Page 9 - AsianOil Annual Review 2021

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around the security and certainty of gas supply. company to “manage the risks associated with
This is very routine.” the government’s policy change”.
PEPANZ, however, was not convinced. CEO He added that Wellington’s decision was
John Carnegie argued that relying on Austral- short-sighted, as two-thirds of the country’s
ian LNG would likely drive up domestic energy energy use was for industry and transport and
prices while also leading to higher emissions there were no economically viable renewable
connected to shipping. alternatives. It is not just upstream investors
He said: “It means we’d be funding the Aus- that are reviewing their position in the country,
tralian economic recovery instead of generat- however.
ing the jobs and royalties here in New Zealand.
If we’re going to keep using natural gas until at Downstream doldrums
least 2050 as the Climate Change Commission Canada-based Methanex revealed last month
acknowledges, surely it’s better to produce it that it would mothball its methanol plant in
locally.” Waitara Valley in Taranaki after being unable to
Carnegie added: “Local natural gas producers secure sufficient gas supplies. The company said
are investing in their assets to enhance supply in it would restart the plant if gas supplies became
the short and medium term, but beyond that we available.
need new exploration and the right conditions to Methanex, which consumes around 40% of
encourage investment.” the total gas supply, has said it would keep its two
plants at Motunui open. However, Methanex has
Upstream challenges launched an organisational review in the face of
NZOG and Australian partner Beach Energy lower availability.
applied in February to relinquish petroleum New Zealand’s gas production peaked at
exploration permit (PEP) 52717 (Clipper), 243.49bn cubic feet (6.9bn cubic metres) in 2001
which contains the Barque prospect. The Clip- before falling to 171.32 bcf (4.85 bcm) in 2019,
per permit is located in the offshore Canterbury according to Ministry of Business, Innovation
Basin. and Employment (MBIE) data.
Company CEO Andrew Jefferies, in his com- Taranaki Chamber of Commerce CEO Arun
pany’s statement announcing the move, fired a Chaudhari told Stuff that unlike in past instances
warning shot across the government’s bow, not- of mothballing, there was less confidence that
ing that several challenges including the govern- the plant would restart owing to the fact that less
ment’s “adverse regulatory settings for offshore offshore exploration was planned.
exploration” had tipped the joint venture’s hand. New Plymouth Mayor Neil Holdom said:
He said: “I expect it will not be the last off- “It was inevitable, given our government seems
shore acreage to suffer the same fate. [NZOG] determined to end the oil and gas industry in
believes a confluence of events including adverse New Zealand as soon as they can with increased
regulatory settings for offshore exploration; the coal use likely to make up much the shortfall in
dry hole at OMV’s Tawhaki permit; the recent energy demand in the short to medium term.”
announcement terminating Wherry-1 drilling; The New Zealand government has stuck to
and the effects of COVID on drill rig costs and its guns about offshore exploration and its asso-
availability have formed a perfect storm, mak- ciated environmental costs. Having declared
ing the task of finding suitable partners in the in 2019 its ambition to reach net-zero carbon
required timeline impossible.” emissions by 2050, Wellington sees the oil and
After deciding not to drill the deepwater gas industry as an obstacle to achieving this goal.
Wherry-1 exploration well in PEP3864, Beach While a future study could advocate for the
abandoned all three of its exploration permits in development of LNG import capacity, the gov-
the offshore Canterbury Basin, while retaining ernment will surely be worried about political
its interests in the Taranaki Basin. fallout from such a move. It may instead prefer
NZOG has been an outspoken critic of the to wait and see whether falling gas production
government’s ban on new offshore exploration continues forces Methanex to relocate its opera-
permits, noting in 2018 that the decision would tions overseas. This would free up gas supply for
drive it to look for new opportunities overseas. other sectors, which could allow the government
Jeffries said at the time that investing in upstream to avoid addressing the problem of a potential
assets in other jurisdictions would allow the gas supply shortfall for a number of years.™

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