Gas reserves have fallen 20% in a year, Government reports

Thursday, 11 July 2024

Labour energy spokesperson Megan Woods says it had a plan.

The country’s reserves of natural gas have slumped by 20% over the course of just one year, Energy Minister Simeon Brown says.

Brown said figures released by the Ministry of Business, Innovation and Employment (MBIE) on Thursday showed the level of “proven plus probable reserves” of gas had fallen to 1300 petajoules (PJ) of gas by the end of last year.

That equates to less than nine years’ demand, based on gas consumption in 2022.

Brown said 44% of the drop in gas reserves was attributable to gas being extracted and used.

But 56% was the result of gas field operators revising down the amount of gas they estimated they held “as operators now understand the relevant fields hold less gas than previously thought”.

Production shortages have lit a fire under gas prices on the spot market and left large gas users struggling to find suppliers.

An MBIE spokesperson said the downgrade did not include the impact of any reduction in reserves that might flow from the failure of an infill well drilled at the Kupe gas field in May.

That means the current reserves situation is likely to be worse than reflected in MBIE’s report.

Genesis Energy warned last month that it might downgrade the reserves at Kupe by 80PJ when it released its annual results in August.

Brown said the reserves update made very concerning reading, coming at a time when “natural gas production cannot currently meet demand”.

“New Zealand’s exporters and manufacturers need more natural gas to power their businesses and produce value-added goods to drive economic growth,” he said.

Josh Adams, a spokesperson for the Major Gas Users Group, which represents major industrial users of gas, said shortly before the reserves figures were updated that there was a risk the closure of some major gas fields might be brought forward.

MBIE is understood to have struggled to find a new supplier of gas for schools and hospitals after putting their custom back out to tender, and there are rumours that some large businesses have been told gas they have bought in advance can’t be supplied.

The ministry’s markets manager, Mike Hayward, said gas production was expected to drop “below demand”.

“For at least the next three years, data shows New Zealand’s natural gas reserves will produce 10PJ less than recent demand levels.”

“New Zealand has used around 150PJ of natural gas per year for the last two years. While New Zealand holds 8.7 years of natural gas in usable reserves, field operators only expect to extract up to 140PJ each year for the next three years,” he said.

Brown said the drop in reserves was evidence the previous government should not have imposed a ban on issuing new offshore permits to oil and gas explorers in 2018.

Labour’s energy spokesperson, Megan Woods, has maintained it was the right decision and that the former government had a plan to wean the country off gas on which the coalition Government had not followed through.