Oil and gas policy the Government’s biggest gamble

A few weeks ago the Zero Carbon Act passed through Parliament with assistance from National. It might have been a great day for the political career of Green Party co-leader James Shaw, Prime Minister Jacinda Ardern and the environmental faction then. But it comes at considerable long term risk that cannot be ignored in the provinces.

Several provinces will be directly impacted by the move away from fossil fuels. None more so than Taranaki, but Westland (coal) and Northland (refinery) are hot on its heels.

I honestly do not think the Government has thought it through. A broad, grand brush stroke is meaningless without substantive policy and matching investment in alternatives, which at this stage does not appear to be something viewed as a priority by either the Minister for Energy and Resources Dr Megan Wood or the Prime Minister.

I have stated my ideas about what should happen clearly. A potential hydrogen plant support a transition away from petroleum; the exploration of hemp as a building material since concrete manufacture releases a lot of carbon dioxide; waste to energy as an alternative source of electricity among others. I am believer in the green technological revolution and I believe New Zealand has the means and the know how to show other small nations how they can transition to a more sustainable energy platform. I am believer because there are jobs to be had, research to be done which will draw in skilled workers and infrastructure projects – should that research be positive – that could go ahead.

Since the announcement, I have heard little from Dr Woods, Ms Ardern or Mr Shaw on how they might mitigate the economic impact that they must surely know is going to be had on the country. They must surely be aware that National is going to push the economic consequences of this as hard as it can as it seeks to wrest back control of Government from Labour-Greens and New Zealand First.

To be sure the Government has passed the Zero Carbon Act, with National Party assistance on the understanding National will make changes when it next wins the election. But little has been said about developing a working group or other framework to steer this change. Nothing has been said about obvious minor steps such as recycling aluminium to reduce electricity consumption, some of which are also quite easy steps to take.

Overall I feel that this is the Government’s biggest gamble. It might pay off if it sets a precedent for other countries to follow, but I get the feeling that New Zealanders are not going to come on board until they see a plan, irrespective of what Extinction Rebellion, Greenpeace and other N.G.O.s might think about this. People are understandably concerned about their incomes, being able to provide for their families and make sure that their children have all of their needs provided for.

Unless this gamble is given some solid policy to back it up with aside from the Zero Carbon Act, I believe this is the gamble that might cost the Sixth Labour Government the election.



Infrastructure boom or bust?

Former National Party M.P., Minister for Economic Development and one time Treasurer in the Government of Prime Minister Bill English, Steven Joyce believes that it is necessary for the Government to spend more to stimulate the economy. The comments from Mr Joyce come amid an increasingly turbulent global outlook and signs that the New Zealand economy may be about to stall.

I find it interesting that Mr Joyce, from a party that is traditionally against government intervention in the economy especially where it comes to significant expenditure, seems keen on this Government spending more to stop the economy from stalling.

It is not that I necessarily disagree either, though my preferences for spending priorities will be rather different to his. Mr Joyce and the National Party had a road building programme called Roads of National Significance that they focussed their transport policy on at the expense of other transport modes. $12 billion was set aside for new motorways and extensions of existing ones, particularly around Auckland, but also with significant projects in Christchurch and Wellington.

Whilst some of the projects were definitely needed like the four laning of State Highway 1 from Belfast to Templeton, there were other motorway projects of questionable need which were constructed north of Auckland. If the money had to be spent on roading, there are three potential alternative projects in the South Island that could have gone ahead would have been:

  1. Either a second one lane bridge over the Hurunui River in north Canterbury on State Highway 1 or the addition of a second lane to the existing one;
  2. Making State Highway 70 better able to take trucks, thereby keeping them off the southern part of the coastal stretch of State Highway 1
  3. Replacing the one lane bridges over most West Coast rivers with two lane structures or building a second single lane one next to the existing structure

However a much more meaningful project would be to upgrade the South Island segment of the Main Trunk Line. This would be a useful alternative for freight that might otherwise end up on trucks that cannot or should not be navigating South Island roads, in particular the Kaikoura coastal stretch and the alpine passes. But how much thought have either party given to this? Probably not much.

The Government and National both say that they are concerned about the cost of petroleum to the consumer, but neither have bothered to explore the possibility of biofuel using waste stream product. I have mentioned potential cooking oil and fat, but there may be other sources in the waste stream as well. Depending on the feasibility this could be a potentially significant revenue and job creation scheme – researching the feasibility; developing a blend; getting it tested and certified; finding potential investors in it. The waste stream will not be disappearing any time soon given our consumption habits and the unwanted refuse it creates.

