May 19, 2025 • 13 mins
Experts have raised concerns after natural gas production took a nosedive.
It fell 20 percent in the first quarter compared to the same time last year, to 22.85 petajoules.
Industry spokespeople say available gas is depleting - and they can't harness new fields because of the 2018 ban on exploration.
Energy Resources Aotearoa CEO John Carnegie joined the Afternoons team to discuss.
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Speaker 1 (00:09):
You're listening to a podcast from Newstalk ZB Follow this
and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
Good afternoon, So we're talking about oil and gas in
New Zealand on the back of the twenty eighteen ban
by the Labor government. It appears that reversing that ban
is not as simple as once thought. That is still
moving its way through parliament. But the question we've got
for you is do we need to change policies and
legislation to get some more confidence back in the industry
(00:37):
to allow exploration with these dwindling supplies, primarily of natural gas.
To break it all down, we are joined by John Carnegie.
Here's the chief executive of Energy Resources Alter Roa. John.
Very good afternoons too.
Speaker 3 (00:50):
Yeah, good afternoon, hey John.
Speaker 4 (00:52):
Let's get right back to basics. What do we mean
by natural gas in New Zealand?
Speaker 3 (00:57):
Right? Okay, Well, let us going back to basics. Basically,
natural gas is a fossil fuel which is primarily extracted
in the Taranaki region and it's used widely for electricity
generation and industrial processes. And of course, as we've tried
to see in the last couple of years, back up
(01:21):
for renewableoks during dry years or pig demand.
Speaker 4 (01:24):
So okay, and how much are we producing and how
much are we importing?
Speaker 3 (01:30):
Well, as we most of just about all of what
we produce is used domestically. Back in the day we
used to produce the units of measurement called petagules. We
used to produce around one hundred and eighty two hundred
of them. We're down to about one hundred and ten now.
(01:50):
The slight exception to that is LPG, so that's bottled
gas where we do actually import a small fraction of
our LPG from Australia. But the situation, the reason we're
in this situation, of course, is that drop from one
hundred and eighty petitules down to one hundred and ten
(02:12):
and possibly lower.
Speaker 2 (02:15):
So we'll come back to the LPG bottled LPG, John,
But how quickly are we running out of the natural
gas that is primarily used by industry.
Speaker 3 (02:26):
I mean, that's a bigger question. It sounds unfortunately. I mean,
the irony is that we have lots of natural gas resource,
but where the sector is constrained given the oil and
gas span to exploring it so effectively. You know, if
you want to think about it from a business perspective,
(02:46):
the oil and gas industry is effectively running out of runway.
Every business, of course, needs to invest in its future,
and the oil and gas sector got told effectively in
twenty eighteen that it didn't have one. So you know
what we're now seeing is the impact of that. So
there's plenty of gas we just can't access at what
the sector is confined to its existing fields and they
(03:13):
are all getting old, mature and the nearing end of life.
So that's the issue, not that we're running out of gas.
We're running out of gas that we have available to us,
and that is the importance of this government reversing the
(03:35):
oil and gas new permit ban and hopefully that revitalizing
our oil and gas sector.
Speaker 4 (03:43):
What was the plan, So if this must have been foreseeable,
so what was the plan to replace what gas does
for our power needs in the country.
Speaker 3 (03:55):
Well, there's a very good question. I guess the expectation
was that behemoth projects like the Onslow stored pumped hydro
scheme that was put forward by the last government down
down in the South Island, and also the expectation that
renewable sources of energy, so hydrogen grand gases and a
(04:21):
greater electrification was actually going to fill the gap left
by gas. But clearly, as we can see from sharply
increasing prices, they haven't been able to come online fast
enough to offset the declining supplies in our gas fields.
Speaker 4 (04:39):
And how much have gas prices gone up since the ban?
