Energy crisis: Another factory may close; Genesis says importing gas an option

Wednesday, 7 August 2024

Packaging giant Oji Fibre Solutions’ Penrose Pulp Mill may be another victim of the energy crisis that has seen wholesale electricity and gas prices soar.

State-owned enterprise Genesis Energy has even signalled importing liquified natural gas from overseas could be an option to shore up energy supplies.

Oji Fibre chief executive Jon Ryder said it had begun consultations on closing the mill which employs 75 staff and which he said had been losing money for three years in part because of “dramatically rising energy costs”.

Oji Fibre Solutions employs 1854 people across Australia and New Zealand and Ryder said while “today we are focusing on Penrose”, energy costs were affecting its other sites.

“Energy, however, is not the only issue at Penrose,” he added.

On Monday, almost 300 workers at Winstone’s pulp and timber mills in Ohakune were told to lay down their tools because of soaring energy costs.

Finance Minister Nicola Willis said on Tuesday that she had sought an “urgent briefing” from the Treasury after wholesale electricity prices spiked to several times their normal level.

Resources Minister Shane Jones said gas production was 20% down on last year and Willis said it was “obvious that the complete lack of gas is impacting the electricity market and other markets”.

State-owned enterprise Genesis Energy, which burns gas to meet peak-time electricity demand, has signalled importing liquified natural gas (LNG) from overseas could be an option to shore up energy supplies.

Chief executive Malcolm Johns told The Post the current pressure on the energy system was due to a combination of low hydro lake levels, a period of low wind and the gas shortage.

“LNG is an option to reduce that pressure, as is more natural gas. Genesis would be an off-taker of either or both,” he said.

“New Zealand will continue to have periods of low solar and wind generation during winter in the years to come, and we will have dry years with low hydro levels in the future,” he added.

John Carnegie, chief executive of industry group Energy Resources Aotearoa, said the onshore infrastructure to receive LNG could be built faster and at a lower cost than in the past.

“Given where we are at, we need all options on the table. But the quickest way of getting more gas into the system is through our existing natural gas producers,” he said.

Ryder made clear energy prices were only one of several challenges confronting its Penrose mill.

“Our parent company, Oji Holdings, has a larger, more modern plant in Malaysia that can ensure supply of quality recycled paper for our box-making operations in New Zealand and Australia,” he said.

“However, closing Penrose Mill would reduce our capacity to produce recycled paper, and increase cleaned waste paper sent offshore.”

Oji had proposed closing the mill “after considering all our options”, he said.

“We are about to begin a consultation period with our 75 staff at the site, to see if there is any alternative we have not yet considered.”