Simeon Brown peddling porkies about gas shortage

Written By: - Date published: 9:00 am, August 27th, 2024 - 43 comments
Categories: climate change, Economy, energy, Environment, simeon brown - Tags: , , , , ,

Energy Minister Simeon Brown is peddling lies about Aotearoa having a gas shortage.

The country exports around 40 percent of its annual gas production as methanol, while another large chunk is used to make 260,000 tonnes of synthetic nitrogen fertilizer, a nasty contributor to our greenhouse emissions, for our farms.

Brown seems poised to announce a pathway for bulk imports of liquified natural gas (LNG) in a move that seems bonkers – spending hundreds of millions of dollars to set up LNG import distribution facilities, while we are busy exporting the bulk of our gas.

The Canadian company that owns Taranaki’s Motunui plant, plus the mothballed Waitara plant, exports 95 percent of the methanol produced there.

Brown may be putting a paper to cabinet this week about “clearing the barriers” for private companies to set up LNG import facilities. He says that will create competition to lower power prices.

Earlier, this month, Methanex took advantage of the crisis in the wholesale electricity market to switch production from methanol to supplying gas to gentailers, Contact Energy and Genesis Energy, so they can fire up their peaking power plants.

The move has helped ease wholesale electricity prices that have jumped to a peak of NZ$1,000 per megawatt hour this month. Methanex will reap windfall profits.

Brown said in an interview on Sunday with Q+A’s Jack Tame on TVNZ, that gas was the tool to give investors in solar and wind the confidence to proceed, but added “we don’t have enough of it”.

He said Aotearoa should really be focused on getting indigenous gas out of the ground, though LNG had to be considered “because we have an energy shortage”.

“Ultimately, we face a shortage of energy, a shortage of supply,” he said.

Brown has refused to take advise on alternative, less environmentally damaging options, such as rooftop solar in combination with using hydro power as the base back-up.

As well, in one of its first moves in coming to power, National canned feasibility studies on the giant Lake Onslow battery project.

Rooftop solar would be a quicker, cheaper, more climate-friendly fix than LNG, a group of scholars said in a recent article in The Conversation.

“A much better option (to LNG), we suggest, would be to prioritise the expansion of rooftop solar throughout New Zealand. This could not only add significantly to the overall electricity supply, but also help bring down prices,” academics Geoff Bertram, Stephen Polietti and Bruce Mountain wrote.

The wholesale power crisis, precipitated by unusually low southern lake hydro levels, has been exacerbating by the market power of the gentailers, which profit from power scarcity, they said.

Brown told Tame he is not considering structural change, such as forcing the gentailors to split their generation and retailing operations, to neuter that power.

Led by Brown, National has reversed Labour’s ban on future offshore oil and gas exploration, and he falsely blames the ban for the recent sharp downturn in Aotearoa’s gas production – down 28 percent this year on top of last year’s 12 percent fall, continuing a decade-long trend.

In fact, Labour’s ban did not prevent oil companies using permits issued ahead of the ban, and despite spending $1.3 billion between 2020 and on exploration, almost all the wells drilled were dry, according to Canterbury University Academics.

Brown, and his drill-baby-drill colleague, Resources Minister Shane Jones, fail to grasp that oil discovery invariably follows a path of diminishing returns. Initially, the largest and most easily accessible reserves are discovered, but exploration and production costs rise, the profitability of discovery diminishes, especially given gas demand in Aotearoa is trending down. An industry facing increasing costs, smaller finds, and lower returns, is hardly going to invest in more offshore exploration under such as scenario.

The fact that we export so much of our precious gas resources goes back to the Muldoon government of the 1970s, that was desperate to develop the giant, offshore Maui gas field, one of the world’s largest gas discoveries. Take or pay agreements were signed to spread the risk and because of those, National developed the disastrous Think Big projects, to use the gas that was had to be used under those contracts.

Motunui was originally designed to make synthetic petrol for the domestic market but it proved uneconomic and unwinding its debt cost taxpayers billions of dollars. Methanex bought Motouni in 1993 for $130m, and still operates under take-or-pay agreements that extend until 2029.

According to Methanex’s 2023 annual report, it also has a clever little clause in the agreement that adjusts the price of gas it pays to “enable all these (NZ) facilities to be competitive at all parts of the methanol price cycle”.

Methanex last year posted a net profit of $C622m, down from $C932m in 2022. Profit is boosted by around $NZ50—60m annually as a result of getting free carbon credits from the Government under a scheme to shield exporters from being disadvantaged by New Zealand’s carbon price. That works out at about $200,000 for each of its 300 workers, according to campaign group Common Grace Aotearoa.

(Simon Louisson is a retired journalist, who has also worked two short periods as Green Party media adviser)

43 comments on “Simeon Brown peddling porkies about gas shortage ”

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  1. PsyclingLeft.Always 1
    27 August 2024 at 9:17 am

    Gas not the way out of an energy crisis, expert warns

    An Australian energy analyst is warning New Zealand against importing liquified natural gas, saying it is extremely expensive and energy intensive.

