The report's crystal ball gazing contains several scenarios - few of which should surprise energy bosses - and seems to have an each way bet on the likelihood of more gas discoveries and continued petrochemical production.
However, its reference scenario assumes international oil prices rising from $US20 per barrel in 2004 to $US25 per barrel by 2020 and constant thereafter; Pohokura gas available from 2007 and Kupe from 2008; gas discoveries of 35PJ per annum for 2011-2013 and 60PJ pa from 2014 onwards.
It estimates oil use, mostly for transport, will grow steadily at 1.2% per annum and that wholesale gas prices increase to about $8 per Gigajoule by 2025, excluding any carbon tax charge that may be imposed as a result of the Kyoto Protocol. Coal will cost between $NZ3-4 per GJ, with a carbon charge of $NZ15 per tonne of CO2 from 2008.
The report says New Zealand will meet its requirements under Kyoto and that after allowing for CO2 absorption through new forest plantations, net carbon dioxide emissions are expected to be below the 1990 level as required.
"There is considerable uncertainty around some of these key assumptions," concedes the report, and so it looks at alternative scenarios, including no gas discoveries, continued Methanex methanol production, higher GDP growth and slower growth in energy efficiencies.
However, the report's ambivalence is highlighted by it assuming that the tightening gas market will see Methanex close next year, though it says it is "quite likely Methanex will secure additional gas and maintain operations longer".
It also admits that "it can be argued the existence of such a large single user provides a valuable incentive for exploration" - what oil and gas commentators have been saying for years.
Ministry deputy secretary David Smol is reported as saying there is no looming gas supply crunch, as there will be enough gas for domestic, industrial and commercial users for a very long time. Known gas supplies will last until 2021, and New Zealand can import LNG if necessary.
The report says that, excluding Maui, explorers have found an average of about 60PJ of gas a year. However, this is nowhere enough to replace existing reserves as New Zealand uses about 230-250PJ of gas a year with Methanex, and 140-160PJ without Methanex.
The report, released yesterday by Energy Minister Pete Hodgson, says the main driver for electricity generation to 2025 will be the availability of gas, with coal use growing increasing when gas supplies are constrained.
About 3355MW of new power stations, the equivalent of almost 10 Taranaki Combined Cycle stations, will be needed to cope with increasing demand for power, projected to be about 1.2% a year. This could be made up of about 890MW of new hydro, 635MW of geothermal, 630MW of wind, 800MW of combined cycle gas, 50MW of distillate and 350 MW of cogeneration.
Wholesale power prices were forecast to rise from 6.3 cents per kilowatt hour in 2005, to 8.4 cents in 2025, with domestic electricity tipped to be about 14-15 cents a unit in 2005, increasing to more than 16 cents a unit in 2025.
