An important contributor to the North Island economy, Methanex Corporation, said the banning of new offshore gas exploration will have a significant implications for long-term gas supply.
The Canadian company through its New Plymouth based subsidiary Methanex New Zealand utilises about 40% of all natural gas produced in this country for the production of methanol.
TVNZ reported that Methanex operates plants built in the early 1980s “Think Big” era of government-led petro-chemical industrial development - at Waitara and Motonui, using gas piped ashore from offshore Taranaki gas fields.
The Channel One station said those fields will continue to produce for as long as they are commercially viable, but official estimates of remaining reserves suggest New Zealand has only another 10-to-11 years of known gas reserves.
This is at a time when explorers around the world are developing gas fields to meet a mammoth growth in demand.
TVNZ said Methanex echoed other major gas users, saying it was disappointed over the Government's decision to end offshore block offers and the lack of consultation with industry that has gone into making this decision.
“While the announcement does not affect production at our Taranaki sites in the short term, it has significant implications for long-term gas supply and electricity supply security in NZ, Methanex said.
The company wound back production in the mid-2000s when a shortage of natural gas was being foreshadowed. But with new supplies becoming available and reduced demand for gas from the electricity industry, it has more recently ramped production up again.
TVNZ said that in a note to clients, Woodward Partners energy analyst John Kidd said there was increasing speculation of a significant pending downgrade to existing Taranaki Basin gas reserves.
If that occurred, that could “materially impact the forward investment decision-making of gas market super-heavyweight Methanex.”
Kidd said: “Central to that decision-making is forward gas availability and its take on development and exploration pipelines.
“While we don't expect the announcement to materially impact Methanex's decision-making over its pending Waitara Valley turnaround - scheduled for late 2018 - the next cycle of investment decisions in 2021-22 (is) now likely face a higher hurdle.”
The Major Gas Users Group (MGUG) said uncertainty has been cast over the prospects for gas as the Ardern Government seeks to transition the economy to address climate change.
MGUG represents fertiliser manufacturer Ballance Agri-Nutrients, pulp and paper maker Oji Fibre Solutions, dairy cooperative Fonterra Cooperative Group, New Zealand Steel, and Refining New Zealand, which operates the Marsden Point oil refinery.
The group said it would be seeking ministerial meetings to detail the significance of the decision for major gas users “so that the importance of gas, including within regional and the wider national economy is clearly understood.”
Sources: tvnz.co.nz & nzresources.com