in gas use globally by 2040 as countries work to replace coal in power generation, petrochemicals and steel making.
Michael Heard, a lawyer specialising in climate change, urged the committee to act now. The oil and gas industry had been aware of this issue since at least 1992 and refused to act. Warnings by British economist Lord Nicholas Stern in 2006 of the need for early action were ignored and it is now too late.
“What are we going to discover between now and 2020? If we are going to burn it we are part of the problem,” he said.
350 Aotearoa campaign manager Claudia Palmer said the ban was an essential response to climate change as “it addresses the root cause – the fossil fuels industry.”
Committee members appeared to struggle with the differing roles that gas plays in the economy and as a complement to the country’s renewable power generation. Large-scale wind is already cheaper than gas-fired generation.
Labour MP Angie Warren-Clark said she had believed the sector might be able to make a “quite nimble” move into hydrogen.
Pat Hills, chair of the Engineering Taranaki Consortium, told the committee hydrogen may still be five to 10 years away. While there are some pilot studies proposed there is no concept yet of large-scale hydrogen production from renewables locally.
One of the challenges the ban has created, he noted, is retaining the engineers in the sector to help develop that “new energy future.”
Earlier, committee chair Deborah Russell also opined that while gas may be preferable to oil and coal, it wasn’t preferable to renewables.
“When are we ever going to stop using fossil fuels, if not now?” she asked the Todd executives.
Babu Bahirathan, chief executive of Todd-owned Nova Energy, said hydrogen may become a renewable thermal fuel option further down the track.
But in the meantime gas-fired generation will play a critical role in enabling greater electrification of industry – a key part of the government’s strategy.
Without assurance of reliable power supplies – through dry years and periods of light wind – firms won’t make that change, he said.
“Gas will be the best fuel to provide that security of supply at the least cost. So maybe hydrogen might come in by 2050, and we go completely emissions-free, but until that time gas will provide that security.”
Green MP Gareth Hughes challenged a delegation of Taranaki mayors on whether they had been remiss in not starting a transition plan earlier. Oil and gas was a “sunset industry” and explorers like Apache, Anadarko and Petrobras had seen the writing on the wall and left New Zealand years ago, he said.
New Plymouth Major Neil Holdom said the region had been backing renewable energy development for many years.
Historically, New Zealand’s approach to dealing with climate change had been through the ETS. Nor had his council expected to have a ban imposed on 40 percent of the regional economy without the development of a proper plan by central government through proper consultation and clear identification of goals.
Holdom said there had been capital providers willing to help fund the investment needed for the country’s energy transition, but that would now be a challenge given the policy shock the ban had created for investors.
“You’ve got to be thinking about building an LNG importing facility off the coast of Taranaki because otherwise the lights will go out,” Holdom told Hughes. “Wouldn’t that be a failure of policy and are you going to be accountable to your people if that occurs?”
The hearings continue this week.
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