Battle rages over future of N.Z.’s natural resources

Press, 15 August 1978, Page 3

Battle rages over future of N.Z.’s natural resources

r By

OLIVER RIDDELL

A tremendous battle is now .>eing waged within the Government between different --.crgy interests over which forms of energy production should be paramount over the others. This comes after the realisation that New Zealand’s power requirements for 1998 have been overestimated 30 per cent. The degree of over-esti-mation of electricity needs has risen to 25 per cent bv 1993 — the first 15 years of the 20-year power plan — and to 30 per cent for the full 20year plan. If the estimated power sources have to be cut about 30 per cent, then naturally those involved in power production will be concerned about the prospects for their particular fuel. It is not likely that the Government will reduce power production the full 30 per cent. Too many other factors are involved, particularly employment opportunities. Also, the Government will not want to over-react to the point where there is a risk of not having enough power 20 years from now.

But it is obvious that not all planned sources of electricity from hydro, coal, oil, natural gas and geothermal steam will be reduced equally. It is the level of reduction for each source which has caused the argument. At this stage, it seems that the proponents of hydro-electricity are doing best. Electricity from water is the cheapest and most easily renewable source, and once a dam and power station have been built, the water has to be used for it will simply flow over the top. There may well be a reduced momentum for building hydro power schemes. The high dam at Clyde on the Clutha River may be turned into a low dam, and future planned development on the Clutha and the lower Waitaki River may be postponed. Hydro development however, should continue, even if on a reduced scale. It is the cheapest source of power, and one for which New Zealand has “milt up a skilled work force and a pool of sophisticated equipment. Not to continue would be to disperse both assets when renewed economic growth

might require them both in a few years. Geothermal power is also a renewable resource. But it is expensive and poses considerable technical problems. Advantages can be seen in postponing further geothermal growth, so geothermal growth seems certain to be deferred. So what slack there is will be picked up by either coal or cril and natural gas, and it is here that the battle is the most fierce. It seems to be a battle that coal is win-, ning, because its voice within the ranks of officialdom is stronger. Neither coal, oil nor natural gas. is renewable. Both can await further development. But. New Zealand has contractual commitments for the utilisation of both, as well as expensive facilities to handle both, so any decision to use one at the expense of the other will be extremely expensive. Oil and natural gas are the glamour fuels, and both have received a huge financial commitment in the Maui and Kapuni fields. New Zealand has a commitment to the oil company partners of Maui to take or pay for the gas,

so even if the gas stays in the ground New Zealand will still pay for it.

Coal is not a glamour fuel, but it is cheaper to process into electricity than oil and natural gas, and New Zealand has made a large financial commitment to it at the Huntly power scheme on the Waikato River. Other power schemes based on coal, such as at Buller, have been planned.

The reason oil and natural gas seem destined to miss out in favour of coal, in the meantime, lies in the agreement between the Government and the Maui partners.

The Government is bound to pay for the gas, even if it lies in the ground, but at an agreed rate that is now far below (perhaps only 20 per cent of) the international market price for gas. This could have been tolerated by the Maui partners while the gas was being uplifted by the Government, because they could then process the condensate from the gas. Their profit has lain in saies of condensate, particularly of tanked L.P.G. such as has been proposed for gas generation in the South Island.

If the gas stays in the ground, then the Maui partners will have no condensate. This makes the immediate short-term outlook for Maui profitability rather bleak. But, because of this, the Government may well feel that to pay for its commitment on unused Maui Gas would be less painful than paying for its commitment on unused coal. There are not too many options open to the Maui partners. It is unlikely that the Government would permit the export of Maui gas not required in New Zealand, even if the partners could import the sophisticated equipment needed.

Pumping out the gas, taking off the condensate, and then repumping the gas back underground, is theoretically feasible, but not on Maui I. Final decisions have not .vet been made, but the odds seem to be lengthening against oil and natural gas in the revised power plan. New Zealand's good fortune in over-estimating its power needs should be considered in conjunction with the costs of under-using the electricity potential now available.