Argus spoke to New Zealand's resource minister Shane Jones on 10 June about the country's energy policy plans, given that it is currently facing a natural gas shortage. Edited highlights follow:
The government indicated in 2024 it will reverse the 2018 ban on new offshore oil and gas exploration. Is there a timeline on the repeal of the ban?
Yes, the legislative changes are going through parliament at the moment, and they should be done within 4-6 weeks, maximum. There was a delay because one of the most challenging portions of the reform of the ban was the decommission, and decommissioning requires a balance between liability being borne by the owners of the assets, but the final shape and form of the decommissioning not being so severe that it's a disincentive to do anything.
That's good news for investors, because some private firms seem to have lost a bit of confidence in investing in New Zealand.
Yeah, it's a sad story, really, because New Zealand, for the last 30 or 40 years has been a very outward focused, open economy. All nations get nervous about protecting sensitive assets, but unfortunately, back home, our climate change rhetoric galloped too far ahead of economic rationalism.
So once the ban was introduced, it had a chilling impact upon the investment community in southeast Asia and other such places. So that's why we've established the NZ$200mn fund to take the jagged edges off sovereign risk anxieties, and also to convey that there has genuinely been a 180-degree turn from the ban… It's difficult to see what a government could do that's more emphatic than that.
New Zealand's latest proven and probable gas reserve estimates have fallen quite significantly. Has the government has received any official approach from utilities interested in LNG imports?
So I've had about 15 meetings today and yesterday, and some of those firms are keen to work with the government and create an import facility to bring gas into the country. We have a port called Taranaki... and there is a very durable set of distribution assets at that port. So there's every prospect that we could, in a relatively short period of time, create an import facility, and the officials are engaged with potential partners.
Our government hasn't signed that off, but the government is willing to pass legislation to allocate the necessary statutory permits to enable such a development to be stood up in a short period of time.
New Zealand already has over 80pc of its electricity created from clean, green sources. All economies and governments have to ask themselves, how much pain are you willing to endure for the last five or 10pc, and that's not surprisingly where we are.
Solar, wind, maybe bioenergy and more geothermal will be welcome, but fossil fuels are essential to keeping the lights on.
Unless there is a roadmap or a pathway that is technologically feasible, it is lunacy to jettison fossil fuels. You need to take a long and gradual approach to build up some more clean green energy, but at the same time maintain a contingency that's fossil fuel.
On that note, because you say that natural gas is a transition fuel, are you looking at it as a long-term solution or a stopgap solution, and is there a plan for phasing it out eventually?
We pride ourselves being a market economy, but there's no point setting arbitrary dates phasing any fuel out if the economy cannot cope with the costs associated with an unplanned transition. All transitions sit upon costs and benefits. If society cannot bear the cost, then they don't believe in the benefits, and the energy adjustment that we're going through at the moment has caused us to go through the 180-degree turn because we do not have the ability to maintain energy security without gas.
We are already dependent on Indonesian coal, and we need to respect the fact that we can still maintain an energy system using coal. But there's a clear appetite from the public to move towards gas, yes.
Does the government have any plans to incentivise biofuels or biofuel production?
Yes, so we are exploring creating an economic zone next to our largest fuel importation port, Marsden Point. We closed down our refinery about three years ago, and we're keen to create an energy precinct around that port to create an ecosystem to attract innovative risk-takers, including bioenergy. New Zealand has a prodigious forestry resource. So the feedstock, the bioenergy, may very well be a forest resource.
But once again, the government, while it's promoting it, we only we have limited resources. And some critics have said, why didn't you dedicate the $200mn towards bioenergy? But even if we did it with bioenergy, it doesn't solve the problem in the short term of having a contingency, that's why gas has been pursued.
And let's face it, the processes of gas production, gas exploration, gas distribution, are well and truly understood. It's just that investment has declined over the last 10 years, and I come as a politician on behalf of our prime minister and our cabinet, figuratively wearing pom-poms to incentivise inward investment.
So how does your vision balance energy security with your climate commitments, especially now that you're looking at oil and gas exploration again?
As a country, we are committed to our obligations in the Paris Accord. The three parties that make up our government will go back to the electorate in October 2026 and I suspect that each party will campaign differently on how New Zealand should meet those obligations.
The party I belong to, we're a kind of economic nationalist party, and we realise that we're a food-producing nation, and in the Paris accord, there is an exemption for food-producing nations.
To date, we have not triggered that exemption, but the footprint of our agricultural sector is very positive in terms of how efficiently we farm. So these are intensely political issues, and we need to get a mandate from our electorate as to what changes there might be in the future as to how we respond practically to Paris Accord obligations.
