Source: BusinessNZ
New data confirms that New Zealand’s industrial gas market is in crisis, with immediate action required to save jobs, services and manufacturing in New Zealand.
Businesses large and small recently shared their concerns with the Minister for Resources and discussed support strategies to manage the declining gas supply at this year’s Gas User Forum, hosted by the BusinessNZ Energy Council (BEC) and Optima.
Optima Managing Director Martin Gummer says natural gas is used for much more than electricity generation.
“Natural gas is a crucial fuel for New Zealand industry. It’s used in the creation of everyday products and services for New Zealanders. Things like coffee roasting, beer brewing, infant formula, meat and vegetable production, all harness natural gas as part of their process.”
Industrial and commercial gas users were surveyed ahead of the forum. Results reveal a critical and deteriorating situation in New Zealand’s natural gas market.
“Almost half of the surveyed businesses (31 of 66) have reduced operations, increased prices, or cut staff due to rising gas costs or unreliable supply. The average level of concern regarding future gas availability and pricing is 4 out of 10, with uncertainty about the availability of contracts going forward,” Gummer says.
BEC Executive Director Tina Schirr says survey results paint an alarming picture, with significant cost pressures for users.
“On average, prices have surged more than 100% in the past five years, with a quarter of businesses surveyed now paying $25 or more per gigajoule. Most businesses surveyed (80%) have contracts expiring by 2027, creating a narrow window for necessary transitions to alternative energy sources.
“If we do nothing, a major de-industrialisation crisis could escalate in the next two years, having serious and devastating consequences for suppliers and customers of gas-using businesses.”
Schirr says while some businesses can transition to alternatives, it’s not an easy fix.
“More than 40% of businesses surveyed say transitioning to alternative fuels is not commercially viable within the next five years, with a further 20% uncertain. Even with a phase-out period of 15 years, only 75% of all respondents were confident of being able to transition.
“The remainder say that switching may be possible if barriers are removed – including the prohibitive cost of conversion, lack of proven alternative technologies, uncertainty about commercial viability, and the high cost or difficulty of upgrading on-site supply infrastructure.
BEC and Optima believe that for industries able to transition, a joint industry and government plan for a managed reduction and transition away from industrial gas supply is needed, aiding industries in adopting alternative technologies. Government funding and clear long-term energy strategies are critical to support these transitions.
“We urge the government to use all the levers at its disposal to help free up gas supplies and get more gas out of the ground. Minister Jones has been doing good work in this regard, but we’re only scratching the surface.
“Increased investment in developing gas fields short-term is desperately needed to reduce the shortfall in supply. For investors to feel confident there needs to be bipartisan agreement, providing important stability and certainty.”
