KAPUNI GAS OWNERS CONTEST FINDINGS OF CONSULTANTS’ REPORT

Press, Volume CIV, Issue 30845, 2 September 1965, Page 14

KAPUNI GAS OWNERS CONTEST FINDINGS OF CONSULTANTS’ REPORT

The report to the Government by Mr J. G. Shattuck of Zinder International on the utilisation of Kapuni natural gass strongly advocates using the gas as a premium fuel by consumers in nine North Island areas. Using the gas for electricity generation would, the consultants contend, largely waste a valuable indigenous fuel. These views are opposed by the owners of the Kapuni wells, Shell, BP, and Todd, who have the benefit of advice from experts in the major oil companies of world-wide experience and repute associated with them. The views of Shell, BP, Todd are set out in this article.

Mr Shattuck’s recommendation that the gas should be piped to Auckland and Wellington for use as a premium fuel is completely opposed to the thinking of Shell, B.P. and Todd, who are the owners of the gas and consider that the best and most economic use for it lies in the generation of electricity at the well-head. They have, in fact, offered it to the New Zealand Government for this purpose. Capital For Pipeline The thinking behind the company’s attitude is this:— (a) The amount of gas available is relatively small and will not support the great capital expenditure needed to pipe it to Auckland or Wellington. (b) This is particularly true of the early years of supply, when only very small amounts of gas will be used. Pipeline economics over this period do not bear thinking about. (c) There is no certainty that the gas market will ever build up to the point which would make the proposed venture economic.

(d) Mr Shattuck admits that the pipeline operation is not attractive and that it must be subsidised by the Government. (e) If the gas is used in the way Mr Shattuck recommends, it will involve the removal of impurities before it is piped to the consumption areas. This could involve a capital expenditure of up to £3 million and the loss of substantial quantities of good gas. (f) One of the attractions of Kapuni gas is that it is rich in condensate, which is a crude oil suitable for refining at Whangarei. But the lower the gas offtake, the lower the production of condensate. (g) Mr Shattuck’s recommendation means that production of condensate would be •sjboX Xpeo aq; nt moj Awa (h) A high condensate production is a great advantage because it saves importations of crude oil from overseas. If a means of maximising gas and condensate production from the outset can be found, maximum savings of overseas funds will follow. Owners’ Suggestions (j) Shell B.P. and Todd’s suggestion that the gas be used to generate electricity at the well-head, has these advantages:— (1) it enables the full supply of gas to be used from the outset; (ii) it therefore gives maximum condensate production and therefore the greatest saving of overseas funds; (iii) it avoids the need for

up to £3 million (over and above the cost of trunk pipelines and city distribution) expenditure for the gas-cleaning plant, since the generating plant can run on raw gas; (iv) it avoids the need for heavy capital expenditure on trunk pipelines; (v) it helps to relieve the critical electricity supply position; (vi) it avoids the need for heavy expenditure by gas companies, many of whose reticulation systems are in bad shape. Since natural gas has twice the heat content of coal gas, it is doubly important not to lose any. Gas companies’ records in this respect are not good; (vii) the whole venture is

economic from the outset. (k) Mr Shattuck’s report is critical of the proposal to generate electricity because of the heavy loss of efficiency which he says is inherent in the conversion of gas energy to electrical energy. He says that the loss of energy involved means that more fuels of other kinds have to be produced, together with the facilities for using them. The total “loss” he estimates to be as much as £3OO million. Efficiency Loss (l) The company’s attitude to this is that there is inevitably a loss of efficiency in converting one form of energy into another but that modern techniques have enabled this to be kept to a lower figure than ever before. And what Mr Shattuck does not say is that the financial losses in pipeline distribution

are also very substantial and could well amount to as much as he imputes to the alternative use. These losses occur:— (i) during the gascleaning process (ii) at points along the 400 mile pipeline (iii) in the gas companies’ reticulation systems. Additionally, the efficiency factor of the electrical appliance in the home L a good deal more favourable than that of the gas appliance.

(m) Mr Shattuck’s figure of £3OO million which would be “saved” by using the gas in the way he suggests is so blatantly incorrect that his argument is meaningless. Return On University (n) The company’s investment of nearly £9 million which is what has had to be spent for the limited success so far achieved, must also not be forgotten. With only small quantities passing through an uneconomic pipeline (in which we would not wish to share) and with the promotion of a larger natural gas market solely in the hands of local gas companies, we could see no prospect of a return on our investment, unless a comparatively high price were charged for the gas and this in turn would inhibit the growth of the market.

The electricity generation proposal, however, would enable gas to be supplied cheaply in great quantity and thus allow a more satisfactory return on the capital that has had to be spent in order to make the gas available at all.