Speaker 3 (04:43):
That depends on the specific contracts that gas users have,
but gas prices have risen sharply. And actually the worst
part of that is that the electors and gas sectors
are joined by an unbilicle. About thirty percent of our
(05:05):
produced gas is used in the electricity sector. You constrain
supplies through to the electricity sector, you're going to get
increased electricity prices and house which I think said earlier
this year that they're expecting to see price increases of
around about ten percent on average for residential consumers, not
to mention our larger users.
Speaker 2 (05:25):
Right, So, where are we at at the moment? John,
with exploration? As I understand, the ban is effectively still
in place, the legislation is still moving through parliament. What
are the fish hooks there with that legislation?
Speaker 3 (05:37):
Gina, We look, it was about actually about getting that
legislation right and put into a state that was workable
for the industry, and so the government's been deliberate about
ensuring that it actually delivers on their desire to revitalize
(05:59):
the guess sector. So, you know, a key part of
that legislation, which is currently in the House and we
understand is going to be passed into law within the
next month or so, it is the reversal of the
ord in desk span and a desire to ensure that
we have a more exploration ACTI. So basically the purpose
(06:23):
of the actors give the sector back, the runway, back,
the ability to invest in its future, to increase gas
production and to place downward pressure on both gas and
electricity crisis.
Speaker 4 (06:38):
But if that ban is reversed, can that not just
be put on again, reinstated again by a future government
potentially in eighteen months.
Speaker 3 (06:48):
Yeah. Look, I mean that is obviously the big risk,
and that's what you just talked about. There is called
sovereign risk, and that's effectively a fancy phrase for the
impact on investment of a bad government decision. And so yes,
there is that risk. We have been very clear with
(07:10):
the government that investors in the upstream sector, the or
I guess sector and exploration are effectively gun shy and
will we'll need we'll need the government to walk along
side it to ensure that its investments are safe. I mean,
(07:32):
these are these are quig investments. You know, if you're
looking at offshore, you know you're looking at over one
hundred million dollars a well and on shore anywhere from
ten to twenty. So these are not insignificant investments in
New Zealand's energy future, energy security. So the sector rightfully
wants to be assured that its investments are safe, and
(07:56):
that's a future government doesn't come in and say no, sorry,
you've invested that for no good reason. We're going to
focus on something else.
Speaker 2 (08:04):
Well, we are joined by John Carnegie, Chief Executive of
Energy Resources tear Rower to get to the bottom of,
hopefully this what we do about our oil and natural gas.
It appears natural gas is starting to run out in
terms of supply. John, Thank you very much again for
your time.
Speaker 4 (08:19):
Yeah, as we said before, we're going right back to
the basics. But I've got another very basic question that's
coming through here. Is there a difference in supply chain
around the gas we have in canisters at our houses,
barbecue you know, plug into our system and the gas
being pumped to be used in industry.
Speaker 3 (08:36):
Yeah, well there is because we've got a natural gas
transmission pipeline that basically takes gas from the Kadaranaki region
then spreads it throughout the North Island. In the South
Island we have no natural gas network, but what we
do use is a lot of LPG and bottled canisters
(09:00):
and so they know, people will be familiar with those. Actually,
as looking at your barbecue, that's an LPG cannist right
through big canisters that you put on the outside of
your wall, outside your kitchen and use it for your
home eating and water and cooking.
Speaker 4 (09:20):
Okay, And look, just going back you talked before about
the runway for the gas industry. Is gas the future
for New Zealand long term? Or are those who worry
about it's perceived damage to the climate going to eventually
get their way and shut it down, in which case
a runway is only going to be so long. And
if this is the case, what is going to replace it?
Speaker 3 (09:43):
Yeah? Well, look, there are a number of dimentions for that.
Let's address the climate one to start off with. I mean,
what we've seen in the last couple of years is
increasingly we're doing the reverse of what everyone else around
the world is doing. Everyone else around the world is
shifting from coal to natural gas as a cleaner, more
affordable option. We seem to be moving in our eloquacity
(10:05):
sector from gas to coal. So actually more gas in
our electricity system is an environmental wind. And of course
natural gas is covered as its coal, covered by the
emissions trading scheme and a carbon price, so that all
of the emissions are actually accounted for with respect for
(10:27):
natural gas in in terms of the future. As I
said before, what's so frustrating about the situation we're in
is that New Zealand has abundant natural gas that can
be harnessed to help ensure we have a thriving economy.