Another idea that has been subject to criticism of late is developing Waste to Energy plants. One mooted for the West Coast has run into trouble after it was found that the Mayor of Buller District Council had gone behind his council to see if it was possible. Whilst I support the possibility of a waste to energy plant, the N.I.M.B.Y.ist under current starting to appear suggests resistance would be strong and not necessarily founded on fact.

So, yes, there are things the Government could invest in, but they might not be what Mr Joyce was thinking.

Prime Minister “Fleecer in chief”? Not quite Simon

Yesterday National Party Leader Simon Bridges named Prime Minister Jacinda Ardern, the “Fleecer in chief”.

The comments came after Ms Ardern gave hints that the Labour Government is going to take steps to make oil companies stop gouging the consumer. Her comments were in response to a report being described as “landmark”, that suggests that the competition that is meant to exist between petroleum companies at the pump is not working as it should.

The facts are also not in Mr Bridges favour either. He might want to remember that the 5 largest oil companies in the world each make more revenue than the entire Gross Domestic Product (G.D.P.) of New Zealand does in a year:

  1. Royal Dutch Shell (Shell): U.S.$396.6 BILLION
  2. Sinopec: U.S.$314 BILLION
  3. British Petroleum: US$303.7 BILLION
  4. ExxonMobil: U.S.$279 BILLION
  5. Chevron U.S.$159 BILLION

Z, whose infrastructure was acquired from the departed Royal Dutch Shell (Shell), stated that it agrees with the findings of the Commission that there is room for improvement. Despite agreeing with the report its share price managed to fall 3%.

A host of smaller fuel players such as Gull, Challenge, among others exist in New Zealand. However the market is dominated by B.P., Z, Mobil and Caltex, who these smaller companies have to source their fuel from. They are the target of potential initiatives that will attempt to address the ease of supply for the smaller players.

One consistent problem that needs to be addressed, which neither oil companies or the Government seem keen on addressing is whether or not biofuel could become a potential alternative to petrol. New Zealand has a strong waste stream that includes considerable green waste as well as cooking oil/fat which could potentially form the basis of a blend. Whilst it is true that such a development would take significant time, if a low emission alternative to put in fuel tanks whilst we make the conversion to electric cars, should we not be looking to develop it?

Mr Bridges might also want to talk to Judith Collins. In February 2017 during her tenure as Minister of Energy Ms Collins savaged the continual price rises and launched a probe that was not completed before National left office following the 2017 General Election. In July of 2017, a report came out showing New Zealand had the highest petrol price of any country in the O.E.C.D. During the September school holidays that year Ms Collins launched another attack on petrol prices, noting that the Government was examining potential changes to Section 36 of the Commerce Act regarding the misuse of public power.

In October 2018, now as Spokesperson for Energy Ms Collins attacked the Government, which had introduced a regional fuel tax on Auckland to help fund its transportation network. At that point for every litre of petroleum sold, $1.25 went to the Government and $0.31 went to the fuel companies according to Ms Collins.


A coming oil crunch?

It has been reported that United States President Donald Trump’s policy of preventing Iran from exporting oil to other countries may lead to an oil crunch. With several key Persian Gulf states not expecting to increase production to cover any shortfall, it is possible that a shortage of oil could take effect from any time after 01 May 2019.

So, what is causing the prospect of an oil crunch?

The United States has a hard line against Venezuelan regime of Nicolas Maduro who is resisting calls to step aside. Mr Maduro is widely recognized as having caused the collapse of the Venezuelan economy, which now suffers frequent black outs, critical shortages of just about everything, hyper inflation among other effects. Mr Maduro accuses the United States of trying to topple the government and of being an imperialist state. This isĀ  despite the threat of severe sanctions being implemented. Those sanctions include punitive actions against countries that try to buy Venezuelan oil, in the knowledge that Mr Maduro’s government and military will probably squander any income generated. Sanctions of this nature will take effect on or immediately after 01 May 2019 according to United States National Security Advisor John Bolton.

The United States also has a hard line against the regime of the Islamic Republic of Iran. Officially America is not calling for regime change, but its continuing tightening of sanctions on the Persian nation suggests otherwise. Secretary of State Mike Pompeo says that oil brings in U.S.$50 billion of revenue for Iran each year, which comes in large part from sales to China, South Korea and India and which are under pressure to cease buying Iranian oil.

How will it affect New Zealand?

It is too early yet to tell how the market will manage this. Other countries such as the United States and Russia may increase production to try to offset the shortage of Iranian oil and to stifle any global supply concerns. One suggestion is that Saudi Arabia may increase production to offset the loss of Iranian production, but the Saudi’s have said nothing about doing so. Other countries in the Middle East, such as Iraq and Turkey are less than enthusiastic. Iraq believes that Organization Petroleum Exporting Countries needs to make a group decision, whilst Turkey and Iran have been seeking to improve economic ties. Their non compliance may with U.S. sanctions may cause oil prices to become unsettled.

