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19th November 2018

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KiwiRail gets $40 million for new Manawatu freight hub

KiwiRail received a $40 million commitment from the government's Provincial Growth Fund. Photo / File
KiwiRail received a $40 million commitment from the government’s Provincial Growth Fund. Photo / File

KiwiRail is accelerating work to relocate its Palmerston North operations out of the city as part of plans to develop a regional hub to better handle freight flows throughout the lower North Island.

The company has just received a $40 million commitment from the government’s Provincial Growth Fund to help it with the planning process for the project and for land purchase.

Acting chief executive Todd Moyle said the yet-to-be determined site could potentially cover 60 hectares, some of which would be leased to freight forwarders.

It would also need to be long enough to cater for freights trains that can be a kilometre in length, and have sufficient space to support maintenance infrastructure and materials storage.

Palmerston North is KiwiRail’s key staging point for domestic, imported and exported freight in the lower North Island. Rail freight comes and goes from the north, Wellington, Taranaki and Hawke’s Bay.

About 2.4 million tonnes moved through the current facility in the past year and that is expected to grow.

“This project leverages the region’s strengths and will be fully integrated into the other large investments being made in the regional transport system, including the new Manawatu Gorge road,” Regional Economic Development Minister Shane Jones said.

“This is a future-focused investment”, with freight tonnages expected to increase by 60 percent during the next 20 years.

Moyle said KiwRail would have invested in the hub, given its strategic importance, but he said the PGF funding had enabled the company to accelerate the work.

“The PGF focus on the regions allowed us to move the freight hub right up our priority list. Without the possibility of PGF funding it would have remained a low priority.”

The main trunk rail line originally ran through Palmerston North. It was diverted around the city and the current rail yard established in 1964 on what was then the city’s north-western outskirts, but is now surrounded by urban development.

Moyle said the firm will start reviewing potential sites immediately. That includes land inside the city’s North East Industrial Zone near the existing rail line and the city’s airport. Once potential sites have been identified there will be a process to designate the land for rail use.

Moyle said purchasing land and planning work could take up to three years. Construction would take another two years.

He said the inter-modal rail and road hub needs to be near the city so it can be easily accessed by distribution companies and other businesses. It also needs to connect well with the airport, a freight ring road being planned by the New Zealand Transport Agency and the proposed replacement road for the Manawatu Gorge.

Moyle said KiwiRail would relocate from the current location over time, allowing the existing land to be used for business and housing.

Auckland’s supply chain complications

Media release – POAL and NRC 14/11/19

Auckland’s supply chain complications

National Road Carriers Association and the Ports of Auckland are combining forces to promote change in the supply chain to improve delivery times and prevent delays.

This initiative has come about because of supply chain capacity issues which were highlighted following an accident at Ports of Auckland in August. Imported freight has taken longer to deliver and exporters have encountered delays getting their goods away, leading to frustration all round.

“The supply chain is running at capacity, so unexpected problems can have a domino effect,” says David Aitken, National Road Carriers CEO.
“At its heart, the problem is Auckland’s growth. The supply chain needs to evolve and we’re all going to have to change the way we work to prevent future problems. Better planning and coordination are the key.”

“We’re letting stakeholders know what causes hold-ups and we’re working with partners to improve our end-to-end processes,” he added.
Situations contributing to delays can arise at any stage in the supply chain, sometimes occurring thousands of kilometres away from New Zealand.
“In the last 12 months over half of all container ships arrived at Auckland late (often as a result of bad weather), causing congestion,” says Craig Sain, Ports of Auckland’s General Manager Commercial Relationships. “This makes it hard for us to staff the terminal properly, causing delays.”

Labour scheduling issues at the port are made worse by a shortage of labour in Auckland, which also affects the trucking industry.

The port is currently installing an automated container handling system to address this problem, but the work required to install the system has reduced terminal capacity by about 20%, adding to congestion. This situation will remain until late 2019 when the project will be completed.
“With reduced space in the terminal and more containers coming in due to growing Auckland demand for freight, it is taking us longer to service trucks visiting the port,” says Mr Sain.

