Ministerial Statements — Gas Production—Low Supply Projections

I wish to make a ministerial statement relating to low gas production. This morning, the Minister for Resources, the Hon Shane Jones, released a public statement following the release of updated projections from industry coregulator the Gas Industry Company. The assessment from the Gas Industry Company is dire. Insufficient gas is available to meet all contracted demand. As a result, industrial gas use has reduced.

It is important for the House to understand the magnitude of these updated projections. Natural gas production has decreased following the previous Government’s decision in 2018 to ban gas exploration beyond Taranaki. Since 2018, New Zealand has imported record levels of coal from Indonesia. Gas production has fallen by 51 petajoules between the years 2018 and 2023; investment in gas exploration, including to maintain production from existing wells, has collapsed; and existing fields are now in decline. The speed of reductions in production has also exceeded expectations.

Last year, production was expected to be 147.46 petajoules; however, only 146.56 petajoules were produced. That is a shortfall on projections of 12.5 percent. In the first three months of this year, natural gas producers were expecting to deliver 42.6 petajoules but only 30.73 were produced. The difference in production is almost a 28 percent decline. The shortfall in production in the first three months of 2024 alone is almost twice the annual amount of gas used by residential consumers each year. This highlights the importance of New Zealand’s natural gas supplies not only as a firming fuel for our largely renewable electricity sector but as a vital energy source for our manufacturers and exporters.

Natural gas is a key input into the manufacturing of household chemicals, low-emissions shipping fuels, and fertiliser that improves the yields and productivity of our agriculture sector. It is also used extensively in food processing, particularly in the dairy sector, which is New Zealand’s leading export earner. Unlike other countries, natural gas in New Zealand is not exported or imported. All of the natural gas that is produced in New Zealand is used in New Zealand. Without the policy settings that enable more production, New Zealand’s manufacturing base and provincial economies will suffer and our country’s competitiveness will decline.

The coalition Government is committed to returning investment confidence in the natural gas sector so we can continue to produce the energy that powers our industries and keeps the lights on when renewables cannot do it alone. The Minister for Resources, the Hon Shane Jones, and I are working on a set of legislative reforms that we look forward to introducing to the House to support the gas sector. This includes taking decisions on the removal of the ban on offshore oil and gas exploration.

In the interim, the Ministry of Business, Innovation and Employment has established a gas security response group to coordinate gas producers, major gas users, and Government agencies while supply is tight. This group will be tasked with verifying the immediate supply and demand information to make sure we have a true picture of the problem; undertaking measures to make sure any impact of tight supply is managed by the large users who are best able to absorb the reduced supply; coordinating across Government, the gas sector, and electricity users to help identify and resolve any problems; and providing advice to Government on appropriate actions to ensure security of gas supply. This will help to also ensure that gas continues to be supplied to its most critical users, such as schools and hospitals.

The lights must stay on. Less natural gas will mean more coal being used to firm our electricity grid, as Genesis confirmed this morning. If it is not gas that keeps the lights on, then it must be coal. That is the reality of this situation the country finds itself in, and it is why this coalition Government has made urgent decisions on coordinating gas supplies and will lift the 2018 ban.

Thank you, Mr Speaker. The quarterly update from the gas industry company is in line with advice and information that has both been widely known and discussed for some time now, and, in fact, was the body of knowledge and information that informed the previous Government’s work programme. New Zealand has a finite supply of fossil gas. In fact, the Gas Transition Plan—a plan released under our Government to address the challenges in front of us—noted that, even with ongoing investment, supply could decrease over time because our major gas producing fields are in a natural production decline phase in their operational lives. The reality is that according to official data—[Interruption]

💬 SPEAKER: Sorry to interrupt the member. This is a ministerial statement. It’s clearly a very serious matter, and the House should treat it as such.

Thank you, Mr Speaker. The reality is that according to official data, since 2012-13, New Zealand’s gas production has been falling. This was even before our Government made the necessary and the correct decision to end new offshore oil and gas permitting. New Zealand must plan a transition away from gas. It is the Government’s duty to ensure that this is an orderly and a planned transition. In order to do this, and what our Government’s plan was, we must address how we store energy for generating electricity. At the moment, New Zealand stores energy for when the hydro lakes are low in the form of fossil fuels, in the form of coal and gas. This is not a viable option for the future, and nothing exemplifies the backwards looking of this Government than the sentence in this press release that says less gas will mean more coal. On this side of the House, less gas means more renewable energy and renewable storage.

