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Speaker 1: You're listening to a podcast from Newstalk ZB Follow this

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Speaker 2: Good afternoon, So we're talking about oil and gas in

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Speaker 2: New Zealand on the back of the twenty eighteen ban

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Speaker 2: by the Labor government. It appears that reversing that ban

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Speaker 2: is not as simple as once thought. That is still

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Speaker 2: moving its way through parliament. But the question we've got

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Speaker 2: for you is do we need to change policies and

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Speaker 2: legislation to get some more confidence back in the industry

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Speaker 2: to allow exploration with these dwindling supplies, primarily of natural gas.

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Speaker 2: To break it all down, we are joined by John Carnegie.

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Speaker 2: Here's the chief executive of Energy Resources Alter Roa. John.

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Speaker 2: Very good afternoons too.

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Speaker 3: Yeah, good afternoon, hey John.

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Speaker 4: Let's get right back to basics. What do we mean

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Speaker 4: by natural gas in New Zealand?

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Speaker 3: Right? Okay, Well, let us going back to basics. Basically,

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Speaker 3: natural gas is a fossil fuel which is primarily extracted

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Speaker 3: in the Taranaki region and it's used widely for electricity

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Speaker 3: generation and industrial processes. And of course, as we've tried

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Speaker 3: to see in the last couple of years, back up

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Speaker 3: for renewableoks during dry years or pig demand.

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Speaker 4: So okay, and how much are we producing and how

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Speaker 4: much are we importing?

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Speaker 3: Well, as we most of just about all of what

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Speaker 3: we produce is used domestically. Back in the day we

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Speaker 3: used to produce the units of measurement called petagules. We

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Speaker 3: used to produce around one hundred and eighty two hundred

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Speaker 3: of them. We're down to about one hundred and ten now.

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Speaker 3: The slight exception to that is LPG, so that's bottled

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Speaker 3: gas where we do actually import a small fraction of

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Speaker 3: our LPG from Australia. But the situation, the reason we're

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Speaker 3: in this situation, of course, is that drop from one

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Speaker 3: hundred and eighty petitules down to one hundred and ten

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Speaker 3: and possibly lower.

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Speaker 2: So we'll come back to the LPG bottled LPG, John,

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Speaker 2: But how quickly are we running out of the natural

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Speaker 2: gas that is primarily used by industry.

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Speaker 3: I mean, that's a bigger question. It sounds unfortunately. I mean,

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Speaker 3: the irony is that we have lots of natural gas resource,

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Speaker 3: but where the sector is constrained given the oil and

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Speaker 3: gas span to exploring it so effectively. You know, if

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Speaker 3: you want to think about it from a business perspective,

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Speaker 3: the oil and gas industry is effectively running out of runway.

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Speaker 3: Every business, of course, needs to invest in its future,

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Speaker 3: and the oil and gas sector got told effectively in

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Speaker 3: twenty eighteen that it didn't have one. So you know

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Speaker 3: what we're now seeing is the impact of that. So

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Speaker 3: there's plenty of gas we just can't access at what

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Speaker 3: the sector is confined to its existing fields and they

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Speaker 3: are all getting old, mature and the nearing end of life.

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Speaker 3: So that's the issue, not that we're running out of gas.

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Speaker 3: We're running out of gas that we have available to us,

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Speaker 3: and that is the importance of this government reversing the

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Speaker 3: oil and gas new permit ban and hopefully that revitalizing

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Speaker 3: our oil and gas sector.

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Speaker 4: What was the plan, So if this must have been foreseeable,

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Speaker 4: so what was the plan to replace what gas does

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Speaker 4: for our power needs in the country.

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Speaker 3: Well, there's a very good question. I guess the expectation

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Speaker 3: was that behemoth projects like the Onslow stored pumped hydro

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Speaker 3: scheme that was put forward by the last government down

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Speaker 3: down in the South Island, and also the expectation that

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Speaker 3: renewable sources of energy, so hydrogen grand gases and a

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Speaker 3: greater electrification was actually going to fill the gap left

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Speaker 3: by gas. But clearly, as we can see from sharply

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Speaker 3: increasing prices, they haven't been able to come online fast

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Speaker 3: enough to offset the declining supplies in our gas fields.