Another problem is that getting containers off the port can be delayed because there is nowhere for the containers to go. The port works 24/7 and has capacity at nights and weekends, but often distribution centres, importers warehouses and empty container depots are closed at these times.
“In the past working 9-5, Monday to Friday was fine, but now Auckland has over 1.5 million people it is no longer feasible,” says Mr Sain. “The whole industry needs to be able to work 24/7, not just the port and carriers, and this means distribution centres and importers need to be open nights and weekends to receive imports.”

The road freight transport industry is caught in the middle says David Aitken.  “Importers don’t want to pay for weekend or afterhours work but they also don’t want to pay to hold containers at the port or container depots as a result of their limited business hours.”

“We are storing containers at freight hubs longer, which adds costs for double handling, or are delivering goods later than originally expected because of holdups. We’re also facing higher costs because of Auckland’s congestion, costs which could be avoided by working 24/7,” he added.

The solution is going to come through a combination of technology, greater co-ordination and a move to 24/7 working throughout the supply chain.
As well as investing in automated container handling, Ports of Auckland is working with National Road Carriers Association to update its processes and business rules to minimise manual intervention and incentivise off-peak container movements. Last minute freight moves will become a thing of the past, with all movements having to be planned in advance.

“As a port we have a key role to play and we are trying to educate other players in the supply chain so that they understand the need for change and what they can do to make the process more efficient,” said Craig Sain. “Ultimately, these changes will benefit New Zealand through the fast, efficient and cost-effective delivery of freight.”

New Zealand needs to decarbonise transport to get on track with climate goals

The best way to reduce carbon emissions from the transport sector in New Zealand is to switch to alternative fuels and decarbonise the electricity grid. Personal behaviour change will have an impact, but not enough, a new study has found.

According to the chief executive of Infrastructure New Zealand Stephen Selwood, a new report from thinkstep has found that activities such as car sharing, teleworking, home deliveries and using more public transport will save around 15 per cent of carbon emission compared to the near 90 per cent reductions needed to meet climate targets.

“Many people think that enabling alternatives to the car is the best way to reduce carbon emissions in New Zealand,” Selwood said.

But thinkstep’s report calculates that a shift to electric, biofuel and hydrogen-powered vehicles has potential to reduce carbon emissions from consumption by up to 88 per cent by 2050. The Creating a positive drive: Decarbonisation of New Zealand’s transport sector by 2050 was launched on Thursday.

A shift to electric, biofuel and hydrogen-powered vehicles “has the potential to reduce carbon emissions from consumption by up to 88 per cent by 2050,” the report says.

In order to achieve this shift, renewable energy generation would have to double in capacity, and the country would have to see the conversion of five per cent of agricultural land to the production of biofuels.

Encouraging ride-sharing and the use of public transport would have benefits that are more achievable in a short space of time than a complete switch to zero emission transport, but they would only change a small proportion, up to 29 per cent, of total journeys,  the report says.

Everything helps

The government could encourage people to share rides by establishing carpool lanes, and create a pricing model to encourage electric vehicles.

Transport scenarios for New Zealand in the report for 2050 relative to 2015 (savings include domestic greenhouse gas emissions only)

“The role of government and business, as we see it, is to make these low-carbon choices easy and convenient,” says the report.

“While we still depend on fossil fuels, ride-sharing has the potential to be a quick win for New Zealand on climate change,” Dr Jeff Vickers, technical director of thinkstep and lead author of the report said.

“It reduces carbon emissions and road congestion immediately, and the carbon story gets even better as we move to electric vehicles. This is something that could happen virtually overnight, as all you need is a smartphone.”

A year ago Prime Minister Jacinda Ardern set out a plan for New Zealand to transition its electricity grid to renewables by 2035. Between 50 to 60 per cent is already delivered by hydroelectric power. Ms Ardern’s long-term goal is for New Zealand to achieve zero carbon emissions by 2050.