We also need to be accelerating our work on zero-carbon gases. It is why our Government put an emphasis on biomethane. It is why our Government put an emphasis on hydrogen. We also need to work to reduce the demand for gas. The Minister, in his statement, says we must keep the lights on in our schools and hospitals. He is right, and that is why our Government had a State sector decarbonisation programme to move our schools and hospitals away from expensive gas, and why we moved them to the much more affordable renewable energy. We also had a programme to move our industries and our businesses to either reduce or absolutely remove gas from their industrial projects.

Under the Government Investment in Decarbonising Industry scheme, which this Government has scrapped, 20 of our major industrial users moved away from using gas. This is how we will address it, and the Government must also have a policy programme to bring together the electricity and the gas markets. This is absolutely critical for going forward. My intention now is to ask the Minister some questions.

The first question for the Minister: what is the latest data by petajoule that he has on New Zealand’s gas use?

Well, thank you, Mr Speaker. The answers I gave in terms of our gas production and the supply—as the gas industry made it very clear, there is not enough gas being produced to meet existing demand. And the reality is that, in the last few days, I have had major gas users contact my office saying they’re finding it harder to get the contracts they need. We have the Ministry of Business, Innovation and Employment all-of-Government contract out this year for schools, for hospitals, and for other Government entities, and they will either have to pay a lot more or get much shorter contracts in order to get the gas that they need for the critical services. So the reality is that, with less production, we have to have less being produced in this country and higher prices, and that is bad for New Zealanders.

Given the Minister didn’t seem to have the information with him, the latest data that I’ve been able to find publicly is that, by petajoule, New Zealand’s gas use, not production, was 145 petajoules in 2022, which pretty much matches what is being produced, but—

💬 Hon Judith Collins: Then why ask the question?

Because I thought there might be updated data, but clearly the Minister doesn’t have it. One of the things I’d like to know is: how many petajoules are currently in storage, and how does this compare with the situation in 2021 when we had the last tightness in the gas supply situation?

Well, I make the point because I made the comment in my statement that New Zealand does not import or export gas, and so how much is produced is going to be very close to how much is used—and the reality, in terms of storage, is that we don’t have significant storage in New Zealand. So the answer to your question is quite simply: as a closed market, ultimately New Zealand needs to have the production in order to meet the demand that we have as a country.

Just to help the Minister, maybe he could come back with some of these answers in written form if he doesn’t have the information with him.

My next question is, to the Minister: is he aware that, according to Ministry of Business, Innovation and Employment data, New Zealand’s total coal consumption in 2022 decreased by 4 percent compared to 2021? This was the fourth year in a row that demand reduced, resulting in the lowest level of consumption in 22 years. This decrease in consumption was led by the industrial sector, the dominant user of coal in New Zealand. How does that square with what he said in his ministerial statement?

Well, the reality is, if you just look at the statement which was put out by Genesis this morning, they cannot get access to the gas that they need, which means they will be burning coal. And coal has twice the emissions of natural gas. So that member and that past Government have left New Zealand in a situation where, in order to keep the lights on in our country, the only answer is to burn coal with twice the carbon emissions of natural gas. That is a direct outcome of the last Government’s policy decisions in 2018, and they should be standing up in this House today and saying they will back this Government’s decision to overturn that ban on natural gas so we can get the production that we need, so we can make sure we can incentivise that investment. That is what the other party should be doing. Instead, they’re still in denial.

Is the Minister pursuing a work programme looking at renewable storage options, such as the portfolio approach that was put up or other pumped hydro options, and does the Minister have any policies other than bringing back oil and gas exploration to address the crisis?