    "I would tell him to only import liquified natural gas if you like your energy very, very expensive, and if you want it to be very emissions intensive. Otherwise go for renewable energy, with storage, which is cheaper and virtually zero emissions."

    https://www.rnz.co.nz/news/national/526253/gas-not-the-way-out-of-an-energy-crisis-expert-warns

    Mark Ogge, your ideas are a no brainer. Problem is the jerks in control are NO brainer : (

  2. Ad 2
    27 August 2024 at 9:55 am

    If Luxon completes operational build of a Taranaki LNG port by winter 2025 he will reap major political capital.

    May not be what the nerds want, but it's excellent politics.

    • Champaign Socialist 2.1
      27 August 2024 at 10:24 am

      You can't be serious. Luxon is not building the port – the expectation is that private investors will build it. But surely that is a multi year project.

      • Ad 2.1.1
        27 August 2024 at 2:06 pm

        We'll have to wait for the October Cabinet decision. Wouldn't be difficult in Port Taranaki.

    • bwaghorn 2.2
      27 August 2024 at 12:26 pm

      Yeah cause winning is all that matters!!

    • Bruce 2.3
      27 August 2024 at 3:01 pm

      For a gets things done type of guy we could be generating solar by the end of (next) month. see comment 4.

    • Bearded Git 2.4
      27 August 2024 at 3:13 pm

      So all people who are scientists and/or concerned citizens seeking to alleviate climate change are "nerds" now? Do me a favour.

      Given that importing LNG and providing the infrastructure to do this is more costly than rolling out rooftop solar I doubt a political dividend will eventuate for Luxon…in fact just the opposite.

    • Graeme 2.5
      27 August 2024 at 4:12 pm

      Evidently New Plymouth is already set up to import LPG.

      Currently all imports of LPG to New Zealand come from Australia.

      And from a South Island perspective, it makes no difference whether the shipment of LPG comes from Australia or from the North Island, apart from the longer turnaround time to and from Australia, de Geest says.

      If ever necessary to import LPG to meet demand in the North Island, this would go through Port Taranaki which is already set up for it.

      Someone is being disingenuous here, we've been importing LPG into the South Island to supplement NI production for ages, and there's a terminal in NP for the NI production that's shipped south. There might be a capacity constraint, but it's not a green field thing.

      • Ad 2.5.1
        27 August 2024 at 4:21 pm

        Yes that's what I meant by a very quick harvest of political capital from Cabinet decision to facility "built".

        • Graeme 2.5.1.1
          27 August 2024 at 4:35 pm

          How can you say you're going to build something that already exists?

        • Hanswurst 2.5.1.2
          29 August 2024 at 6:28 pm

          In that case, and assuming the claims upthread are correct, it should be easy for Labour/Greens and, for that matter, journalists, to point out that it's already there, and stupidly expensive. The result should be no or negative political capital for Luxon, and when the promised price reductions fail to materialise, it should be a purely negative political result for him.

  3. Champaign Socialist 3
    27 August 2024 at 10:06 am

    The problem with roof solar is that it gives people free and limitless energy – there is no rentier extraction for on roof solar energy.

    NZs privatized and extremely profitable energy sector has to deliver energy in a form that enables rentier profits – gas, oil and coal provide that profitability to multiple entities in the supply and distribution chain.

    In Spain and Germany they are also having an energy crisis but this is due to an over supply of energy. The continuous rollout of renewables and roof solar in particular has increased supply to the point where the price of electricity has fallen below what is profitable for the big generators.

    This is presumably why the government is swerving as swiftly as possible away from roof solar – it is compelled to protect private investor returns on energy and this depends on a controlled scarcity of supply that renewables works against.

  4. Champaign Socialist 4
    27 August 2024 at 10:11 am

    Apparently Pakistan added 13% to their total energy output in one year using low cost solar panels and batteries from China. But this approach circumvents the need for expensive, slow to deliver energy sources with much greater long term profitability. Solar energy is cheap to set up and even cheaper to generate. That's why it won't happen here – in case you are wondering.

  5. Stephen D 5
    27 August 2024 at 12:46 pm

    A mate put solar panels on their new build. Family of 4 with teenagers. Midwinter power bill $6.00.

    • lprent 5.1
      27 August 2024 at 4:56 pm

      That would be solar + batteries?

      • gsays 5.1.1
        27 August 2024 at 5:08 pm

        If he's getting a power bill, I wouldn't imagine there are batteries involved. Just a grid-tied inverter.

        Edit: oops, perhaps there are batteries involved.

        • Belladonna 5.1.1.1
          27 August 2024 at 6:27 pm

          Unless he's only using power during daylight hours, there will certainly be batteries involved.

          • gsays 5.1.1.1.1
            27 August 2024 at 10:16 pm

            You can have solar and be on the grid. Hence the $6 power bill.

            No battery needed, just a grid tied inverter.

            • Belladonna 5.1.1.1.1.1
              29 August 2024 at 8:02 am

              Yes. But if you are using grid power after sundown (or on days when solar isn't sufficient for your needs), you'll be paying a lot more than $6. Or your electricity generator is a lot more generous with the payments for daytime solar fed into the grid than most.
              Just the line charge would be more than $6 – setting aside any actual power draw.