Currently, according to climate action tracker website, New Zealand’s Nationally Determined Contribution target under the Paris Agreement of a 30 per cent reduction from 2005 levels by 2030 is rated as “insufficient”. In other words, it is not consistent with holding warming to below 2°C, let alone limiting it to 1.5°C, as required, and is instead consistent with warming between 2°C and 3°C.

Part of the reason is that transport contributed 19 per cent of all greenhouse gases emitted in New Zealand in 2015. A reduction in transport emissions by 90 per cent would reduce New Zealand’s total gross GHG emissions by 17 per cent.

But the road to decarbonising transport is harder than that. “When considering the carbon footprint of products and services that New Zealanders consume – rather than including those that are destined for offshore markets – transport’s contribution jumps to over 40 per cent,” Dr Vickers said.

The government is currently considering a Zero Carbon Bill. The target of net zero emissions by 2050 is supported by 91 per cent of respondents to a consultation for the bill, while even more, 96 per cent, support the establishment of an independent watchdog, a Climate Change Commission, like the UK’s.

The government realises that it’s cheaper to take action sooner rather than later.

Light commercial and heavy vehicles are assumed in the report to run on hydrogen in the future, yielding a 64 per cent drop in emissions using today’s electricity grid, or 91 per cent for a fully renewable grid.

In this future, biofuels would be used to power ships and planes because of their higher energy density. But biofuels have their own social and environmental impacts: air pollution, displacing crops, and a reduction of biodiversity.

See the full report here.

8 November

National MPs from all over the country have lined up at Parliament this morning to submit ‘save the highways’ petitions signed by thousands of their constituents.

National MP Amy Adams announces she will stand for National Party leader.

Selwyn MP Amy Adams said more than 1000 people signed her petition for the State Highway 1 link between Christchurch and Ashburton to go ahead. Photo: RNZ / Rebekah Parsons-King

They are concerned that major roading projects National announced are being canned by this government in favour of more public transport options or “minimal” safety upgrades of existing roads.

Examples include the Auckland east-west link, the Napier to Hastings expressway and the construction of a four-lane state highway one link between Christchurch and Ashburton.

MPs for the electorates north of Auckland hope to save the ‘four-lanes to Whangarei’ project, with Rodney MP Mark Mitchell saying the uncertainty was having a huge impact on people’s well-being.

“The cancellation of these projects not only reduces road safety, do not only take away the economic opportunities they would create, but it’s also creating a lot of stress.

“There’s a human toll to the people who actually live on these designated routes and have a lot of uncertainty created from very poor decisions, I feel, at central government level,” Mr Mitchell said.

An image of the completed East West roading project.

The proposed east-west motorway link in Auckland was scrapped by the government last year. Graphic: Supplied / NZTA

Eight petitions have been delivered, with thousands of signatures from the MPs constituents.

Amy Adams, the MP for Selwyn, said the State Highway 1 link between Christchurch and Ashburton must go ahead.

“The volume of traffic on those roads is making them not only more dangerous, but more and more congested, obviously effecting productivity,” she said.

Ms Adams said she had more than a thousand people sign up in a short time.

Bay of Plenty MP Todd Muller and Coromandel MP Scott Simpson submitted on the Katikati to Tauranga four-lane link, which it announced in 2017 and said Labour must commit to.

They want a grade separated connection from Omokoroa onto State Highway 2 and a Katikati bypass.

Few questions were asked by the government MPs who sit on the transport committee, however National MP Paul Goldsmith asked a number of questions about the impact of the regional fuel tax on the MPs’ communities.

He said there was little thought for people outside of Auckland who would never benefit from the expensive public transport projects the government was funding in the city.

Pain at the petrol pump: tradies, transport businesses and average people hurting

Small business owners and average income earners in Tauranga are feeling the pain at the petrol pump as fluctuating fuel prices – which recently hit record highs – strain budgets.

Tauranga transport companies and tradies have reported big hits to their bottom lines, while a budget adviser says average people are raiding grocery budgets to pay for petrol.