As for New Zealand, our oil prices are going to increase again. The vast bulk of our petroleum comes from overseas and historical records show that just a small drop can cause chaos. As for our vehicle fleet, its old age – 14.1 years was the average age in 2014 compared to 9.8 for Australia at the same time – and high number of used vehicles being imported mean our petrol and diesel consumption figures are not as good as they could be. Those with inefficient gas consumption will once again be starting to look at hybrids such as the Toyota Camry, Corolla and Prius. More environmentally conscious people wanting to change their cars might be looking at Nissan Leafs and other electric vehicles. Our politicians and commentators will once again debate the merits of a greener outlook, but as soon as prices drop, they will probably forget again.

The devils energy: Nuclear power in New Zealand

Today in the Sunday Star Times I saw that columnist Damien Grant was suggesting that if New Zealand is serious about climate change, then we examine nuclear power again.

Back in the 1950’s and 1960’s it looked like nuclear power might have a future in New Zealand. This however was before concerns about their impact on the environment became known – the emergencies at 3 Mile Island, Chernobyl and Fukushima were all a decade or more away at this point.

Let us be honest here. Building a nuclear power plant faces huge technical, legal and environmental challenges to overcome. And even if they are overcome, the nuclear free reputation of New Zealand would be brought into question, the reputation that earned New Zealand a lot of respect in the 1980’s and 1990’s especially among small Pacific Island nations. These challenges are all going be examined in this article.

First, the political backlash from the left/centre-left would be ferocious. This is possibly worse than building another coal fired power station. There would be guaranteed protests on the streets, in any harbour any ship trying to bring fuel material into and along transportation corridors. Even the centre right are not hot on the idea. Only A.C.T. Leader David Seymour is remotely interested.

Second, the Resource Management Act has no specific provisions dealing with nuclear power, the potential environmental hazards of a spillage or leak of radioactive material – whether it is spent fuel or new fuel. A search of the words “nuclear” and “uranium” in the Act in the Government’s legislation website did not yield any results. “Radioactive” yielded results in Section 15C of the Act. Right here we have a major challenge. It is expressly prohibited to store, dump any radioactive material in the coastal marine area. A nuclear power station needs a significant cooling water supply for the reactors, which means unless a river of sufficient discharge is nearby, it would have to be built on the coast and thus breach the above provision of the Act.

Third, nuclear power stations are very resource intensive. To build one in New Zealand we would need:

  • A supply of uranium ore – that would have to come from Australia, as we do not have any uranium deposit in New Zealand large enough or accessible to use
  • We would need a reactor designed to New Zealand building code, a tough ask for a seismically active area and would have to most probably come from the U.S.A. or Japan
  • The transportation of radioactive material would pose a challenge – whether by truck or by train, there would be security and spill risks that might not meet the mitigatory requirements of the R.M.A.
  • An enrichment facility here or overseas would be needed

Fourth, the cost of such a venture is going to be high. My estimate would be N.Z.$2 billion, which could easily fund research into developing a tidal power station or a waste to energy plant. All expertise, most construction material, the design and construction of the reactor would have to come in from overseas. Putting together a consortium to manage this would be a politically charged process and would be fraught with as many delays as protestors and activists could get away with.

Fifth, the shutdown phase is time and money consuming. One cannot simply turn off a nuclear reactor and walk away from it in the same way that a hydroelectric power station can be taken off line. The cleaning up of the facility, and the dismantling can take over a decade even if there is no accident.

Finally, New Zealand is simply too seismically active. The entire South Island can be ruled out point blank, as well as all of the North Island as far north as Waikato. Large tracts of the east coast of both islands are at high risk from inundation in a tsunami, particularly if the Hikurangi Trench ruptures, which is expected to happen possibly in my life time and would generate a magnitude 8.5-8.8 earthquake and significant tsunami.

The only place thought to be viable was in Northland, on the Kaipara Harbour coast. Whilst Northland might be the least seismically active part of New Zealand, there are a host of other significant challenges that would go with having a nuclear power station in that province. I expect that Ngapuhi would have huge cross party support resisting something that would potentially threaten their ancestral lands. Land owners would be militant and even if the prospect of a jobs bonanza was there, the environmental and social costs would wipe out any gains.

Just by coincidence – I didn’t realize until I had finished typing the article – this will publish on the 8th anniversary of the Japan earthquake 2011, which caused the Fukushima disaster. Lest we forget.