Wednesday 5th September 2018 |
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New Zealand has plenty of natural gas and will need to use it to keep its transition to a lower-carbon economy affordable for homes and industry, First Gas chief executive Paul Goodeve says.
The firm, which recently announced its move into LPG supply, wants to continue investing in gas infrastructure. It would be keen on further acquisitions if it could find assets of suitable scale, he said.
The coalition’s ban on new offshore exploration won’t "make any difference to emissions" but has reduced the prospects for workers in one of the country’s most highly-skilled and highest earning industries, he said.
Fortunately, New Zealand has plenty of onshore gas, he said. OMV, which has agreed to buy Shell’s offshore operations, should also be keen to extend the life of the ageing Maui gas field.
While he’s not worried about near-term gas supplies, Goodeve is concerned that expectations of the rapid electrification of industry – as part of the country’s climate change targets - may be unrealistic. A lot of emissions reduction can be achieved by switching from coal to gas – which generally has about half the emissions - but the government’s ban on exploration has already caused some firms to delay making that change, he said.
“While we wait and think about how we can get a perfect solution, we’re missing an opportunity to do a better solution,” Goodeve said in an interview in New Plymouth this week.
First Gas, owned by infrastructure funds managed by Australia’s Colonial First State, was formed in April 2016 to acquire the Maui gas transmission system and the non-Auckland gas pipelines previously owned by Vector. In December it agreed to buy Contact Energy’s Ahuroa gas storage facility for $200 million and in July agreed to buy its Rockgas LPG business for $260 million.
Goodeve said the company is a staunch advocate for gas and its place in New Zealand’s energy mix. The growth in LPG demand – 6 percent-plus in recent years – also shows that firms and industry understand its value.
While everyone understands the need to reduce emissions in the economy, Goodeve said doing that on the ground is going to be complex. The country hasn’t even settled on what carbon-zero means and there is a need to move quickly from “headlines” and slogans into detailed modelling and costs.
“Once we do that we’ll see how important gas – LPG, reticulated, LNG, whatever – is to New Zealand,” he said.
In May, national grid operator Transpower published a series of scenarios suggesting a sustained investment in wind, geothermal and solar could slash emissions and help electrify transport and heavy industry. Electricity demand would more than double by 2050, while the contribution from oil and gas would fall to about 24 percent of the country’s primary energy use from about 60 percent now.
Not only would that require development of more than 35 wind projects and 20 new hydro projects, but the increased reliance on intermittent wind and solar would also increase the need to dry-year and peak winter loads, probably requiring on-going access to gas-fired generation or an alternative fuel such as hydrogen.
Last month Contact Energy chief executive Dennis Barnes called the scenarios “wildly optimistic.” Meridian Energy, the country’s biggest renewables generator, noted Transpower’s electricity demand outlook was roughly twice that of the Productivity Commission and almost three times its own ‘high’ demand projection.
Goodeve said some of the Transpower projections would be “ridiculously expensive to implement.”
“We are going to need gas for longer than people think if we want to maintain our quality of life and export competitiveness and energy at a price that people can afford,” he said.
“One of the things that most concerns me about our carbon zero conversation is that no-one is talking about the impact that has on people’s cost of energy.
“You are already seeing it with the Auckland fuel tax. The people it impacts on the most are those who can least afford it. You push the price of electricity from 30 cents a unit to 60 cents or 90 cents a unit – it’s going to have a tremendous impact on those people who can least afford to insulate their homes or buy PV (photovoltaic solar panels),” he said.
“That’s where gas is really well placed to help New Zealand balance the energy trilemma. If we don’t have an open mind about that I think we are going to box ourselves into a corner.
“We all want to have a more sustainable New Zealand, but we also want to have one in which people can afford to heat their homes. I’m sure the government is thinking this through, but it’s complex.”
In the meantime, First Gas will continue with its plans. It hopes to shortly complete the Ahuroa purchase and is preparing to start work this summer relocating the Maui pipeline away from the cliff edge at Gilbert Stream on the northern Taranaki coast.
Its purchase of Rockgas will roughly double the size of the firm and will involve it in LPG purchasing and retailing for the first time.
Goodeve said the group is keen to learn more in both areas, but particularly how to promote the use of gas. LPG is simply a different form of gas delivery – yet its much stronger growth relative to piped gas shows there is something lacking in the industry’s piped gas offer – possibly in its pricing, or the process customers face getting connected, or both.
First Gas has no further plans to expand into gas retailing, and its primary focus remains gas infrastructure, he said.
Rockgas is a good business with a recognised retail brand. But the firm also operates mid-stream LPG storage and reticulated LPG networks, which fit with First Gas’s expertise in asset management and its appetite for growth.
Goodeve said Rockgas will also give the firm South Island exposure and deepen its coverage in the North Island. It also gives the company a “bigger piece of the gas puzzle.”
“We feel there’s an opportunity for someone to be a real advocate for gas as a fuel in New Zealand. By having a wider breadth and having a retail focus, we can justify putting a bit of effort and money into that conversation, which I think has been missing.”
(BusinessDesk)
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