“It hurts,” said courier company owner Ian McGonigal, who drives from Tauranga to Gisborne and back each day, on rising diesel prices.

“It used to cost me $50 to $55 a day 12 months ago, and now it would cost me $80.

“I have had to increase prices to compensate.

“I think the oil companies are ripping us off.”

AD Electrical owner Andre Buitendag said increases were cutting into profits.

“Some of it can go back to customers but I have prearranged contracts with set mileage and I have to absorb the cost.”

One four-year contract had mileage at $1 for diesel, which now cost $1.50.

Two Tauranga moving company owners said they had put hourly rates up – $5 and $10 an hour – due to increased diesel prices and a road user charges.

Mover Allan Crossley said he was dialling down petrol consumption at home, too.

He was thinking about trading in his Ford Falcon for a hybrid “just to save some fuel” and seeing his daughter in Hamilton less.

He said the Government was “not helping the situation” by increasing fuel taxes.

Motorist Paul Anderson said prices would have dropped if Kiwis had not just become used to paying $2 a litre.

”We think we are getting a deal but we’re still getting ripped off.”

Kirsty Morrison of One21 Recruitment said she advised job seekers looking at a role across town to consider petrol prices, transport and traffic before taking it.

Tauranga Budget Advisory Service manager Diane Bruin said the increases were especially hard on average workers who were not on bus routes and could not car pool.

“Food would be the initial hit of accessible money as it is usually what is left, however, this is really stretching an already stretched budget.”

The Ministry of Social Development said rising living costs were reflected in a rise in demand for emergency grants.

Anyone struggling to afford to get to work should get in touch.

Minister for Transport Phil Twyford said fluctuations in the global crude oil price had a far bigger influence on New Zealand petrol prices than minor excise increases.

The international price of crude oil has risen by more than 40 per cent this year, while 2018 excise increases will cost the average household 83 cents a week – 40c for those on the lowest incomes.

The funding would allow $5 billion more in transport investment over the next decade to “get our cities moving, create new economic opportunities in our regions, and save lives on our roads”.

The Government wanted to see a competitive market for petrol so Kiwis were not paying more than they had to, he said.

”We are concerned that the margins of fuel companies have increased over the last three weeks to record levels. We’ve passed a law that will allow the Commerce Commission to compel petrol companies to provide information on pricing.”

Representatives of BP, Z, Mobil and Gull all said their fuel was priced competitively and increases were largely due to factors outside their control, particularly the price of crude oil and the New Zealand exchange rate.

Over the last few weeks, crude oil prices had dropped and those savings had been passed on to customers at the pump, they said.

The general manager of Gull NZ, Dave Bodger, was scathing of Twyford’s claim of increased margins, saying the minister did not have reliable data on which to make that claim.

“I fear the minister is confused. Over the last three weeks, our margins haven’t gone up.”

He welcomed the Commerce Commission inquiry, provided it was even-handed and surveyed the industry as a whole.

He described government fuel taxes as “the poisoned cherry” on the cake.

New Zealand Taxpayers’ Union executive director Jordan Williams said politicians cried crocodile tears about pain at the pump when most of it was caused by tax hikes.

”What makes petrol taxes particularly loathsome is they are regressive – disproportionately hitting the poor and those who can least afford it.

“While alternative transport options might apply in our large cities, for much of regional New Zealand there is no choice.”

– Additional reporting Samantha Motion

AA Petrol watch on fuel prices

– In the last fortnight prices for 91 dropped from the near record highs of $2.49 per litre
– Whether prices would continue to fall “remains to be seen”
– Government taxes accounted for about 43 per cent of the retail price or $1.07 cents a litre
– Fuel prices influenced by exchange rates and the cost to buy and import the product.