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Speaker 4: And how much have gas prices gone up since the ban?

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Speaker 3: That depends on the specific contracts that gas users have,

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Speaker 3: but gas prices have risen sharply. And actually the worst

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Speaker 3: part of that is that the electors and gas sectors

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Speaker 3: are joined by an unbilicle. About thirty percent of our

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Speaker 3: produced gas is used in the electricity sector. You constrain

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Speaker 3: supplies through to the electricity sector, you're going to get

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Speaker 3: increased electricity prices and house which I think said earlier

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Speaker 3: this year that they're expecting to see price increases of

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Speaker 3: around about ten percent on average for residential consumers, not

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Speaker 3: to mention our larger users.

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Speaker 2: Right, So, where are we at at the moment? John,

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Speaker 2: with exploration? As I understand, the ban is effectively still

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Speaker 2: in place, the legislation is still moving through parliament. What

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Speaker 2: are the fish hooks there with that legislation?

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Speaker 3: Gina, We look, it was about actually about getting that

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Speaker 3: legislation right and put into a state that was workable

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Speaker 3: for the industry, and so the government's been deliberate about

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Speaker 3: ensuring that it actually delivers on their desire to revitalize

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Speaker 3: the guess sector. So, you know, a key part of

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Speaker 3: that legislation, which is currently in the House and we

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Speaker 3: understand is going to be passed into law within the

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Speaker 3: next month or so, it is the reversal of the

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Speaker 3: ord in desk span and a desire to ensure that

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Speaker 3: we have a more exploration ACTI. So basically the purpose

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Speaker 3: of the actors give the sector back, the runway, back,

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Speaker 3: the ability to invest in its future, to increase gas

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Speaker 3: production and to place downward pressure on both gas and

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Speaker 3: electricity crisis.

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Speaker 4: But if that ban is reversed, can that not just

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Speaker 4: be put on again, reinstated again by a future government

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Speaker 4: potentially in eighteen months.

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Speaker 3: Yeah. Look, I mean that is obviously the big risk,

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Speaker 3: and that's what you just talked about. There is called

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Speaker 3: sovereign risk, and that's effectively a fancy phrase for the

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Speaker 3: impact on investment of a bad government decision. And so yes,

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Speaker 3: there is that risk. We have been very clear with

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Speaker 3: the government that investors in the upstream sector, the or

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Speaker 3: I guess sector and exploration are effectively gun shy and

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Speaker 3: will we'll need we'll need the government to walk along

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Speaker 3: side it to ensure that its investments are safe. I mean,

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Speaker 3: these are these are quig investments. You know, if you're

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Speaker 3: looking at offshore, you know you're looking at over one

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Speaker 3: hundred million dollars a well and on shore anywhere from

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Speaker 3: ten to twenty. So these are not insignificant investments in

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Speaker 3: New Zealand's energy future, energy security. So the sector rightfully

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Speaker 3: wants to be assured that its investments are safe, and

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Speaker 3: that's a future government doesn't come in and say no, sorry,

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Speaker 3: you've invested that for no good reason. We're going to

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Speaker 3: focus on something else.

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Speaker 2: Well, we are joined by John Carnegie, Chief Executive of

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Speaker 2: Energy Resources tear Rower to get to the bottom of,

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Speaker 2: hopefully this what we do about our oil and natural gas.

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Speaker 2: It appears natural gas is starting to run out in

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Speaker 2: terms of supply. John, Thank you very much again for

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Speaker 2: your time.

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Speaker 4: Yeah, as we said before, we're going right back to

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Speaker 4: the basics. But I've got another very basic question that's

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Speaker 4: coming through here. Is there a difference in supply chain

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Speaker 4: around the gas we have in canisters at our houses,

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Speaker 4: barbecue you know, plug into our system and the gas

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Speaker 4: being pumped to be used in industry.

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Speaker 3: Yeah, well there is because we've got a natural gas

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Speaker 3: transmission pipeline that basically takes gas from the Kadaranaki region

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Speaker 3: then spreads it throughout the North Island. In the South

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Speaker 3: Island we have no natural gas network, but what we

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Speaker 3: do use is a lot of LPG and bottled canisters

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Speaker 3: and so they know, people will be familiar with those. Actually,

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Speaker 3: as looking at your barbecue, that's an LPG cannist right

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Speaker 3: through big canisters that you put on the outside of

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Speaker 3: your wall, outside your kitchen and use it for your

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Speaker 3: home eating and water and cooking.