Well, we have an entire suite of policies around electrifying New Zealand, but when she asks about storing energy and Lake Onslow, well—I tell you what—Lake Onslow isn’t going to help us this year. It wasn’t going to even be constructed till the end of next decade at all. So they had no plan on how the transition would go; just a pipe dream costing billions and billions of dollars, which, by the way, the energy sector said was having a chilling impact on the investment we need in renewables. So not only were they pro-coal; they were also anti-renewables. And so glad we got rid of that past Government last year. But they should be standing up in this House today and saying, “We are going to back this Government to repeal the ban on oil and gas so we can restore confidence and have the energy security our country needs.”

💬 Scott Willis: Mr Speaker.

OK, my mind has slipped again.

💬 Scott Willis: Scott Willis, Mr Speaker.

Yes, I know, Scott. We just spent a week away, and I can’t believe that after a week away overseas with you, I forgot your name.

I don’t want to suggest what that might’ve been, Mr Speaker! But I would like to say that the Minister, the Hon Simeon Brown, certainly loves gas and gaslighting, because he’s pouring more fuel on the climate crisis. I am more interested in the actual practical steps that this Government is willing to do to decarbonise our energy system. There is an abundance of renewable energy potential in Aotearoa, and the Minister is wrong—he’s wrong—when he says we have to choose between coal and gas. I’m really tired of this prosperity gospel gibberish on gas. Why won’t this Minister deliver what’s needed? We already have 1,551 megawatts of consented wind. We have hundreds of megawatts of consented solar. They can be built tomorrow.

I’ve got some questions for the Minister. When is the Minister going to look at the broken electricity market and fix it, to make it attractive to build consented renewables? Wind and solar farms can be built tomorrow if needed. Our electricity market is dominated by four gentailers who control generation capacity, and they are receiving high profits from the fossil fuel component. That doesn’t benefit households. That doesn’t help us get off gas. When will the Government acknowledge that a modern, flexible, distributed renewable electricity system is feasible, is simple, and can be delivered now?

When will this Government allow a transparent electricity market to allow new electricity generation, allow innovation, like incorporating electric vehicles, hot water cylinders, solar, plus batteries, cold store in a flexible, distributed energy system? That can be done now. So what advice has the Minister received on whether shutting down the Climate Emergency Response Fund and the Government Investment in Decarbonising Industry initiative has exacerbated gas shortages by enabling a key way of getting gas-polluting companies off gas? Will the Minister embrace the Greens’ clean power plan to provide grants to households to help transition away from gas and reduce demand?

Really, looking around the House, some politicians need to get their heads above the inversion layer and see what some clean air looks like. It looks like renewables, it looks exactly like what every major investment bank and business consultant group is advising, it looks like the basic stuff that so many of our peers around the world are already doing, and it looks like the call from 350 Aotearoa, who want homegrown energy. It looks like the call from FlexForum to unlock the value of distributed energy resources and flexibility. It looks like the call from the Community Energy Network for democratising our energy system, for resilience for our climate response, to keep the energy dollar local. So we can have cheaper, cleaner, smarter power, but this Government simply seems bereft of ideas.

There is no doubt that we have a capacity issue right now during the colder months, but it’s simply a result of Government inaction. Firstly, the cheapest power is that which we don’t use. So where is the investment in the expansion of the Warmer Kiwi Homes scheme? The success that we’ve seen with innovators like Aukaha and the deeper upgrades through the Otago Home Upgrade Programme, through all of those innovators in the Community Energy Network—where is the strengthening of resource standards’ healthy home requirements to reduce household demand, to get gas out of households. The Minister and his colleagues say they want to overcome green unicorn thinking. I  suggest it would be far better to embrace science-based thinking in transition engineering to build a sustainable future, rather than die as a dinosaur in a climate hell.

Thank you, Mr Speaker. The ACT Party campaigned to repeal the ban on oil and gas—a terrible policy delivered without any consultation by the previous Government, no cost-benefit analysis, and no idea what the impacts would be or how Kiwis would actually cope. Gas shortages have been forecast for years, as the former energy Minister Megan Woods rightly pointed out, but her Government—the previous Government—did nothing about it. It did nothing about it. Their gas transition plan was a no-gas transition plan, and that’s why we’re experiencing shortages and why the spot price for electricity today has hit a serious peak. It’s going to cost households and businesses more than they could possibly imagine.

