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:

  1. 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
  2. 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
  3. 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.
  4. 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.

Analysis suggests $28 billion loss if NZ oil and gas ban happens

An analysis of the intention to phase out oil and gas with no new exploration allowed, suggests that New Zealand might lose $28 billion IF the ban goes ahead. The ban, which was announced last year by Prime Minister Jacinda Ardern was meant to address the impact of carbon from man made emissions on the climate.

I say IF for a simple reason. At some point, National is guaranteed a return to power and possibly with A.C.T. as a coalition partner or supporting party. It is only inevitable that one or both parties or some other combination of centre-right parties will try to either overturn the ban, or so weaken it by indirect action that it is no longer a workable mechanism of reducing our man made carbon emissions.

The concerns I have about the likelihood of succeeding in completely winding up oil and gas exploration are matched by concerns about the feasibility of electric cars. Yes there might be a surge in the number of Nissan Leaf’s entering the market, along with new models from Toyota, Mitsubishi and Kia, but looking at the range of these vehicles, only two of them could make the 189km trip from Christchurch to Kaikoura even if they left completely charged up.

Other companies – namely Tesla, Renault, B.M.W. and Hyundai – offer vehicles in New Zealand as well, but the prices as an article on Stuff in October 2018 suggested are far higher. Who is likely to want to shell out for a N.Z.$59,000 Hyundai Ioniq EV? For that matter when one considers disposable income in most New Zealand households, who can even afford one?

The death hold Toyota Corolla’s have on the small vehicle market is growing. A hybrid version now exists, which is basically $38,500 and their very popular petrol version continues. Toyota also have medium size Camry’s, again with a hybrid option.

There is another problem too. Many New Zealanders simply don’t see the need for flashy complicated vehicles and as long as they can get cheaper ones that have had numerous owners and still run fine, then it is a losing argument on simple economic grounds.

Also IF this ban is to be effective, New Zealand needs a comprehensive plan in place to make this happen. So far all I have seen is Green Party chest thumping over getting the ban in place and a lot of hot air from National and A.C.T. about how the economy will be crippled whilst completely ignoring the environmental impacts. A New Zealand Energy Voices advert on Facebook promotes oil and gas.


The doubled sword of Crown Minerals Act change

It has been presented in the media as a double edged sword. On one hand we have the well publicized statement by Prime Minister Jacinda Ardern with full support of the Green Party that by 2050 oil and gas will be banned in New Zealand. On the other the more pro-development New Zealand First Member of Parliament and Minister for Regional Development Shane Jones is touting a $1 billion hydrogen gas development in Taranaki.

Taranaki in the 1980’s had a very large energy projects underway. These were part of the Robert Muldoon Government’s “Think Big” scheme which called for large industrial projects that would create hundreds of thousands of jobs, boost the New Zealand economy and address significant energy shortages. They included a methanol plant at Waitara and a synthetic fuel plant at nearby Motunui.

Now in 2018, Mr Jones is talking about the possibility of an American consortium developing a multi-billion dollar emissions free plant based on existing technology. 8 Rivers have announced a project in which they build a plant using Allam Cycle technology that they developed in the United States and which is used at a plant in Texas.

Whilst I am interested to see how the technology will be used and what any Government feasibility study will show, I have some concerns on both sides of the fence. Notably:

  1. It might be emissions free technology, but how will the gas be extracted. If it is fracking one can expect significant resistance from the Greens/Greenpeace over potential damage to groundwater, and other parts of the environment – one can also expect resistance purely based on ideology as well
  2. Who would fund it? My parents generation will be wary of anything that looks like another “Think Big” project on the grounds of the parlous financial state that the original ones left New Zealand in
  3. How would the American consortium construct the project and would New Zealand communities nearby receive due benefits for hosting it

Not surprisingly, especially with the Government’s statement on ending oil and gas by 2050, there is excitement among local businesses and Mayors, keen on getting some confidence back into a region heavily reliant on energy projects.

Back in 1979 when the Muldoon Government was pushing for energy independence, New Zealand was probably not ready for such ambitious projects and their costs. Despite worsening Middle East tensions and the rises in the price of oil caused by the fall of the Shah in Iran and the Arab oil shock of 1973 following the Yom Kippur War, compared with the price of petroleum today, it was even then quite low. Our transport system, energy market and infrastructure was not ready for something that then was probably a couple decades ahead of its time.

But 40 years later with concerns about the impact of fossil fuels now widely advertized and concerns about energy dependence in the future justified, this debate rears its head once again. The sword being wield though, depending on which side of the blade strikes you, is another thing all together.

Government rushing oil legislation

The Crown Minerals (Petroleum)Amendment Bill is before Parliament at the moment. It has come back from the submissions phase, where 2312 submissions were collected from members of the public, N.G.O.’s and others. In the next few weeks it will go back to the House of Representatives for its third and final reading.

Despite its promises of transparency, I find myself in the unusual position of agreeing with those who oppose the legislation in claiming that it is being rushed. Yes we had a chance to make submissions (though mine was destroyed when my USB drive corrupted itself one day and never got to be submitted). Yes we were given a chance to speak to the submissions before the select committee.

But I nevertheless believe that too much haste is being made in progressing this legislation. This is especially since the announcement in April that oil and gas would be phased out did not involve any prior consultation with the oil and gas sector, or any apparent effort to figure out what alternative sources of fuel could be developed. The stance is capped off by the chair of the oil and gas industry body PEPANZ, Cameron Madgwick. Mr Madgwick has gone on the record as saying that the industry would rather have certainty about the process going forward in 2018 than being offered a new block for exploration.

As it is, I have always believed that totally ridding New Zealand of oil and gas is never going to happen and that the Government will find itself being forced to make concessions of some sort or another. It will also find that its failure to acknowledge the lack of a nation-wide blue print for meeting New Zealand’s energy needs in the forseeable future proves problematic with no clear priorities, objectives for meeting those priorities or policies to give effect to the objectives, in place.

Even if New Zealand does meet its objectives, will it make any difference? I think New Zealanders are more conservative than Labour and the Greens are willing to admit when it comes to energy. Certainly people realize that a few significant policy decisions in major countries like India, China or the United States could lead to changes that completely undermine any in roads New Zealand makes in carbon emissions.

So, Labour can rush this Bill of Parliament through as it looks like they will try, but it is not a well crafted law and will cause them and their Green allies some significant headaches in the months and years to come.