The draft New Zealand Energy Strategy (NZES) barely mentions gas and ignores liquefied natural gas, concentrating on various forms of renewable energy, and arguing that where possible all new electricity generation should be renewable.

But PEPANZ executive officer John Pfahlert disagrees strongly.

“While PEPANZ supports this aim of reducing carbon emissions, it considers that renewable energy cannot be implemented in isolation and that gas should play an important role in the New Zealand economy for decades to come,” he told PetroleumNews.net.

If petroleum companies were dissuaded from exploring because of any likely carbon charges on end users, that would increase the likelihood of insufficient gas being found to prevent a predicted gas supply gap from occurring in the middle of next decade.

The NZES could also drive explorers to concentrate on projects in and around the Taranaki Basin, the country’s only semi-mature area with existing gas infrastructure, thus limiting the chances of significant new volumes of gas being developed, he warned.

Pfahlert said constrained gas-fired electricity generation options, along with the associated limited exploration opportunities, were likely to constrain the growth of the New Zealand gas market.

Without large foundation customers, such as electricity generators, and long-term gas supply contracts, explorers would not have the certainty of the cash flow necessary to “bank” any new gas field developments.

“Gas-fired power generation helps to underpin renewable electricity generation, therefore the government should be explicit in encouraging gas exploration by permitting efficient baseload gas-fired generation to help provide energy security,” he said.

PEPANZ argued that many countries around the world promoted energy diversity, in particular the use of gas, as gas could provide power generation capacity with much lower rates of carbon emissions than coal.

The NZES also stated that the government believed the current regime and incentives for gas exploration were appropriate and needed no further enhancements.

Again, Pfahlert disagreed, saying more incentives were necessary to overcome New Zealand’s isolation. He suggested:

• opening up acreage currently set aside for future blocks offers;

• improving tax deductions for exploration drilling costs;

• amending the Crown Minerals Act to enable the establishment of a wholesale gas market; and

• ongoing government investment in seismic data acquisition in frontier basins.

Pfahlert said if the government recognised the strategic importance of gas, and provided further incentives for exploration and development, there was “excellent potential for the petroleum sector to continue the discovery of oil and gas”, as evident by the recent offshore Pohokura gas and Tui oil finds.

Given New Zealand’s significant reliance on imported fuels for transport, Pfahlert thought the NZES should have also stressed the value to the economy of exploring and developing oil reserves to ensure at least partial self-sufficiency in transport fuels.

Again, the NZES was almost silent on how to constrain fuel consumption, and of how development of domestic resources might play a future role.

“We recommend the strategy is amended to deal with this deficiency,” Pfahlert said.

Submissions on the draft NZES closed last Friday. Many energy companies made submissions.