THE PRESS SATURDAY, JUNE 24, 1978. Future for gas in Christchurch

Press, 24 June 1978, Page 14

THE PRESS SATURDAY, JUNE 24, 1978. Future for gas in Christchurch

The plight of the Christchurch Gas, Coal, and Coke Company, as described by the company this week, has become critical. The problems of the company, and for its customers, have been a long time in the making; now. however, the crunch seems very close. The chairman of the company’s board (Mr H. W Revell) wants to know from the Government whether the company will have the support and assurances it needs to stay in business.

The company's trading loss for the last year was $153,000 and it is highly likely that such losses will continue for some time, in spite of the increased tariff put on gas for industrial and commercial users. Outdated plant and a high rise in the cost of coal and naphtha feedstocks will force the tariff higher; this trend can only discourage consumption, which has already fallen. The lesson is plain to read: gas manufactured by present means has had its day. The future is less easy to read. The company is likely to continue to make a loss in the immediate future if it stays in business. So it must hold out some reasonable prospect that eventually its fortunes will recover. Liquid petroleum gas from the Maui field may become available within a few years, and this supply is almost certainly the key to recovery. The company wants to know the Government’s intentions about L.P.G. and the Government has not made up its mind. If the company obtained an assurance that it would become the supplier for L.P.G. in Christchurch, it might look on its own future with a more optimistic eye. Yet the whole question of the use and distribution of L.P.G. is a national one and the national interest may not coincide with the company’s hopes. Mr Revell himself raised the possibility of the company's going out of business before the Maui supply is available. It makes some sense to close an uneconomic undertaking when it has served its purpose well for many years, but is no longer suited to the times. Mr Revell has urged that there is no alternative to keeping going so that domestic, institutional, and industrial consumers are not put to inconvenience and expense. Nevertheless, he has asked the Government whether the company will be required to keep producing gas for the next three or four years. If the company continues its supply it will face exceptional expenditure to keep the old coal carbonising plant going The question is; who will pay for this expenditure which, on ordinary business judgment, would not be considered wise unless the eventual prospects of the company were good? With comparatively little adjustment to the existing naphtha plant, the company’s works will be able to reform L P.G., though this will entail some loss of the fuel’s energy value. The New Zealand gasfields are large, but any wastage must be weighed carefully in a world in which energy is becoming more precious. Some further loss is entailed in distribution. The company could distribute L.P.G. mixed with air, but this would require entirely new

piping Although progress has been made in renovating pipelines for natural gas in some North Island towns and cities, Christchurch does not lend itself to a wholesale renewal of its gas reticulation.

If the company closed down entirely it might be confronted with demands from consumers for compensation to cover the cost of equipment or conversion to other fuels. In law, at least, such demands are not likely to succeed. Many gas consumers could be supplied by delivering storage tanks of L.P.G. On balance the reticulation of gas to the present customers may be more economical. That has yet to be demonstrated. However, once a reliable supply of L.P.G. has been established, it is possible that the delivery of bottled gas beyond the reticulated system would become attractive. The gas business could become a growing industry again in Christchurch.

If the company’s value to the national and regional economy is such that the Government is persuaded that the company must survive, the Government should support it until Maui gas becomes available. The company may not benefit directly: its customers would certainly be relieved. The main decision is an engineering decision: how best to supply energy from gas if gas is to remain a major source of energy. Some assessment must be made of the merits of gas distribution through new pipes or in bottles. The economics of handling bottles as opposed to filling bottles from a tanker would have to be considered.

In its present financial condition the company would be hard put to it to find the money to change its distribution system, though it could be wound up now with no loss of capital for the shareholders. The company’s reserves would probably finance only part of a conversion to new methods of gasmaking and distribution. Consumers* equipment would need alteration, but the Government has already promised some financial relief to that end. One important asset is the company’s staff and its long experience in working with gas. This provides a strong argument for leaving gas distribution in the hands of the company rather than allowing other suppliers, such as oil companies, to enter the field.

Among the possibilities the country has to consider is the use of L.P.G. as a motor fuel. It may be that the country would gain more from that than from the supply of L.P.G. to the South Island to replace manufactured gas. The problem is complex, but the Government should get the answer right in the first instance. While the national policy on energy remains unsettled the uncertainty for Christchurch gas consumers raises serious threats to the city’s role as a centre for industry. A collapse of the gas industry in Christchurch would also put a severe, probably crippling, strain on electricity supply at times of peak demand. The Christchurch Gas, Coal, and Coke Companj' will not be the only sufferer from any Government slowness.