Gas Industry Company : Industry Participants

Currently, natural gas is produced entirely in the Taranaki region from 12 fields. Production has been dominated since the late 1970s by the Maui field, which was considered large on an international scale. However, as the Maui field goes into decline other sources of gas are coming online and Pohukura has emerged as the major source of gas in 2007 with 42.1% of net production (this information and much of the subsequent discussion comes from the July 2008 Energy Data File, published by the Ministry of Economic Development). The Maui and Pohukura fields are owned by Shell New Zealand Limited, OMV New Zealand Limited and Todd Energy Limited (and provide 73.5% of total production).

The remaining 26.5% of net production in the year to December 2007 was provided from:

McKee and Mangahewa, owned by Todd Energy Limited;
Kapuni, owned by Shell New Zealand Limited and Todd Energy Limited;
Waihapa/Ngaere and Tariki/Ahuroa fields, owned by Southern Petroleum New Zealand Exploration Limited and Origin New Zealand Limited;
Rimu and Kauri fields owned by Origin Energy New Zealand Limited; and
Ngatoro, Kaimiro and Turangi fields, owned by Greymouth Petroleum Limited.

Total New Zealand gas production in the year ended December 2007 (excluding gas re-injected or flared and LPG extracted) was 165.5 PJ, an increase of 10.3% compared with 150.1 PJ in the year ended December 2006. Many of the fields, in addition to producing natural gas, provide other useful products, which include condensate, naphtha, natural gasoline, CO2 and LPG. These other products are separated and either exported or sold locally. For example, a proportion of LPG is both exported and shipped to the South Island.

Exploration and development

In 2004, the Government announced packages to encourage gas exploration and development. These incentives, which range from tax breaks to government funded seismic surveys, coupled with the decline in the Maui field have resulted in a substantial increase in exploration and development activity in recent years. In 2007, 42 new wells were drilled in New Zealand (compared with 30 in 2006) with a record 17 being drilled offshore. Exploration and development continues to be centred in the Taranaki region (both onshore and offshore) due to the high success factor of drilling in this area, however there is significant new exploration being conducted in the Great South basin and Canterbury basin east of the South Island, and in the East Coast basin of the North Island.

All major basins in New Zealand exhibit hydrocarbon seeps, and there has been little historic exploration outside of the Taranaki basin. Even the Taranaki basin is considered lightly explored on an international scale, with one well per 72,000 acres having been drilled. The potential for major gas and oils finds in the wider New Zealand Exclusive Economic Zone is considered high.

Transmission

Transmission pipelines transport large volumes of natural gas under high pressure from production fields to distribution networks, or to large customers along the pipeline.

There are over 3,400 km of high-pressure gas transmission pipelines in New Zealand. The major gas transmission pipelines are:

Vector’s network (formerly NGC), which extends to most major North Island centres; and
the Maui pipeline, extending from South Taranaki north to Huntly, owned by Maui Development Limited.

Other transmission pipelines are owned by Origin Energy, Shell, and Todd Energy.

On the 1st October 2005 an open access pipeline regime for the Maui pipeline came into effect, allowing all parties to ship gas through the Maui pipeline. The Vector transmission system already operated open access arrangements.

Distribution

Distribution networks transport gas from gate stations (transmission pipeline delivery points) and reticulate it into residential houses, offices, hospitals, factories and other businesses.

There are more than 2,800 km of intermediate, medium and low pressure gas distribution pipeline networks in the North Island connected to the high pressure transmission system.

There are four gas distributors: Powerco, Nova Gas, Vector and Wanganui Gas.

Major Users and the Retail Sector

Major users

Electricity generation (including cogeneration) accounted for about 59% of New Zealand’s total gas consumption for the year ended December 2007. Contact Energy Limited (Otahuhu B, Taranaki Combined Cycle and New Plymouth), Genesis Power Limited (Huntly, including the new E3P combined cycle plant and Might River Power (Southdown) are the main thermal electricity generators in New Zealand using natural gas.

The industrial sector (excluding electricity generation and petrochemical production) consumed 20.1% of total production in 2007; major users supplied directly from the transmission system include New Zealand Steel, Carter Holt Harvey, Degussa Peroxide, Fonterra Co-operative, NZ Refinery Company and Tasman Pulp and Paper. Many smaller industrial users are connected to gas distribution networks.

The petrochemicals sector consumed around 15% of natural gas produced during 2007. This gas was used in Methanex’s methanol plants at Waitara Valley, and the Ballance Agri-Nutrients (Kapuni) ammonia/urea plant. Methanex is currently considering recommissioning its Motonui plant on the basis of record high international methanol prices and the strong medium term outlook for economically priced gas contracts in New Zealand.

Retailers and retail gas users

Retailers compete with each other to sell natural gas to smaller gas users (including residential households, hospitals and factories) who do not purchase directly from gas producers. Retailers effectively aggregate all the purchases of many smaller users to form a sizable purchase from gas suppliers. They also pay the transportation tariffs associated with transmission and distribution so that they can offer a convenient, bundled product to retail customers.

There are a number of retailers operating in New Zealand, many of these share parent companies but provide differing service areas or products: Auckland Gas Company, Bay of Plenty Electricity, Contact Energy, E Gas, Energy Direct, Gas Net, Genesis Energy, Get Gas, Mercury Energy, Nova Gas, and On Gas.

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