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.