              Sounds like this is a stand-alone array + battery installation.

    • Belladonna 5.2
      27 August 2024 at 6:27 pm

      And cost of the installation was?

  6. joe90 6
    27 August 2024 at 2:40 pm

    spending hundreds of millions of dollars to set up LNG import distribution facilities

    Is someone paying these clowns to deepen our dependence on imported fossil fuels?

  7. Mike the Lefty 7
    27 August 2024 at 3:02 pm

    Meanwhile behind the scenes, the energy suppliers are doing their utmost to convince the CoC not to do a b…. thing, we like the high prices so don't stick your fingers into the pie and spoil the taste.

    They won't interfere in the market, they will prevaricate, talk big and end up doing nothing – praying that we will get a downpour of rain in the hydro lakes catchments that will take the heat off things and then they can boast about how they solved the crisis.

    If they do actually import LNG for electricity generation, it surely won't lower the wholesale price, if anything it will increase it.

    Incidentally, I have decided to get some quotes on installing solar energy on my house. I nearly got solar on another house a few years ago but I got so much negativity about it that i gave up. Some of those who gave me so much flak about it are now doing it themselves on their homes!

    • gsays 7.1
      27 August 2024 at 4:38 pm

      Consider, if you have the space, a ground mounted array.

      New bifacial panels generate power on the back side as well. Paint the surface underneath them white and you get a little extra bang for yr buck.

      These panels are designed to be mounted vertically running north to south but that is in places that have high snowfall and therefore keep generating power in all but the midday sun.

      Approximtely $1 a watt, cheap as chips!

      • Mike the Lefty 7.1.1
        27 August 2024 at 4:47 pm

        I have a tiny yard, unfortunately, but thanks for the info anyway.

      • Belladonna 7.1.2
        27 August 2024 at 6:30 pm

        Cost of installation?

        • gsays 7.1.2.1
          27 August 2024 at 10:23 pm

          Harrisons will do a 8kw system with a quality (Fronius) inverter, installed for $20,000.

          https://www.harrisonssolar.co.nz/solar-systems/8kw-solar-system

          You still will pay a line or daily charge. That is why I went off-grid, Max Bradford's reforms lies.

          • Belladonna 7.1.2.1.1
            29 August 2024 at 8:08 am

            Economics probably don't stack up for me. It would take around 15+ years to pay off – especially if I still have to pay line charges to top up from the grid if/when needed. And added maintenance and then replacement.

            In 20 years I might be kicking myself. But also in 20 years I may not be in the same house.

            • Gareth 7.1.2.1.1.1
              29 August 2024 at 10:43 am

              Ask for a free quote from one of the solar companies. The quotes are pretty detailed. I've just signed up for a similar system, 8kW fully installed for 22K. Their calculations said based on my previous bills and the expected generation, the system should pay for itself in 9 years. Based on a 20 year lifespan it should save 51K.

  8. Jenny 8
    27 August 2024 at 3:15 pm

    Apart from its many other uses, methanol is a percursor chemical used in the manufacture of explosive ordinance.

    We would be doing the world a massive favour if we didn't export any of it.

  9. Jenny 9
    27 August 2024 at 3:40 pm

    "Led by Brown, National has reversed Labour’s ban on future offshore oil and gas exploration… " Simon Louisson

    The Labour Opposition just need to make an announcement, 'Don't get your hopes up boys. We will be re-imposing the ban on new offshore oil and gas exploration as first order of business on regaining the 1reasury Benches.'

    Fixed.

    • Grey Area 9.1
      28 August 2024 at 6:22 am

      Why haven't they? Labour have said very little about reversing the many changes CoC have inflicted on NZ so quickly.

      I hope Labour (and GP/TPM) are working on an action plan to do exactly this in their first 100 days.

      I doubt they are. Labour are doing a good job of challenging the CoC's awful agenda but I still don't trust them, or more specifically, Hipkins.

    • Mike the Lefty 9.2
      28 August 2024 at 2:18 pm

      I hope that pacific island leaders at the forum take Luxon to task for his government's choice to burn more fossil fuel and add to the rising sea levels that are a major problem for many of them right now.

  10. thinkee 10
    27 August 2024 at 6:19 pm

    Well, thee silver lining here is the more stupid this governments decisions are the easier it should be to toss them out.

    So far, the left should be able to win in 2026, but it needs to present a united front and I don't think that's happening yet. Not visibly anyway

  11. Georgecom 11
    28 August 2024 at 5:28 pm

    A few weeks ago brown and luxon etc were accusing labour of crashing the oil exploration sector in nz and causing the current power situation.

    Never mind the realities of $1.5 billion being sunk into drilling wells over the past 6-7 years which has failed to maintain national gas flow levels.

    If brown was serious about restarting exoration, his move to export LNG will kill any new gas explotation. National is to blame for the 2025, 2026, 2027 and onward shortages in cheap gas and consequental cheap electricity by sabotaging the drilling industry and locking us into imprting costly lng.

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