News
19/12/24
Reliability drives New Zealand power mix: Minister
Sydney, 19 December (Argus) — New Zealand's conservative coalition government
wants to ensure reliable generation, whether that is from coal, oil, gas, or
geothermal resources, the country's resources minister Shane Jones told Argus
this week. Jones was also clear about the need to draw a distinction between
"the expectations on [a] small, open trading nation like [New Zealand] not to
use coal and the major hope[s] and needs of the average New Zealander for
affordable power, reliable power." "If [reliable power] comes from coal, that's
the mix and the menu for the future," he added. Jones argued that existing
renewable power sources cannot exclusively provide for New Zealand's energy
needs. He instead suggested that his government is interested in promoting
alternative power sources such as oil, gas and geothermal, through investments
and policy changes. New Zealand's coal-fired power generation surged between
July-September, according to the New Zealand's Ministry of Business Innovation
and Employment (MBIE). Coal rose to 8pc of total generation from 3pc a year
earlier, following a drop in hydroelectric power production. The country burned
363,513t of coal over those months, more than tripling its use for power
generation purposes compared to the same period last year. Oil, gas Jones has
taken steps to boost the country's oil sector since taking office in late 2023,
following the coalition's victory over the centre-left Labour party. The
minister introduced the Crown Minerals Amendment Bill in June, a piece of
legislation that he described as being "aimed at increasing investor confidence
in petroleum exploration and development." Jones told Argus that under the
previous government, "people who may have been willing to [make] investment[s]
and bring patient capital concluded that New Zealand was no longer available as
a destination for oil and gas and this has resulted in a diminution in [oil]
investment." The Crown Minerals Amendment Bill will overturn a 2018 ban on
offshore oil exploration, which was introduced while Jones was serving in an
earlier Labour-led coalition government. New Zealand's oil sector increased its
annual well spending from NZ$110mn ($63.2mn) in 2018 to NZ$403mn, in the years
following the ban in 2018. The total number of active oil permits in the country
has plunged from 56 to 37 over the same period, MBIE data show. New Zealand
likely houses at least 223.5bn m³ of undiscovered, offshore gas reserves; 249mn
bl of undiscovered, offshore oil reserves; and 177mn bl of undiscovered,
offshore NGL reserves, mostly scattered around the North Island, according to US
Geological Survey (USGS) estimates in 2022. The country's discovered,
recoverable reserves are at between 38.3mn-52.7mn bl of oil; 29.4bn-39.8bn m³ of
gas; and between 1.2mn–1.4mn t of LPG as of 1 January 2024, according to the
MBIE. Besides restarting oil exploration, the Crown Minerals Amendment Bill also
seeks to change permitting processes to drive capital into the sector. Permits
are currently allocated through a competitive tender process, Jones told Argus
this week. The government wants "the flexibility to use alternative processes to
match investor interest in the most efficient and effective way by allowing the
option of using non-tender methods." MBIE has indicated that the government may
start using ‘priority in time' tenders, which allocates permits to the first
eligible projects that apply for them, once the bill passes. But the Crown
Minerals Amendment Bill does not specify how the government will manage
non-competitive tenders. The government is also not using the Crown Minerals
Amendment Bill to "specifically intervene in coal mining operations" in New
Zealand, Jones said. But coal demand will fall "in the event that [the
government is] able to expand the supply of indigenous gas," he noted.
Geothermal The government's energy strategy also appears to involve doubling
down on domestic geothermal generation, which is New Zealand's second most
common source of power. Geothermal generators produced 2,363GWh of power between
July-September, accounting for 20.5pc of total generation, in line with
historical averages, according to MBIE data. New Zealand's government seems to
be trying to push that share up. The government in early December decided to
allocate up to NZ$60mn of public infrastructure funding to research for deep,
geothermal energy production. The work will focus on drilling geothermal wells
up to 6km deep, nearly twice the depth of standard wells. Jones told Argus that
New Zealand officials are currently in Japan, discussing supercritical
geothermal generation opportunities with engineers and scientists. By Avinash
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