We fuel manufacturers and exporters to deliver key with jobs
and prosperity. And unfortunately, what we're seeing around the most
(10:50):
in now is businesses whose contracts financial gas are rolling
off and are getting rate shock effectively, are being told
that the gas sector is constrained, supplies constrained, and that
their prices are are going to go up. Eventually. Of course,
(11:12):
there will be alternatives, so again, as I said, earlier.
There will be alternatives developed, will greater electrification, obviously, that's
the first cab off the rank. Some will use more
LPG and canisters we'll develop and that we're developing actually
and putting into our system renewable methane based of digesting
(11:38):
food digesters. So you know, there are a number of
options coming to the table, including batteries, you know, the
electricity system, delivering more wind and solar. You know, all
of that is good. The primary issue for us and
why we will always need natural guessing our electricity system
(11:58):
is the fact that we are so water dependent. And again,
as we've all seen over the last couple of years,
as we have dry years, we need need something to
fill the gap, and that will be flexible natural gas,
or it certainly should be, and we think that that
will have an ongoing role in our electricity system, a
(12:20):
smaller role, but an ongoing role. We need more natural
gas in our electricity system and for our industries there
are hard to shift industries as well with natural gas.
Speaker 4 (12:32):
And now, John, just one last question that's come through
from a textra on nine two nine two. We've got
to go to the news, but just quickly, can you
ask John, if I'm building a new house, should I
put in gas, a gas connection or go all electric?
Speaker 3 (12:46):
Oh, I mean that I'd hate to give that advice.
But look, if the government's plans pay off, we will
have a revitalized gas production sector. But also, residential gas
is always a small component of the overall use of gas.
(13:06):
There will always be guess at the residential level.
Speaker 2 (13:10):
Yeah, John, very interesting, Thank you very much for your time.
Really appreciate it. That is John Carnegie, Chief executive of
Energy Resources. Out here at are
Speaker 1 (13:20):
For more from news talks at b listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
You're listening to a podcast from Newstalk ZB Follow this
and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
Good afternoon, So we're talking about oil and gas in
New Zealand on the back of the twenty eighteen ban
by the Labor government. It appears that reversing that ban
is not as simple as once thought. That is still
moving its way through parliament. But the question we've got
for you is do we need to change policies and
legislation to get some more confidence back in the industry
(00:37):
to allow exploration with these dwindling supplies, primarily of natural gas.
To break it all down, we are joined by John Carnegie.
Here's the chief executive of Energy Resources Alter Roa. John.
Very good afternoons too.
Speaker 3 (00:50):
Yeah, good afternoon, hey John.
Speaker 4 (00:52):
Let's get right back to basics. What do we mean
by natural gas in New Zealand?
Speaker 3 (00:57):
Right? Okay, Well, let us going back to basics. Basically,
natural gas is a fossil fuel which is primarily extracted
in the Taranaki region and it's used widely for electricity
generation and industrial processes. And of course, as we've tried
to see in the last couple of years, back up
(01:21):
for renewableoks during dry years or pig demand.
Speaker 4 (01:24):
So okay, and how much are we producing and how
much are we importing?
Speaker 3 (01:30):
Well, as we most of just about all of what
we produce is used domestically. Back in the day we
used to produce the units of measurement called petagules. We
used to produce around one hundred and eighty two hundred
of them. We're down to about one hundred and ten now.
(01:50):
The slight exception to that is LPG, so that's bottled
gas where we do actually import a small fraction of
our LPG from Australia. But the situation, the reason we're
in this situation, of course, is that drop from one
hundred and eighty petitules down to one hundred and ten
(02:12):
and possibly lower.
Speaker 2 (02:15):
So we'll come back to the LPG bottled LPG, John,
But how quickly are we running out of the natural
gas that is primarily used by industry.
