New Zealand’s Genesis Energy to resume coal imports

New Zealand's upstream firm and utility Genesis Energy plans to resume thermal coal imports later this year to feed its dual gas- and coal-fired Huntly power plant.

The resumption was because of lower domestic gas production and rapidly declining coal stockpiles, and will mark the firm's first coal imports since 2022.

Coal inventories at the 953MW Huntly plant, — New Zealand's largest power station by capacity and the country's only coal-fired facility — recently slipped below 500,000t, down from 624,000t at the end of March, and will fall below 350,000t by the end of the winter. This will trigger a need to purchase more coal to maintain a target operational stockpile of around 350,000t ahead of winters in 2025 and 2026, the company said on 8 May.

Imports are currently the most efficient option for the quantity the company will need, with a delivery time of around three months, chief executive Malcolm Johns said. Genesis typically imports from Indonesia, the company told Argus.

Gas production in New Zealand has dropped at a faster rate than expected, with major field production in April down by 33pc on the year, Genesis said. Lower gas availability typically leads to more coal burn, because the Huntly plant runs on gas and coal.

This is in addition to an extended period of low hydropower inflows in recent months, which required higher thermal generation to ensure supply security. A prolonged outage at Huntly's unit 5 gas turbine between June 2023 and January 2024 also led to an even greater need for coal-fired generation, Genesis said.

Biomass transition

The company — which is 51pc owned by the state — is the second-largest power retailer in New Zealand, behind domestic utility Mercury, according to data from the Electricity Authority. It has a NZ$1.1bn ($659mn) programme for renewable power generation and grid-scale battery storage, which includes a potential replacement of coal with biomass at Huntly. But the transition to biomass "will take some years," Johns said.

Genesis has successfully completed a biomass burn trial at Huntly last year and has collaboration agreements with potential New Zealand pellet suppliers, but there is currently no local source for the type of pellets needed for the plant. Genesis is hoping to move to formal agreements "as soon as counterparties are able".

The company will not consider importing pellets, it told Argus. "We will only use biomass if we can secure a local New Zealand supply chain that is sustainable and cost-effective," it said.

Domestic gas production

New Zealand's three-party coalition government said separately on 8 May that the "material decline" in local gas production threatens energy security, blaming the previous Labour party-led government for "policy decisions which have disincentivised investment in gas production."

The decisions — which were part of the former government's pledge to achieve a carbon-neutral economy by 2050 — led to a reduction in exploration for new gas resources since 2021, while suppressed maintenance drilling reduced production from existing gas fields, according to a joint release from energy minister Simeon Brown and resources minister Shane Jones.

"Due to this significant reduction in gas production, the government has also been advised that some large gas consumers are expressing concern about their ability to secure gas contracts," the government said. Major industrial users such as Canada-based methanol producer Methanex have been forced to reduce production as a result, it noted.

"We are working with the sector to increase production, and I will be introducing changes to the Crown Minerals Act to parliament this year that will revitalise the sector and increase production," Jones added.

By Juan Weik