National fuel prices as at October 25:
91 Octane – 238.9
95 Octane – 247.9
Diesel – 177.9

National fuel prices as at September 24:
91 Octane – 240.9
95 Octane – 249.9
Diesel – 180.9

– Source: AA Petrol Watch

New railway line to Marsden Point being investigated by KiwiRail

KiwiRail to investigate Marsden Point railway – Photo / File

KiwiRail has started work on geotechnical investigations along a section of the new route for the proposed rail-link to the port at Marsden Point in Northland.

KiwiRail Acting Chief Executive Todd Moyle says the scoping work will inform the business case for Northland rail currently being developed by the Ministry of Transport.

“We’ve held a designation for this rail spur for several years, and are very pleased to be now taking steps to determine how the line would be built,” says Moyle.

“These investigations will provide us with more detailed information about the design and potential construction methods for the link, as well as costs and timeframes.

“To begin with, we’ll be working at Mata Hill over the next few weeks, using a drilling rig to take samples from a number of locations,” he says.

These will bore up to 30 metres into the ground to remove samples for analysis.

“We are also investigating what associated works would be needed on the North Auckland Line to allow for more freight to be carried by rail to and from Northland,” says Moyle.

“The Government has indicated its strong support for the value rail delivers in the regions and the benefits it brings for New Zealand by taking trucks off the road, improving safety and reducing carbon emissions.

“The work we are doing in Northland is one of a number of projects underway to ensure we deliver stronger connections for a better New Zealand,” he says.

Quake-hit Wellington wants biggest ships

The November 2016 quakes put Wellington’s container cranes out of action for 10 months. Now CentrePort is looking at investing to accept bigger container ships. But not everyone agrees, Thomas Coughlan reports.

Wellington’s CentrePort is at a crossroads. Flush with cash after more than $170 million of earthquake insurance payouts, the port now has an opportunity to reposition itself for the future. But its proposal to dredge the harbour entrance to welcome in much bigger container ships is being challenged by those worried it will waste money on ships that never come. However, the quakes have also ironically proven the worth of keeping ports open to provide a back-up if road and rail fail.

Even before the earthquakes, CentrePort’s future was uncertain. Container ships are getting bigger and bigger and Wellington runs the risk of falling behind.

The port currently supports ships with a capacity of 4500 containers, half the capacity of the Port of Tauranga, which hosts the 9640 container Aotea Maersk, the largest container ship to visit New Zealand.

The port has long had an eye on dredging the entrance to Wellington Harbour to allow the port to host ships with up to 6000 containers. The plan was put on hold after the earthquake, but is again on the agenda as the port recovers.

But figures in the industry question the wisdom of such massive capital outlay. If trade tensions bubbled over, the project could become a white elephant, forcing CentrePort, and its owners, the Wellington and Horizons Regional Councils to bump up port fees.

Detractors say the port should stick to what it’s good at: providing services for the 10 Cook Straight ferry sailings it hosts each day. They say attention should be paid to resilience and making sure that when the next big one hits, the main link between the North and South Islands is not cut off.

Wellington’s future has country-wide implications. Ninety-nine percent of New Zealand’s imports by weight arrive on ships and the Government is keen to increase the amount of coastal shipping in New Zealand as part of a push to take trucks off roads.

This is likely to form part of the Government’s second-stage General Policy Statement on Land Transport, which is due next year.

Scraping the bottom 

Shipping is an industry of maxims. Speak with anyone for long enough and they will give you one or two inviolable rules about how the industry operates.

CentrePort CEO Derek Nind is no exception. Speaking to Newsroom he said the major trend he had experienced in his career was the size of ships increasing.

“In my 25 odd years all we’ve seen are container ships getting bigger,” he said.

In shipping, capacity is measured in containers, which are known as TEUs or “20-foot-equivalent”. The harbour currently [handles] ships carrying roughly 4500 TEUs. With dredging, it could host ships of up to 6000 TEUs.

Container ships have grown massively in size. In 1996, the largest ship in the world carried 6000 TEUs. Now, new classes of container ships carry up to 21,000 on ships each as long as four rugby pitches.

Those sorts of ships are unlikely to visit New Zealand anytime soon. The current international trend for hubbing means that they tend to operate on routes between major trading centres, like Shanghai and Singapore.