Speaker 3 (02:26):
I mean, that's a bigger question. It sounds unfortunately. I mean,
the irony is that we have lots of natural gas resource,
but where the sector is constrained given the oil and
gas span to exploring it so effectively. You know, if
you want to think about it from a business perspective,
(02:46):
the oil and gas industry is effectively running out of runway.
Every business, of course, needs to invest in its future,
and the oil and gas sector got told effectively in
twenty eighteen that it didn't have one. So you know
what we're now seeing is the impact of that. So
there's plenty of gas we just can't access at what
the sector is confined to its existing fields and they
(03:13):
are all getting old, mature and the nearing end of life.
So that's the issue, not that we're running out of gas.
We're running out of gas that we have available to us,
and that is the importance of this government reversing the
(03:35):
oil and gas new permit ban and hopefully that revitalizing
our oil and gas sector.
Speaker 4 (03:43):
What was the plan, So if this must have been foreseeable,
so what was the plan to replace what gas does
for our power needs in the country.
Speaker 3 (03:55):
Well, there's a very good question. I guess the expectation
was that behemoth projects like the Onslow stored pumped hydro
scheme that was put forward by the last government down
down in the South Island, and also the expectation that
renewable sources of energy, so hydrogen grand gases and a
(04:21):
greater electrification was actually going to fill the gap left
by gas. But clearly, as we can see from sharply
increasing prices, they haven't been able to come online fast
enough to offset the declining supplies in our gas fields.
Speaker 4 (04:39):
And how much have gas prices gone up since the ban?
Speaker 3 (04:43):
That depends on the specific contracts that gas users have,
but gas prices have risen sharply. And actually the worst
part of that is that the electors and gas sectors
are joined by an unbilicle. About thirty percent of our
(05:05):
produced gas is used in the electricity sector. You constrain
supplies through to the electricity sector, you're going to get
increased electricity prices and house which I think said earlier
this year that they're expecting to see price increases of
around about ten percent on average for residential consumers, not
to mention our larger users.
Speaker 2 (05:25):
Right, So, where are we at at the moment? John,
with exploration? As I understand, the ban is effectively still
in place, the legislation is still moving through parliament. What
are the fish hooks there with that legislation?
Speaker 3 (05:37):
Gina, We look, it was about actually about getting that
legislation right and put into a state that was workable
for the industry, and so the government's been deliberate about
ensuring that it actually delivers on their desire to revitalize
(05:59):
the guess sector. So, you know, a key part of
that legislation, which is currently in the House and we
understand is going to be passed into law within the
next month or so, it is the reversal of the
ord in desk span and a desire to ensure that
we have a more exploration ACTI. So basically the purpose
(06:23):
of the actors give the sector back, the runway, back,
the ability to invest in its future, to increase gas
production and to place downward pressure on both gas and
electricity crisis.
Speaker 4 (06:38):
But if that ban is reversed, can that not just
be put on again, reinstated again by a future government
potentially in eighteen months.
Speaker 3 (06:48):
Yeah. Look, I mean that is obviously the big risk,
and that's what you just talked about. There is called
sovereign risk, and that's effectively a fancy phrase for the
impact on investment of a bad government decision. And so yes,
there is that risk. We have been very clear with
(07:10):
the government that investors in the upstream sector, the or
I guess sector and exploration are effectively gun shy and
will we'll need we'll need the government to walk along
side it to ensure that its investments are safe. I mean,
(07:32):
these are these are quig investments. You know, if you're
looking at offshore, you know you're looking at over one
hundred million dollars a well and on shore anywhere from
ten to twenty. So these are not insignificant investments in
New Zealand's energy future, energy security. So the sector rightfully
wants to be assured that its investments are safe, and
(07:56):
that's a future government doesn't come in and say no, sorry,
you've invested that for no good reason. We're going to
focus on something else.
Speaker 2 (08:04):
Well, we are joined by John Carnegie, Chief Executive of
Energy Resources tear Rower to get to the bottom of,
hopefully this what we do about our oil and natural gas.