New Zealand is dependent on natural gas, not necessarily for energy use but also for industrial manufacturing. There are plants like Methanex in Taranaki, which produces all of the plastic products that go into everything we use and consume. Your kid’s backpack, your special raincoat that not just Green Party but also maybe even ACT politicians like to go tramping in, the plastics in your mobile phone—they’re all made from methanol coming from Methanex in Taranaki. Two-thirds of their plant is shut down right now because of gas shortages and the extraordinary price of gas.

It is correct that gas is a transition fuel. Gas is going to help us transition from a period of using high - greenhouse gas fuels to lower, but only because natural gas provides for the peaking. In other words, when there is too much demand in the morning or evening peaks, the gas peakers can come on. They can be turned on with a text message; 20 minutes later, they’re delivering 50 or 100 megawatts to the grid; and what that means is we can continue to invest in renewables in New Zealand, knowing that the lights will always be on and the heating will always be on. That’s quite a different approach to the approach taken by the previous Government.

Now, when we hear from the Opposition that we should be—oh this, what do we call him? The “Switched-on Gardener” over here, in the Green Party, is suggesting we should move to 100 percent renewables and nothing but solar panels. I don’t think that member knows that the Huntly power station typically runs on about 85 percent coal, but it can run on 100 percent natural gas—

💬 Scott Willis: And it can run on biomass.

—at half the emissions. The member points out that it can run on biomass. Well, fortunately, because we have natural gas, we can afford to invest in biomass, and that is a good thing. But it’s not the answer to everything. Households, businesses, rest homes, school boards, as well as major energy users—they want to know that they have access to affordable and reliable energy, and that is natural gas.

Minister, I’ve got a couple of questions for you. How does having fast-start gas generators help achieve New Zealand’s progress towards a greater percentage of renewable energy?

Well, the reality is that having fast-start gas peakers means that we can firm the renewable energy that is intermittent, and that is why we on this side of the House are committed to repealing the ban on oil and gas exploration and encouraging the investment into that gas production. It is so that we can firm the renewable wind and renewable solar, which means that when the sun is not shining and the wind is not blowing, we can still have that security of supply on our electricity grid, which is so critically important to households and businesses across New Zealand.

Thank you, Minister. How does repealing the ban on oil and gas exploration help support businesses in regions like Taranaki, and does this provide confidence to those businesses and all of those engineers and support sectors that work in the natural gas and energy sector to actually invest and stay in New Zealand?

Well, repealing the ban on oil and gas exploration is part of the plan to ensure that we can encourage investment back into oil and gas in New Zealand, because it is a critical part of firming renewable energy, and it will play a huge role in terms of providing confidence back to that sector. My colleague the Hon Shane Jones is leading that piece of work and will be making decisions on that in coming weeks.

This short contribution is to support my ministerial colleague. Today, industry sees the long-term consequences of the shallow, emerald manikin - thinking that’s driven energy policy for the last five or six years. Today, industry throughout New Zealand is confronted by the facts as a consequence of that juvenile, woke-riddled, foolish belief that we don’t need our natural resources, that we don’t need our natural gas, that we don’t need coal has been laid bare. Hopefully, these emerald manikins will retire and let the serious politicians address the unresolved issues in our economy.

Of course, any threat to energy security is not only a matter for households, hospitals, schools; it lies at the heart of our industry. When industry is contacting the Minister for Energy and saying they have doubts as to whether or not they can secure, with security, industry resources such as fuel, look no further than that side of the House. That side of the House, with their indiscriminate, destructive, refinery-destroying actions. That side of the House, with chilling, chilling effect, stopping investment, scaring overseas existing investors away, and destroying industry in New Zealand. For what—for what? This faint green vision that somehow we can keep the lights on with unicorn kisses. Impossible. We need hard driven, trade-off decisions, which is what the Minister and my good self—with appropriate modesty—will be delivering.

