Minister echoes concerns for Kiwi power

New Zealand government and electricity executives are warning of a looming power crisis, possibly with soaring power prices, coupled with constraints on economic growth, as Maui gas runs out.

Energy Minister Pete Hodgson yesterday released Ministry of Economic Development papers which say replacement fields for Maui need to be found to ensure priority power demands, such as for the dairy industry, can be met in future years. The depletion of Maui could see electricity prices rising over the next few years, a move which could reverse New Zealand's competitive energy advantage over Australia.

National grid owner Transpower forecasts that by 2005 existing generation is likely to be insufficient to meet demand in a dry year. Electricity demand continued to increase by about 2%, or an additional 150MW of additional generation capacity, each year. The security margin to cope with dry years was reducing, Transpower said in its forecast, cited by the MED.

About 20 per cent of New Zealand's electricity is generated from Maui gas and, crucially, it has acted as a buffer, able to increase production when hydro-electricity is constrained in dry years, as happened in the 2001 winter.

Meanwhile Meridian Energy chief executive Keith Turner says it's already too late for new gas fields to be found in time to replace Maui. The north Taranaki offshore Pohokura gas field was a "projection, not a fact" and the offshore south Taranaki Kupe resource would be hard to develop.

Analyst Energy Review has, however, reported that operator Shell Todd Oil Services is pressing ahead with the $NZ900 million development of the 1tcf-plus Pohokura gas-condensate field off north Taranaki, scheduled to be finished by late 2005-early 2006, and that major Kupe stakeholder Genesis Power expects to shortly announce the chosen developer for that field.

Turner told an Energy Law Association meeting in Wellington yesterday that New Zealand already faced a really tight (electricity) supply position and that urgent action needed to be taken, as the country could no longer rely on gas for electricity production.

There was potential for more hydro power stations, on top of Meridian's planned $1 billion 600MW hydro power scheme on the South Island's Waitaki River, but these might not be to be producing power until 2008 at the earliest, a year after Maui was expected to falter.

There was also limited potential for wind and geothermal stations. The other alternative was fuelling power stations with New Zealand or even Australian coal.

Preussag Energie New Zealand vice-president David Salisbury said Maui would be replaced by a portfolio of smaller gas fields. New Zealand was highly prospective and largely unexplored, but an adequate replacement portfolio had not yet been identified, he told the Wellington meeting.

The large size of the Maui field and its relatively low gas prices had overshadowed the market for many years. The pace of exploration was increasing, with about 50 companies now actively prospecting in New Zealand.

However, there were few big players among them and activity levels were constrained by the continuing need to raise exploration capital, Salisbury added.

Analyst Energy Review has for months been reporting other energy executives and leading explorationists saying concrete measures - including further incentives and a review of government policy - need to be urgently implemented to prevent the predicted power shortages and to keep methanol manufacturer Methanex here beyond 2006.

Energy Minister Pete Hodgson said the government was focused on keeping prices down through market competition, or regulation if necessary, and on improving the country's energy efficiency. The Energy Efficiency and Conservation Authority estimated the energy efficiency strategy, adopted by the government last September, could produce economic benefits worth $900 million by 2012 if its targets were met.