The Press SATURDAY, AUGUST 14, 1965. Using Kapuni Gas

Press, Volume CIV, Issue 30829, 14 August 1965, Page 14

The Press SATURDAY, AUGUST 14, 1965. Using Kapuni Gas

The second report of the Government’s consultants on Kapuni natural gas confirms the findings in their 1964 report that the use of the gas as a premium fuel by consumers in nine North Island areas is preferable to its use for electricity generation. The latter use, they say, would largely waste a valuable indigenous fuel. The findings take into account a report by separate consultants on pipeline costs and their own investigations. Some Government assistance is held to be necessary because the margin between the price at which natural gas can be sold to consumers and a reasonable price for the gas at the field is not sufficient to support both the pipeline establishment and the gas undertakings without Government help. “ With such assistance ”, the report says, “ the pipeline establishment can finance, pay its costs, and “ retire its debt without the necessity of contributions “ from public funds With a small amount of Government help at the beginning, the gas companies “ can absorb the costs involved in conversion and will “ no longer need the Government subsidy which they “ now receive Another firm has reported on the Kapuni field, confirming that the reserves are very large, though “ certain ” reserves are probably lower than the producing company’s estimate. In general, the consultants’ report is a confident and reassuring assessment of the Kapuni gas field’s economic value. Use of the proved Kapuni gas in the form of gas over the next 25 years will, they say, “ reduce by from 5 per cent to 10 per cent the “ quantity of additional electrical energy which will “ have to be generated However, it is obvious that without a great deal more information the conclusions must be general and tentative. They are based on separate confidential studies made for the Government and for the gas undertakings. The views of the owners of the field and of the State Electricity Department have yet to be taken into account. The price of natural gas from the well must obviously be competitive; but little is said about a factor that bears strongly on price. This is the condensate that flows with the gas, which would be highly valuable as a light fuel for the Whangarei refinery and would save a large part of the funds at present expended on imports of crude oil. It follows that if there is to be a slow build-up in the use of gas “ as gas ” —as the report recommends—there must be a correspondingly slow build-up' of condensate; and this would have a strong bearing on the price at which the owners of the gas coukt afford to sell it. It cannot be overlooked that the owners have a huge amount of capital tied up in the Kapuni field, and interest charges on capital would bear more heavily on smaller sales than on larger. The report assumes a substantial addition to earnings from liquefied petroleum gases in the form of propane and butane, but appears to overlook the difficulty of finding or creating substantial markets for these products in a country as small as New Zealand. The report assumes a continuously rising rate of gas consumption for the life of the field; but if no new discoveries are made—and millions of pounds have been spent outside Kapuni without avail — would this thesis be tenable? Would consumers after, say, 20 years be interested in buying gas-using appliances to use natural gas that showed signs of running out? The consultants’ report must be seen as a step—a useful step, but no more—towards the goal of putting Kapuni gas to use. The next step must be consultations among all the parties interested—the Government, the State Electricity Department, the gas undertakings, and, by no means least, the owners of the gas wells; and it will then be time for all these parties to lay their cards on the table.