Coal-gas plants face closing soon as subsidies go

Press, 11 August 1979, Page 1

Coal-gas plants face closing soon as subsidies go

By 1

MIKE HANNAH,

energy reporter

The coal gas industry faces probable extinction in three to 10 years: the Government announced yesterday that it proposes to phase out subsidies on coal and oil feedstocks.

Gas companies and municipal undertakings have also been told that they cannot look to liquefied petroleum gas as their saviour, because big gas consumers are more likely to install their own L.P.G. tanks than to rely on supplies from a gas company. Representatives of all South Island undertakings were told in Christchurch yesterday that the Gas Council would study each undertaking and prepare reports on each for the Government in the next three weeks.

The council’s chairman, and Under-Secretary of Energy (Mr Brill) met gas industry representatives yesterday to assess the problems that would arise from the proposal to phase out subsidies, and to see what help the Government could give to consumers changing to an alternative energy supply. Mr Brill assured the meeting that no undertakings would be allowed to close until consumers were assured a sufficient supply of alternative fuels. He said that consumers were able to get assistance in changing from gas to other energy forms when a gas undertaking had been given authority to close. At the same time, Mr Brill said, the Government had not finally abandoned the possibility of natural gas becoming available in the South Island. .“Although two studies

have shown a Cook Straight' pipeline to be hopelessly uneconomic, the Gas Association has commissioned a further detailed report from Otago University. This will be closely examined by the Government if it indicates any possibility of a pipeline being justifiable,” he said.

The meeting was closed to reporters, but it is believed that some representatives were concerned that the Government’s proposals appeared in “The Press” last week before they had seen them. “A question mark has been hanging over undertakings for many years, but they have been kept alive by heavy subsidies until alternative energy sources were available,” said Mr Brill.

The carbonising plants in the South Island were probably the only remaining coal-gas producers left in the world. All would stay open for at least three years, and some of them might continue for 10 years or more. Their future would depend on their economics.

Mr Brill made it clear that the Government did not regard the future of the gas industry as a problem it should intrude upon.

Subsidies could be removed in the next three to five years, he said. “If they still find they have got plant life and remain open after the subsidies have gone, they will have to compensate their domestic consumers.”

However, the Gas Council would not allow any plants to close until it was quite satisfied that all customers had a sufficient supply of alternative fuels.

It is believed that the Government will not allow L.P.G. to be used as a feedstock for gas manufacturing. and Mr Brill said yesterday that direct use in industry was much more economic than “reforming” the fuel into town gas.

The gas industry maintains that the potential market it could service with L.P.G. in the South Island would require 30,000 tonnes of the fuel a year. This is equivalent to the expected initial output from the Maui 1 gasfield.

Mr Brill, however, said that the figure included big consumers who now used coal-gas and who were more likely to install their own bulk tanks. “We believe that, in the interests of getting a firm basis for the distribution of L.P.G., we need. to know what the gas undertakings will do,” Mr Brill said. The potential market would be -tudied along with the other needs of the industry in the individual studies over the next three weeks.

The manufactured-gas industry has been heavily subsidised by the Government for many years on its supplies of coal and naphtha, an oil-product used as a feedstock. Oil subsidies alone cost the taxpayer SI.SM a year. The coal subsidy is much higher, and it has been estimated that phasing out the manufactured gas industry could save New Zealand SB3M over the next 10 years. Some gas representatives argue that gas undertakings may be worth retaining, in spite of their losses and subsidies, for the benefit to the community in keeping particular industries open.