Decription:

This study is a continuation of earlier CAE analyses of the New Zealand energy situation, and the issues surrounding primary energy supply in particular. The study offers a comprehensive discussion of the risks New Zealand faces in the post-Maui era, especially with regards to the supply and consumption of gas. The premise of the report is that gas exploration in New Zealand in recent years has declined due to the large reserves and the low cost of gas from the Maui field. As Maui comes to the end of its productive life, the imbalance between gas demand and gas supply will intensify.

The key distinction between the Maui era and the present is that proven developed gas reserves are now low relative to the rate of consumption. We argue that New Zealand needs to find thermal energy solutions that can balance energy security against higher costs while achieving energy diversity through planned investment in alternative strategies.

The inherent difficulty faced by the New Zealand energy market is one of scale; in a small market the likelihood for market dominance by one thermal fuel is high. For major energy users the future price of gas will be critical. Higher costs will also adversely impact on the competitiveness of the primary production and processing sectors and hence on the economy as a whole.

The purpose of this investigation, therefore, has been to inform government policies and industry strategies on the implications of various supply options and the public policy imperatives that are needed to underpin future planning and investment. To achieve this, the report seeks to develop a clear understanding of the primary technical, economic and transactional requirements that might frame future decision-making. In particular, this study seeks to provide an analysis of:

• The state of the New Zealand thermal fuels market.
• How the indigenous natural gas sector might develop to meet domestic demand during the transition to “new” thermal fuels post-Maui.
• How other thermal fuels may be used to supplement indigenous gas supply to meet any supply gap and enhance security.
• How these options may be deployed should indigenous gas supply prove inadequate.
• The possible effects of “high assurance solutions,” such as conventional LNG implementation, on the vitality of exploration and development.
• The optimal energy supplies strategy that balances risks and opportunities for the New Zealand economy.