First, there will be further exploration, delivery, and investment in oil and gas. It lies at the heart of the nation’s fiscal solvency and the nation’s productivity. And, yes, if they meet the criteria, they will get a permit in a rapid period of time, just as sun will, just as wind will. Tell me this—those who are opposed to resilience and energy security, name me one bill that has been passed by the other side of the House to deliver rapid, clean, green energy investments. No, you can’t—no, you can’t. Oh, we are going to hear about a pipeline—a pipeline—of BlackRock investment, but no consents. We’re going to hear about a pipeline of climate change dreams, but absolutely no content. That’s why the actual body of officials and stakeholders that are being stood up this Friday are going to go to the heart of the issue. They’re not going to write any more policy, say, on scripts. They’re not going to tolerate any more long, protracted working groups. “We’re going to have a working party about gas transition. By 2030, we’re going to get rid of all fossil fuels.”—pipedreams that deserve the outcome that was visited on the other side of the House: permanent Opposition.

We, however, are going to ensure that this group creates concrete steps that will deliver not only certainty to industry but they will be able to rely upon a fast-track regime that will be accompanied by new legislation reopening oil and gas, not juvenile, foolish tiddlywink games on the other side of the House. They will also see that there will no longer be this cumbersome, throttling, burdensome obligation upon the industry; there will be balance. When that happens, not only will there be gas to ensure we avoid energy blackouts but there will be confidence back in investors in New Zealand, industry in New Zealand, and hospitals and schools, because they realise that all the green manikin - thinking has gone by the way, the grown-ups are in charge—energy’s on the way.

Point of order. At the appropriate time, I wonder if you might be able to have a look at that contribution and perhaps the one from the ACT Party as well and see if it was in line with Speakers’ Rulings 150/2 and 150/3.

OK.

Thank you, Mr Speaker, and I thank members from across the House for their—

💬 SPEAKER: Do they want to speak? Sorry, do Te Pāti Māori want to make a contribution?

💬 Debbie Ngarewa-Packer: Yes.

💬 SPEAKER: You need to call.

Tēnā koe, e te Pīka. I did but—kei te pai.

First of all—I don’t actually know where to start after hearing that. You sort of want to grab the unicorn by the horn and carry on! I think what’s really important, first and foremost, is that Te Pāti Māori will always talk on the side that we believe in, in rights and interests. Actually, I found myself uniquely agreeing at times with Minister Jones, which is an unholy feeling—an unholy feeling because Te Pāti Māori also found itself at odds with certain parties on this side of the House, and that was because they did not support our seabed mining bill.

So I want to make it really clear that no Māori iwi affected in Taranaki support the opening and the continuing of that sector. But they do want to hear solutions and what a transition would look like. There were no solutions or transitions that came through. We do have a concern about energy equity. We do have an appetite towards community solutions, and community solutions that can be about renewable energies.

I do want to sort of put ourselves in a unique position here, to the Minister, to ask: what are the time lines? Gosh, sometimes I think the Minister on this side wants to join this party because he sometimes talks more for me than I get to talk for myself. But one of the things I do want to gauge from the Minister is how is the Government engaging—and I mean truly engaging, not the type of Zooms that we see Minister Jones having with iwi leaders where he’s the only one who gets to speak. How are you engaging with Māori on the issue—on the issue of gas, on the issue of coal in Aotearoa? And what are some of the economic considerations that can make, I guess, the transition for us, particularly in Taranaki—I mean, we do have some infrastructure. We do have desires to continue on.

So, despite what many over here think, there are some great aspirations, there are some kōrero coming through, and I do think that they had started with the Minister on my right, but things didn’t progress. And they are some of the largest investors—they are some of the largest investors and they are also part and parcel of some of the largest ongoing “stakeholders”, for want of the right word, not only because we have rights as Tiriti but also they will continuously invest in Taranaki. So I would like to gauge from the Minister where and how you see those transitions looking and, more importantly, the time line.

💬 Rawiri Waititi: A very mature speech.

Because while we sit here and watch the—thank you; I felt mature—padder tennis going on, people really want to know: what are you going to do that’s any better than the last? When are you going to do anything better than the last? And I guess, too—part of our policy was to address the fact that we established funds to be able to counteract what it is that was being withdrawn. When decisions were made in the last Government, no one gave that sector or our community a transitional fund. So I do want to be really open about it. We want to see the end of the sector. It is a finite source. It is a finite source, but we are the energy Mecca of Aotearoa and we intend to keep that role in a way that we can be sustainable, economically proud, and environmentally assertive. So I would like to gauge that from the Minister.