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Speaker 4: Okay, And look, just going back you talked before about

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Speaker 4: the runway for the gas industry. Is gas the future

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Speaker 4: for New Zealand long term? Or are those who worry

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Speaker 4: about it's perceived damage to the climate going to eventually

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Speaker 4: get their way and shut it down, in which case

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Speaker 4: a runway is only going to be so long. And

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Speaker 4: if this is the case, what is going to replace it?

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Speaker 3: Yeah? Well, look, there are a number of dimentions for that.

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Speaker 3: Let's address the climate one to start off with. I mean,

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Speaker 3: what we've seen in the last couple of years is

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Speaker 3: increasingly we're doing the reverse of what everyone else around

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Speaker 3: the world is doing. Everyone else around the world is

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Speaker 3: shifting from coal to natural gas as a cleaner, more

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Speaker 3: affordable option. We seem to be moving in our eloquacity

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Speaker 3: sector from gas to coal. So actually more gas in

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Speaker 3: our electricity system is an environmental wind. And of course

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Speaker 3: natural gas is covered as its coal, covered by the

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Speaker 3: emissions trading scheme and a carbon price, so that all

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Speaker 3: of the emissions are actually accounted for with respect for

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Speaker 3: natural gas in in terms of the future. As I

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Speaker 3: said before, what's so frustrating about the situation we're in

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Speaker 3: is that New Zealand has abundant natural gas that can

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Speaker 3: be harnessed to help ensure we have a thriving economy.

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Speaker 3: We fuel manufacturers and exporters to deliver key with jobs

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Speaker 3: and prosperity. And unfortunately, what we're seeing around the most

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Speaker 3: in now is businesses whose contracts financial gas are rolling

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Speaker 3: off and are getting rate shock effectively, are being told

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Speaker 3: that the gas sector is constrained, supplies constrained, and that

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Speaker 3: their prices are are going to go up. Eventually. Of course,

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Speaker 3: there will be alternatives, so again, as I said, earlier.

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Speaker 3: There will be alternatives developed, will greater electrification, obviously, that's

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Speaker 3: the first cab off the rank. Some will use more

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Speaker 3: LPG and canisters we'll develop and that we're developing actually

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Speaker 3: and putting into our system renewable methane based of digesting

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Speaker 3: food digesters. So you know, there are a number of

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Speaker 3: options coming to the table, including batteries, you know, the

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Speaker 3: electricity system, delivering more wind and solar. You know, all

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Speaker 3: of that is good. The primary issue for us and

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Speaker 3: why we will always need natural guessing our electricity system

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Speaker 3: is the fact that we are so water dependent. And again,

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Speaker 3: as we've all seen over the last couple of years,

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Speaker 3: as we have dry years, we need need something to

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Speaker 3: fill the gap, and that will be flexible natural gas,

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Speaker 3: or it certainly should be, and we think that that

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Speaker 3: will have an ongoing role in our electricity system, a

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Speaker 3: smaller role, but an ongoing role. We need more natural

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Speaker 3: gas in our electricity system and for our industries there

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Speaker 3: are hard to shift industries as well with natural gas.

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Speaker 4: And now, John, just one last question that's come through

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Speaker 4: from a textra on nine two nine two. We've got

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Speaker 4: to go to the news, but just quickly, can you

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Speaker 4: ask John, if I'm building a new house, should I

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Speaker 4: put in gas, a gas connection or go all electric?

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Speaker 3: Oh, I mean that I'd hate to give that advice.

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Speaker 3: But look, if the government's plans pay off, we will

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Speaker 3: have a revitalized gas production sector. But also, residential gas

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Speaker 3: is always a small component of the overall use of gas.

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Speaker 3: There will always be guess at the residential level.

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Speaker 2: Yeah, John, very interesting, Thank you very much for your time.

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Speaker 2: Really appreciate it. That is John Carnegie, Chief executive of

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Speaker 2: Energy Resources. Out here at are

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