John Kidd: Enerlytica Head of Research on the looming gas shortages

Industry experts suggest looming gas shortages have been a long time coming. 

The Ministry of Business, Innovation and Employment is warning natural gas production in New Zealand is expected to drop below demand. 

It says we may see shortages over the next three years. 

Enerlytica Head of Research John Kidd told Andrew Dickens while upcoming law changes to encourage gas production may help, shortages come as no surprise. 

He says shortfalls have been a threat for years and the trend of low production is now catching up with us. 

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Episode Transcript

Speaker 1 (00:00):
Supplies of natural gas will not meet demand over the
next three years. That's what the guys from MB said yesterday.
This is going to put pressure on gas prices and
also raise further questions of how to secure supply without
reducing or even stopping operations. Our supply has been in
decline since twenty nineteen, many would argue even longer than that.
Last year, the amount in our natural reserves decreased by

(00:22):
twenty percent because we've been using a lot. Director and
head of research at Analytica, John Kidd joins me.

Speaker 2 (00:29):
Now, Hello, John fand and Andrew.

Speaker 1 (00:31):
It's not a new problem, is it.

Speaker 2 (00:34):
Your problem has been coming forward, as you say, for
quite a few years now, and much really what we've
seen over last two years in particular, it's just a
farely dramatic acceleration of what's been a trend now for
the last five or six years.

Speaker 1 (00:46):
So we're using gas like water, but we're not finding
any new gas to use.

Speaker 2 (00:52):
No, we're not using gas like water. Actually, the gas
market isn't quite dramatic contraction, so you know, it's probably
an obvious thing to say, but we don't have the
ability to trade gas and out of new Zealand. It's
actually unique for a developed world. So when supply is
our demand has to meet that. So the gase market
has been shrinking for as you say, the last five

(01:12):
or six years, and that's just a function of the
physical reality of our market. We don't have the ability
to top up gas because it just doesn't come into
the system, so we're just drinking.

Speaker 1 (01:23):
Is the problem that we've not been looking for new
supplies of gas, or that they might not be supplies
at all out there.

Speaker 2 (01:31):
It's definitely not a problem of not looking for new
supplies of gas. We've had five years now that pretty
much that same time period where there's been a period
of a very heavy investment activity insective. It's been something
like two billion dollars invested over the last five years,
fifty odd production wells which have been drilled, and unfortunately,
there's just been a very broad and very deep success

(01:51):
across that activity and we are where we are. I mean,
it's not what the set they had expected that those
work programs were very well, they're considered to be relatively
low risk, and they were expected to deliver a lot
of gas system and that just seridain happened and that's
the nature of the business.

Speaker 1 (02:05):
John, Are you telling me that gas exploration did not
stop during the labor government?

Speaker 2 (02:11):
What I'm probably saying is that the time horizons that
are involved with a sector are so long that most
of the work that I've just spoken about was scheduled
before the ban had come in. So I guess the
most concerning part for us now is what happens next.
Because the work that has gone into the secretary of
the last five of these parties and so had been
well signaled and had been planned for years. We're now

(02:33):
into a next generation really where all of the regulatory
change that has come in on the last two terms
of government, new investors and there aren't many have been
left frankly or existing investors now need to think about
what they do next. Do we go again? Is there
another two billion in the key to go again? And
I would suspect that the answer might be very difficult
to be. It's a very difficult investment proposition for those

(02:54):
companies to deal with.

Speaker 1 (02:55):
Do we have to start preparing for a life without gas?

Speaker 2 (02:59):
No? There will always be guess for the uses that
we are typically used to, So for the mums and
dads at home, industrial and commercial users, although they are
facing their own pressure industrial commercial users, there will be
gas available for those users. Where the pain is coming
from right now and has been for the last few years,
has been into the very large end of town, So methnecks,

(03:21):
they are the ones that are feeling the greatest pain
out of the whole situation and power generation, so those
users have had to curtail the rest of the market.
There will, i'd suggest, always be enough Guess to certainly
service those at home.

Speaker 1 (03:33):
So we're looking for alternative sources of power other than gas.
Would that be a better way to actually sustain the
demand that comes from the beginning of town.

Speaker 2 (03:44):
So I think that's you know that beg end of
the town doesn't have an option. Frankly, their process is
exclusive to Guess and if they don't have gas, then
they can't process. So that's actually quite a big problem
for ended Ink Because I mentioned Methnics before, they're a
billion dollar exporter. They when they're running at high capacity
and billiy Nolan's be sports out of the Taraonaki region
that's none now just a fraction of that because they

(04:05):
can't produce to what they would normally or what they did,
the gas market was full. For those that are sort
of further down the chain, you know, the transition is
real and everybody is focused towards getting away from fossil fuels,
but that's not something that can happen instantly or in
many cases even slowly. There needs to be fuel available
to be able to bridge between now and whether it's

(04:28):
twenty fifty, all beyond or before. We need a bridge
to be able to do that, and gas is the
ideal fuel for that.

Speaker 1 (04:34):
John, thank you, Brandon brand Inside and I thank you
so much John as the director and hit of research
at Analytic or a private company that does deep dives
and research into gas and energy expiration. And this is
a big problem. For more from the Mic Asking Breakfast.
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