The other thing that I would like to also get from you is: how are you going to address the community energy inequities and how do we assure that, as in Taranaki, we support some of the wind activity being proposed—how do we ensure that we get the benefits? And I don’t just mean in a social licence sense. You know, iwi were leading and they were extremely progressive, and you’ll know between the last couple of Governments, in best-practice engagement with some of these sectors—how do they then leverage off that? Because they’re better at this business than the Ministry of Business, Innovation and Employment and actually politicians?

💬 Rawiri Waititi: Absolutely.

Absolutely—absolutely! They have been involved in the energy sector much longer than anyone else in this House, including our esteemed members over on the left. So I would like to gauge from you: what is the engagement and the level of commitment that you’re going to do and those aspirations in addressing again community and their energy inequities and how we can grow in a partnering way, not in a co-governance way—in a partnering co-investing way into what your vision is for those communities. Kia ora rā.

I thank the member for her engagement and the questions. The reality is that iwi have an important role to play when it comes to investing in our energy sector—whether that’s in the oil and gas sector, whether that’s in offshore renewables, whether that’s in renewable energy, there is a critically important role. But this Government wants to open up those pathways for investment in New Zealand, so that is why we are going to repeal the ban on oil and gas exploration. That is why we’re progressing the fast-track legislation so that we can actually make it quicker and easier to build the infrastructure that New Zealand needs. Whether it’s offshore renewable energy in Taranaki—we need to have the legislation in place to be able to allow that and make those decisions a lot faster, so I ask the member and her party to back the Government so we can create these opportunities so that iwi across New Zealand can invest and can be part of that success.

The other element I would make in terms of the equity issues is that all New Zealanders need access to affordable energy. When we have a tight energy market like we have now—when we have low gas production and we have those challenges which mean the price of gas goes up—it means the costs go through to consumers, and, ultimately, all New Zealanders, including Māori, pay more, and that is bad for New Zealanders.

Thank you. What are the Minister’s views, therefore, on unregulated energy, the rights and interests of Māori and ownership, and certainly where that sits within the Crown Minerals Act? I know they are different portfolios.

Well, I’m not responsible for the Crown Minerals Act, but what I would say is that, ultimately, the Crown does have an important role to make sure it upholds Treaty settlements.

💬 Scott Willis: Mr Speaker, just two additional questions that I’d like addressed, please.

💬 SPEAKER: The time has passed. I call on, for a reply in this particular ministerial statement, the Hon Simeon Brown.

Thank you, Mr Speaker. I thank members from across the House for their engagement in this important topic. The reality is that we have been faced with the latest projections and information from the Gas Industry Company, which have outlined there has been a significant downgrade in production from our gasfields in New Zealand—a 28 percent decline in just the past three months on what was projected to be produced. This shortfall has a significant impact on our country’s industries and on our energy security as a nation. It highlights the critical importance of the work this Government is doing to repeal the ban on oil and gas exploration, and to ensure that we are achieving the investment we need to reduce the gas that is required for industrial purposes, for our schools and our hospitals, and, importantly, for our electricity sector so that we can have that firming for our wind, solar, and to keep the lights on.

The news today that Genesis Energy is going to have to import more coal is a direct result of the fact that we are not producing enough gas as a country. So this is a really critically important report. The Government has a plan on how we’re going to address these challenging issues, and my message to all parties across the House: New Zealanders wish—want—to have energy security. New Zealanders need energy security. I ask them to back the Government’s reforms, provide bipartisan support to those reforms so we can keep the lights on, encourage that investment, and ensure we have the energy that New Zealanders need for our security as a country.

I just wanted to respond the point of order raised by the Hon Kieran McAnulty. He asked me to consider the speech by the Hon Shane Jones in light of Speaker’s ruling 150/2. I think this has been a spirited debate—would be a fair thing to say—and I think if the member reflects on the speeches, perhaps even the Hansard, from the Hon Megan Woods and from Scott Willis, perhaps the response from Mr Jones would be more understandable.