Ships that stop over in New Zealand tend to be much smaller, although they are growing. Since 2016, Tauranga has hosted visits of the the 9640 TEU Aotea Maersk. Though relatively small by international standards, in 1996, it would have been the largest ship in the world.

Nind says the improvement would encourage ships sailing round New Zealand to call in to Wellington. In shipping terms, this is known as intermediacy and diversion. Wellington had good intermediacy to ships passing along the cost. Ships could call in to port and potentially only face a four or five hour diversion from their regular route.

“Intermediacy is if you’re calling at Tauranga and you’re calling at Lyttelton we’re a four hour deviation,” he said.

But dredging is expensive. Costings done under the leadership of former CEO Blair O’Keefe came to around $40 million. It wouldn’t be extensive. Wellington is a naturally deep harbour, but for a lip at the entrance, which bars larger ships from stopping at port.

With inland transportation costs currently high, Wellington is well placed to take advantage of logistics firms looking to [cut] costs by shipping products as close to their end destination as possible. CentrePort can take advantage of road and rail connectivity in the Lower North Island and ferries to the top of the South Island.

More maxims

But the programme has some detractors.

Annabel Young, Executive Director of the New Zealand Shipping Federation, thinks the port should stick to what it’s good at: inter-island ferries.

She backs this up with another maxim: “Ships go where the cargo is”.

“This is all driven by ‘where is the cargo and how much is there?,” she said.

Young is a former National MP and her sister is Nicola Young, a Wellington City Councillor and mayoral candidate. Young is concerned that without adequate cargo in Wellington, the port will be forced to recoup the cost of dredging by raising port fees.

“If they do the capital work and the ship doesn’t turn up, consumers will pay,” she said.

The question of cargo is a touchy one in New Zealand. After the Kaikoura earthquake, cargo destined for CentrePort was offloaded elsewhere before making its way to Wellington by truck or train.

CentrePort has taken some of that business back, although it still has some way to go. In the 2016 financial year it offloaded 131,645 TEUs, this more than halved to  51,750 in 2017 before bouncing back to 84,755 this year.

But the port is focused on making sure it’s the nexus for shipping in the Lower North Island, partnering with KiwiRail to develop rail connectivity. Nind said the port wants to be “the port of choice for Central New Zealand.

It has developed rail hubs in Whanganui and New Plymouth and leverages Wellington’s strong transport connections with Palmerston North. This encourages cargo to travel via Wellington, rather than Napier or other ports.

But even with these connections, Young says there is still a limit to the amount of shipping that will pass through the Lower North Island, based on the size of local industries. These are dwarfed by industries based in the highly productive “Golden Triangle” of Hamilton, Tauranga and Auckland.

Roll up and roll on… and another working group.

Young believed attention needed to be directed to the Cook Strait ferries.

The port is currently part of a working group comprised of the Wellington City and Regional Councils, ferry operators, and NZTA about the future of the Cook Strait connection.

The working group is currently looking at the possibility of combining the Interislander and Bluebridge terminals into one and looking at ways to ensure the ferries can continue to service both Wellington and Picton after a major earthquake.

State Highway 1 technically runs over Cook Strait, which means the Government and NZTA have a strong interest in making sure the connection is resilient. It services seven million tonnes of cargo and 1.2 million passengers each year.

Nind noted that the port was quick to have both the Interislander and Bluebridge terminals up and running after the Kaikoura earthquake.

Wellington — and the whole country — will hope the Port fares similarly next time.

NZ air pollution report: Heat sources a persistent problem

People heating their homes and using their vehicles are the biggest causes of poor air quality in New Zealand, according to new statistics.

No caption

Photo: RNZ / Tracy Neal

The Ministry for the Environment and Statistics New Zealand has released its latest report in the environmental reporting series as legally required.

Our air 2018 showed there had been an improvement with levels of some pollutants declining, however there are persistent problems such as heat sources.

Burning wood or coal to heat a home is the largest single-cause of air pollution by humans in New Zealand.

