By NZPA
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Tuesday 11th February 2003 |
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The planned refurbishment of New Plymouth's capacity to burn fuel oil as well as natural gas was announced by Contact chairman Phil Pryke, at the company's annual meeting in Christchurch today.
"Restoring New Plymouth power station's capability to run on liquid fuel is a key ingredient in our planning to deal with possible gas shortages over the next few years."
The decision will make it more difficult for New Zealand to meet its commitment to stay within the Kyoto Protocol that sets targets for reducing the burning of fossil fuels.
The redetermination of economically recoverable reserves released last week confirmed the warning first issued in late 2001 that the Maui field had significantly less gas remaining than was previously estimated. "There is no magic bullet solution to this issue," said Mr Pryke. He said there are a number of clear areas where there is obviously a requirement for swift action: the flow-on impacts of last week's Maui redetermination need to be settled rapidly.
The parties needed to swiftly resolve revised usage profiles that will apply to remaining reserves; the so-called "use it or lose it" provisions of the Crown Minerals Act should be strictly enforced.
"Those with an ownership interest in known but undeveloped gas reserves must either be encouraged to develop them now, or to get out of the way for others who will," he said in reference to the Pohokura and Kupe fields.
There was urgent need for a regime that guarantees open access to the gas transmission system, which the Government had already recognised, Mr Pryke said.
"Without that, no investor will move willingly to develop non-Maui resources."
The industry needed to develop a gas balancing regime that can manage short term fluctuations in gas availability.
"This issue -- security of supply and the steps needed to ensure it -- together with the maintenance of internationally competitive pricing to users, are essential underpinnings to the future development of the economy as a whole.
"There is no option here just to 'muddle through'," said Mr Pryke. "Failure to act decisively on these issues not only increases the likelihood of under-investment in new energy sources and generation, but also increases the likelihood of pressure for a political solution."
He said it would be "disastrous" if the problems in the gas market were to be addressed by attempts at further reform in the electricity market.
"While I acknowledge that there is scepticism in some quarters about New Zealand's electricity market arrangements, the fact is that they are working well -- giving clear signals to and prompting action by all parties on both the short and long term trends in electricity supply and demand."
He said the plan to restore dual fuel to the New Plymouth power station was a clear example of the electricity market working.
He said such problems that existed were concentrated in the gas market.
Mr Pryke said the restoration of dual fuel to New Plymouth, one of the country's older thermal stations, would create an additional element of back-up to the national electricity system that would be valuable "if and when gas shortages coincide with hydro shortages".
The upgrade will apply to four of the 100MW units at New Plymouth, although Contact will only apply for permission to run a maximum of three units on liquid fuels at any one time.
Yesterday, Contact announced a first quarter net profit of $18.4 milllion, a slight improvement on the same period last year.
Contact shares that have been climbing on both the prospects of gas shortages and a dry winter, jumped another 10 cents today to a new record of $4.36.
The company said the result was driven by continued strong growth in retail electricity sales, offsetting lower wholesale electricity revenues.
Recent news on the gas situation has been all bad. As well as the downgrade of Maui's size, there are indications that the main replacement field, Pohokura, will be about a third less than originally estimated.
Yesterday, New Zealand Oil and Gas said its Tui well, that it had estimated could hold over a billion barrels of oil, had proved a dud.
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