It appears natural gas is starting to run out in
terms of supply. John, Thank you very much again for
your time.
Speaker 4 (08:19):
Yeah, as we said before, we're going right back to
the basics. But I've got another very basic question that's
coming through here. Is there a difference in supply chain
around the gas we have in canisters at our houses,
barbecue you know, plug into our system and the gas
being pumped to be used in industry.
Speaker 3 (08:36):
Yeah, well there is because we've got a natural gas
transmission pipeline that basically takes gas from the Kadaranaki region
then spreads it throughout the North Island. In the South
Island we have no natural gas network, but what we
do use is a lot of LPG and bottled canisters
(09:00):
and so they know, people will be familiar with those. Actually,
as looking at your barbecue, that's an LPG cannist right
through big canisters that you put on the outside of
your wall, outside your kitchen and use it for your
home eating and water and cooking.
Speaker 4 (09:20):
Okay, And look, just going back you talked before about
the runway for the gas industry. Is gas the future
for New Zealand long term? Or are those who worry
about it's perceived damage to the climate going to eventually
get their way and shut it down, in which case
a runway is only going to be so long. And
if this is the case, what is going to replace it?
Speaker 3 (09:43):
Yeah? Well, look, there are a number of dimentions for that.
Let's address the climate one to start off with. I mean,
what we've seen in the last couple of years is
increasingly we're doing the reverse of what everyone else around
the world is doing. Everyone else around the world is
shifting from coal to natural gas as a cleaner, more
affordable option. We seem to be moving in our eloquacity
(10:05):
sector from gas to coal. So actually more gas in
our electricity system is an environmental wind. And of course
natural gas is covered as its coal, covered by the
emissions trading scheme and a carbon price, so that all
of the emissions are actually accounted for with respect for
(10:27):
natural gas in in terms of the future. As I
said before, what's so frustrating about the situation we're in
is that New Zealand has abundant natural gas that can
be harnessed to help ensure we have a thriving economy.
We fuel manufacturers and exporters to deliver key with jobs
and prosperity. And unfortunately, what we're seeing around the most
(10:50):
in now is businesses whose contracts financial gas are rolling
off and are getting rate shock effectively, are being told
that the gas sector is constrained, supplies constrained, and that
their prices are are going to go up. Eventually. Of course,
(11:12):
there will be alternatives, so again, as I said, earlier.
There will be alternatives developed, will greater electrification, obviously, that's
the first cab off the rank. Some will use more
LPG and canisters we'll develop and that we're developing actually
and putting into our system renewable methane based of digesting
(11:38):
food digesters. So you know, there are a number of
options coming to the table, including batteries, you know, the
electricity system, delivering more wind and solar. You know, all
of that is good. The primary issue for us and
why we will always need natural guessing our electricity system
(11:58):
is the fact that we are so water dependent. And again,
as we've all seen over the last couple of years,
as we have dry years, we need need something to
fill the gap, and that will be flexible natural gas,
or it certainly should be, and we think that that
will have an ongoing role in our electricity system, a
(12:20):
smaller role, but an ongoing role. We need more natural
gas in our electricity system and for our industries there
are hard to shift industries as well with natural gas.
Speaker 4 (12:32):
And now, John, just one last question that's come through
from a textra on nine two nine two. We've got
to go to the news, but just quickly, can you
ask John, if I'm building a new house, should I
put in gas, a gas connection or go all electric?
Speaker 3 (12:46):
Oh, I mean that I'd hate to give that advice.
But look, if the government's plans pay off, we will
have a revitalized gas production sector. But also, residential gas
is always a small component of the overall use of gas.
(13:06):
There will always be guess at the residential level.
Speaker 2 (13:10):
Yeah, John, very interesting, Thank you very much for your time.
Really appreciate it. That is John Carnegie, Chief executive of
Energy Resources. Out here at are
Speaker 1 (13:20):
For more from news talks at b listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
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