Wood burners heated 33 percent of North Island homes and 47 percent of South Island homes, according to the last available data, however, burning wood as a heat source had declined over time.

Coal burning accounts for about four percent of residential emissions, but the report said this could be an underestimate.

Other human factors contributing to air quality include the burning of wood for construction and manufacturing processes.

Emissions from vehicles are also a major contributor of poorer quality air from exhausts, but also through the wearing and abrasion of pavement, tyres and brake pads.

Shipping was an important source of sulphur dioxide emissions, and the report said the size and number of international cargo ships and cruise ships visiting New Zealand continued to grow.

Recent intensification of agriculture could be causing an increase in ammonia emissions, which could affect ecosystems and biodiversity.

Read the full report here:

Human health

The report mainly deals with two types of air pollution – PM10 and PM2.5 and these refer to what is known as the particulate matter, or particles suspended in the air that are small enough to be inhaled.

PM10 is particles less than 10 micrometres and PM2.5 is particles less than 2.5 micrometres.

In general, the smaller the particle, the greater the impact on human health because they penetrate more deeply into the human body.

Modelling suggested that in 2016 the number of premature adult deaths per 100,000 people from exposure to PM10 in New Zealand was 8 percent lower than in 2006.

But relative improvements in air pollution effects appeared to be largely due to more people living in areas with lower PM10, such as Auckland, rather than an actual reduction in the pollution.

New Zealand was one of the few developed countries with no air quality standards for PM2.5, so it wsas measured against the World Health Organisation’s guidelines.

Long-term data showed that four of the 11 airsheds monitored for PM2.5 had an annual average higher than the WHO guideline between 2014 and 2016.

According to international studies, effects of air pollution included shortness of breath and coughing, heart attack, stroke, diabetes, and premature death. New Zealand specific studies on the health impacts were limited.

The report stressed that the knowledge of environmental issues in the New Zealand air domain was incomplete.

There was very little data about the impact of air pollutants on natural ecosystems and biodiversity.

There was also limited information on indoor air quality in New Zealand, which was important because people spend 80 to 90 percent of their time inside and outdoor air (which could be polluted) could make its way inside.

NZ heading for gas supply gap, warns industry executive

New Zealand is heading into a gas supply gap and will need a new discovery to arrest the production decline it is on now, MPs heard yesterday.

The country has just seven years’ firm supply, and production is forecast to start falling away from 2021, according to Patrick Teagle, a New Zealand-based executive for Austrian oil and gas company OMV. Teagle was talking to Parliament’s environment select committee.

The company, soon to take over operatorship of the Maui and Pohokura gas fields, will work to mitigate the decline in production from those fields as a priority, he said. But that will only slow the decline.

What the country needs is a new discovery, just when the government’s proposed ban on new offshore exploration is “discouraging” the potential partners that OMV and other firms will need if they are to explore offshore, he said.

“It needs to be understood that demand will outstrip supply and we are heading towards a gas supply gap in New Zealand,” Teagle said.

“We have real concerns about our ability to maintain security of supply over the next decade.”

The committee is hearing submissions on legislation the government is pushing through to effect the ban on new offshore exploration it announced in April. The ban, intended to allow a managed transition away from fossil fuels as part of the country’s 2050 targets, also bars onshore exploration outside Taranaki but keeps intact all rights to develop discoveries made in existing permits.

The clash of viewpoints among the 12 submitters was stark. Government MPs didn’t appreciate being told the ban would increase emissions rather than reduce them, that the ban had already halted some investment, and that reduced domestic gas supplies would increase electricity costs for all consumers and sacrifice opportunities to reduce coal use and replace higher-emitting imports – like fertiliser – with lower-emission local production.

Supporters of the bill tended to want tougher action, with several seeking the immediate revocation of existing permits. They focused on the scale of global hydrocarbon reserves that can’t be burned in order to limit global warming, while largely ignoring domestic energy security and non-transport uses of oil and gas as industrial feed stocks.

