Frequently Asked Questions

Is New Zealand running out of natural gas?

Why are people worrying about natural gas running out?

But we’re told that Maui Gas will run out in 2007, what will we do for gas supplies then?

Won’t we simply switch to LNG (liquefied natural gas) supplies brought in from overseas for electricity generation and heavy industry?

Should residential and commercial gas users consider converting to electricity?

What is this reticulated market anyway?

Aren’t wind farms and the like going to take up any shortage of natural gas for electricity generation?

Who owns the natural gas produced in New Zealand?

What’s being done to find more gas?

Why don’t we just move to renewable power sources like wind and solar power?

Won’t New Zealand’s obligations under the Kyoto Protocol mean that it will be no longer economical to use Natural Gas to generate electricity?

Are we exploring for more natural gas?

Are consumers choosing gas?

Is gas more efficient than electricity?

Q. Is New Zealand running out of natural gas?
A. No. There are a number of existing producing gas fields to offset Maui, such as Kapuni, and new discoveries, such as Pohokura, Kupe, and Turangi-1 that are currently being developed for production. These wells will provide sufficient gas for the reticulated market for the foreseeable future. This means the continued supply of gas for homes, hospitals, restaurants, light industry, schools and so on. Further, there is an active exploration programme that both the Industry and Government believe will find more gas. For instance the Minister of Energy said in April 2004 “There’s no doubt that New Zealand has plenty of gas – we just have to drill enough holes to find it in economic quantities and locations, and attract the capital necessary to develop the fields.”

Q. Why are people worrying about natural gas running out?
A. It is a well-known fact that supplies of natural gas from the giant Maui field are declining. However, the reticulated gas pipelines system around New Zealand is not dependent on Maui, which was largely used for electricity generation and by large heavy industries. The smaller customers on the reticulated network, such as homes, hospitals, schools and restaurants account for only about 5% of current gas usage. There is plenty of gas for this market as far forward as can be seen.

Q. But we’re told that Maui Gas will run out in 2007, what will we do for gas supplies then?
A. Alternative fields, such as Pohokura, Kupe and Turangi-1 are expected to provide sufficient natural gas in the short term. Maui will not necessarily stop producing gas, what the run-out means is that the cost of extracting further gas will be uneconomic at the current price, so supplies could continue to come from Maui in the future at a higher agreed price. Further, an intensive exploration programme is now in place, and several minor natural gas finds have recently been announced.

Q. Won’t we simply switch to LNG (liquefied natural gas) supplies brought in from overseas for electricity generation and heavy industry?
A. There are many issues to be canvassed before any definitive decision can be made to use LNG as a replacement fuel. These issues include the cost of the fuel and its transport to New Zealand, Resource Management issues with storage tanks at ports, capacity of existing pipelines, reliability of supply and so on. LNG is not necessarily an easy or logical answer.

Q. Should residential and commercial gas users consider converting to electricity?
A. That’s their decision, but they can be assured that there is sufficient gas for the reticulated market for the foreseeable future. Further, while price rises are expected as the cost of new supplies from new fields are incurred, the price of natural gas is expected to retain its competitive relativity with electricity.

Q. What is this reticulated market anyway?
A. The reticulated market consists of the consumers, large and small, supplied from the network of pipelines containing natural gas extending from the Taranaki fields north as far as Whangarei, east as far as Gisborne, and south through to Wellington and up the East Coast to Hastings.

Q. Aren’t wind farms and the like going to take up any shortage of natural gas for electricity generation?
A. No, not at the moment, 41% of natural gas produced is burnt to generate electricity. This generates 28% of total electricity generated (MED, Energy Datafile, July 2005). This is a very large percentage of New Zealand’s electricity requirements, and cannot, at this stage, be replaced by planned or existing alternative energy sources.

Q. Who owns the natural gas produced in New Zealand?
A. The Government owns all oil and gas, and makes it available to explorers under a petroleum prospecting and (in the case of discovery) petroleum mining regime. When a discovery is made, explorers develop the field for production. When oil and gas are produced, the field owners pay the Government a royalty and sell the products to downstream (i.e. wholesalers and retailers) buyers.

Q. What’s being done to find more gas?
A. The NZ Government has an active programme of providing areas, called blocks, for oil and gas prospecting. These blocks are regularly auctioned, and winners have the rights to drill exploration wells in those areas. As well, Government has moved to make the taxation environment for exploration more attractive with changes to the taxation and royalty regimes for explorers. There are a number of exploration projects currently underway, with drilling on both the west and eastern coasts of the North Island. There is considerable optimism about a number of drilling projects. However, until the reserves are proven, such prospects cannot be relied upon.

Q. Why don’t we just move to renewable power sources like wind and solar power?
A. Government is encouraging such a move, however technology and resources do not yet mean these alternatives to hydro and gas fired electricity can fully replace current electricity production. Also, while providing useful additional power from projects such as the Tararua wind farms, these technologies are dependent on the availability of wind and sunshine. Government is also promoting energy efficiency in an effort to reduce power usage. Natural gas and hydro will both be needed in the foreseeable future as primary sources of electricity generation.

Q. Won’t New Zealand’s obligations under the Kyoto Protocol mean that it will be no longer economical to use natural gas to generate electricity?
A. As part of supply and confidence agreements with New Zealand First and United Future the proposed carbon tax was abandoned. The Government is currently consulting on the development of a New Zealand Energy Strategy and an updated version of the National Energy Efficiency and Conservation Strategy. New Zealand’s obligations under the Kyoto Protocol are expected to be addressed as part of these processes.

Until such time as a substantial resource substitute for natural gas can be found, gas will continue to be burned to generate electricity.

Q. Are we exploring for more natural gas?
A. Yes. The Government has an active gas and oil exploration programme underway. Details of the programme and the incentives around it can be found on the MED and Crown Minerals websites.

As the price of gas increases, relative to similar increases in electricity prices, natural gas discoveries made in the past are becoming more attractive as they become more economic to produce.

Q. Are consumers choosing gas?
A. Yes. Natural gas is the efficient fuel of choice for home owners, commercial and industrial users. For example over 75% of new home owners in new subdivision in the North Island are choosing natural gas as their fuel of choice in their new homes.

Q. Is gas more efficient than electricity?
A. Yes. Gas produces fewer emissions and is highly energy efficient. It can heat water twice as quickly as electricity at almost one third of the cost and when maintained, it is often 80 – 90% more efficient.