THE PRESS FRIDAY, OCTOBER 5, 1984. Energy in 1984

Press, 5 October 1984, Page 16

THE PRESS FRIDAY, OCTOBER 5, 1984. Energy in 1984

The 1984 Energy Plan is the fifth such document produced. Because of the central place of energy in the fortunes of New Zealand, the annual appearance of an Energy Plan is useful in forming an idea of what the country is doing about planning to produce energy and about the way in which it is consuming energy. The 1984 Energy Plan was prepared in the term of the National Government. The point is important because a number of the major projects were part of a package on which the National Party based its 1981 election platform, and it was largely because of them that New Zealand incurred such a large overseas debt. They were conceived at a time in which there was concern about increasing prices of imported oil and worries about security of supply. The Energy Plan is prepared by the Ministry of Energy, not by the National Party, but the Ministry would need to be circumspect about its views on some of the projects. It is too early to be certain about the present Government’s moves on energy. A few moves have been taken, but it cannot yet be seen how they fit into an over-all strategy. The devaluation of the currency necessitated an increase in the price of petrol by 16.5 cents a litre. The price of compressed natural gas was left the same. The Minister of Energy, Mr Tizard, has reinstated low-interest loans for home insulation. He has also forecast greater incentives for South Island motorists to convert their cars to use liquefied petroleum gas, but has said that some incentives for North Islanders to convert their cars to use compressed natural gas might be reduced. After attending an energy conference in Australia, Mr Tizard said that he had become more cautious about approving substantial investment in plans to export gas or petrochemicals. When he was overseas, the Minister of Trade and Marketing, Mr Moore, said that the new Government would make the best of the “think big” projects. The marketing director of Mobil Oil New Zealand Ltd, Mr Jack Hazlett, has given a reminder that one of the conditions for the Marsden Point refinery loan was that the cost of the expanded refinery would be passed on direct to the consumer. He drew the conclusion that fuel prices would soon rise again.

The reinstating of the low-interest loans for home insulation is really the only policy decision to come out of all this. The encouragement to South Island motorists to convert to L.P.G., and the saving entailed in

reducing the incentives to North Island motorists to convert to C.N.G., if implemented, may also be described as a policy decision. What Mr Tizard is relying on is that the cost of petrol is now so much greater than C.N.G. that there is a strong incentive to convert without any extra encouragement. Mr Tizard only hints at some bigger decisions to be made; and the Energy Plan records no more than decisions made to date. Urgent attention needs to be given to a number of these bigger issues before long.

One of the first tasks is to co-ordinate the production of liquid fuels and the consumption of liquid fuel substitutes. The extension of the oil refinery means that the refinery will be able to take a wider range of oils. It is also intended to produce diesel and jet fuel; and the production of petrol is a necessary accompaniment to the production of these. What needs to be co-ordinated is the production of petrol from the refinery, the production of petrol from the synthetic petrol plant, and the conversion of cars to use L.P.G. and C.N.G. Petrol supplies have, of course, to be adjusted by imports. The production and uses of methanol have also to be integrated into the whole co-ordinated plan. The country must not allow itself to get into the position of relying on export markets to take its surplus production of gas and oil products. These markets will never be secure or steady.

Mr Tizard’s caution on export sales of L.P.G. or petro-chemicals is well based. The stability in the price of oil gives cause for concern about the profitability of such ventures. In any event, the petro-chemical industry is one of the toughest international businesses and New Zealand has no expertise in it. The economics of petro-chemicals do not lend themselves to production for the home market alone. Mr Tizard is expecting a report on these projects soon. The Government could also save a great deal of money by . stopping further investigations into the conversion of Southland lignites or Chatham Islands peat into liquid fuels. Although the process for the conversion of coal into petrol has been proved as an industrial process, the very high costs have also been proved. The aim of self-sufficiency in liquid fuels has an obvious appeal; yet it cannot be profitably pursued to the point at which money saved in replacing imported liquid fuels is less than the amount spent in servicing overseas borrowings to pay for the plant that makes the substitute.