The oil and gas sector was to blame for climate change – which governments had denied for too long – and for creating the societal “structures” that made individuals so reliant on their products for transport.

“Their time is finally up,” Low Carbon Kapiti chair Jake Roos told the committee.

“Adding to the pile of fossil fuels we plan to set on fire is madness.”

Committee chair Deborah Russell asked New Zealand Oil & Gas executives how they could claim to have been “caught by surprise” by a change that was always coming for the sector.

The Labour-led government has leaned heavily on its claims that the 100,000 square kilometres of existing exploration acreage is sufficient to ensure on-going gas supplies during a managed, 30-plus-year transition.

Official advice issued last month estimated the potential loss of Crown revenue at $1.2 billion to $23.5 billion out to 2050, and warned of a potential increase in global emissions if locally-made petrochemical production was replaced with product made offshore.

John Carnegie, responsible for climate change policy at BusinessNZ, told the committee the proposed legislation is “bad law” based on “scant evidence”. The impacts of the ban include higher emissions, increased energy costs, reduced competitiveness for New Zealand firms, and worsening balance of payments.

“Those are far wider than just the oil and gas sector per se.”

In a testy exchange with Labour MP Kiri Allan, he said the impact of the ban had been immediate. He cited the decision of Ballance Agri-Nutrients not to proceed with an expansion at its Kapuni plant due to the lack of certainty over long-term gas supplies.

“It’s not a 30-year transition,” he said.

“We are now in that transition.”

OMV’s Teagle told the committee the government’s transition timeframe appeared to be based on a fundamental misunderstanding of the exploration process.

Firms target the most attractive potential prospects. Acreage that does not show promise in early drilling – typically at the end of the first five years, or early in the second five years – will most likely be surrendered.

In the current environment “the chances of further exploration drilling in those permit areas is very, very low,” he said.

New Zealand Shipping Federation executive director Annabel Young silenced the committee with a detailed explanation of the challenge ship owners will face if they can’t access locally-made methanol – made from gas – to meet new international fuel pollution standards.

News that Methanex may start cutting production as soon as 2026 due to the tightening gas market had been a shock, she said. Refining NZ, operator of the Marsden Point oil refinery, is still not clear on whether it will be viable for it to make the ultra-low sulphur marine fuels the sector will need otherwise, she said.

Paul Goodeve, chief executive of pipeline operator First Gas, said the shipping issue illustrated the complexity of climate change policy and the risks of unintended consequences.

He said the gas sector has an important role to play in lowering emissions in New Zealand and longer-term, while options like hydrogen – either as a stand-alone fuel or blended with natural gas – are developed. Access to fast-start thermal back-up is also essential in a renewable generation sector increasingly reliant on solar and wind.

Goodeve said the “ad hoc” exploration ban – in an otherwise sensible policy framework – risks distracting from or slowing the major near-term opportunity to reduce emissions by electrifying transport, he said.

Trying to shut down gas, coal and fuel oil at the same time risks “sinking” the country under the cost of the new generation, distribution and transmission that would be required.

Forest & Bird climate advocate Adelia Hallett told the committee the strategy of using gas to replace higher emitting fuels may have worked 30 years ago. Inaction during that time means the world now needs to make significant reductions in the next 10 to 14 years.

“The cuts we need to make now are harder and faster.”

NZOG managing director Andrew Jefferies said the debate wasn’t about climate change, but over which are the best tools to address it.

Another billion people joining the world population need low-emission energy. New Zealand can help meet that directly with exports of gas or methanol, or by using gas locally to replace imports of fertiliser and other products made from higher-emission sources and then shipped here, adding further emissions.

If countries like New Zealand stop exploring for gas, higher emitting hydrocarbons like Canadian tar sand or Venezuelan bitumen, will continue to be extracted, he said.

“If you vote against gas you are voting for coal and bitumen and tar sands,” NZOG external relations manager John Pagani told the committee.

The hearings are scheduled to continue for the rest of the week.

– BusinessDesk