Emissions reduction project first victim

The government’s misguided ban on off-shore oil and gas exploration has claimed its first victim:

The government’s proposed ban on new offshore exploration looks likely to halt plans by Methanex for a $100 million-plus emissions reduction project at its Motunui plant.

The company uses natural gas to make methanol and had been considering a project to recover and re-use CO2 from its production processes in order to reduce emissions per tonne of product.

But that project is now unlikely to proceed due to uncertainty about the longevity of affordable gas supplies in New Zealand, says John Kidd, director of sector research at Woodward Partners.

“This is a project that should have been an absolute slam-dunk,” he said. “It’s good for emissions, it’s good for the economy and it’s good for gas continuity.”

Unlike the ban which is bad for emissions, bad for the economy and bad for gas continuity.

Vancouver-based Methanex is the world’s biggest methanol maker and the biggest gas user in New Zealand.

Methanex New Zealand declined to comment on the emissions reduction project. In July it said it had secured sufficient gas to meet half its New Zealand requirements through to 2029, but noted its disappointment with the exploration ban which it said would impact it long-term.

Kidd said carbon dioxide recovery would be a good project, but it required a long pay-back period. Methanex refurbishes its production trains every five years and the uncertainty the government policy change has created means it would struggle to justify investments needing more than five to 10 years to pay off.

Kidd says it is an example of the environmental costs of the proposed ban, which he believes is more likely to increase emissions than reduce them.

The potential for carbon leakage as New Zealand-made products are replaced with products made overseas is “absolutely real”, he said. The fact the coalition is proceeding with the ban shows the government is more focused on shutting down the country’s oil and gas sector earlier than would have been the case, rather than reducing emissions.

“All of the scenarios are negative – some of them dramatically so,” Kidd told BusinessDesk.

“And the policy objective of reducing emissions is actually worse.” . .

If the policy was going to have a positive environmental impact it might, just might, be justified but it will make emissions worse.

Oil and gas account for just over half the country’s primary energy supplies. Kidd noted that gas – produced as methanol – brings in more than $1 billion in exports. When converted to urea it displaces about $200 million of imported product, while locally produced LPG displaces about $200 million of imported fuel.

The ban loses billions in foregone income, will lead to job losses, will increase emissions and reduce fuel security.

It combines rank stupidity with political posturing at a high environmental, financial and social cost.

4 Responses to Emissions reduction project first victim

  1. Mr E says:

    This is good stuff Ele. I’ve been surprised by Nationals avoidance of any conversation around the environment/economy interaction. I think they need to engage on these conversations with more voracity. I doubt the polling that frightens them off this angle does this with great validity.

    When the government has setup committee after committee to take on challenging issues, but flat out banned exploration without consultation – there’s a reason. I suspect they are afraid of the whole argument. That it will not support their goals.

    I think this issue is a sleeping giant that needs continual poking with a stick.

    I see the Government risking the economy in the hope to achieve foreign admiration. Climate change will be the next cab off the ranks. I expect the Government to throw the country under the bus on the basis of global leadership, when there are no guarantees others will follow. It is Russian roulette with the economy. And with climate change in itself.

    I have always been suspicious of those that seek grandeur at the cost of the people (short term and long term).

    I also want to know when we will see Ele Ludemann running for National. I think you could make a fantastic Prime Minister. I’m not sure Grant would emulate a Gayford approach but I’m sure he could make it work. I am thankful for my anonymity right now.

  2. homepaddock says:

    When Mr E? While I appreciate the confidence you show in me, the answer is never.

  3. adamsmith1922 says:

    Reblogged this on The Inquiring Mind.

  4. Mr E says:

    I know you do a lot in that sphere already. And I am greatful.

    My attempts at planting a seed may remain quarantined. However it is worth noting every great idea has humble beginnings.

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