Natural gas makes a substantial contribution to New Zealand’s energy supplies, providing energy security and supporting the New Zealand economy in a way that helps to achieve the country’s environmental sustainability goals.
New Zealand produces up to 500 terajoules of energy from gas each day. That’s about 180PJ a year. About a third of gas is used to generate or co-generate electricity. The other two thirds is used primarily by large industrial and commercial gas customers around the country.
In recommending gas governance arrangements, Gas Industry Co’s principal objective is to ensure that gas is delivered to existing and new customers in a safe, efficient, fair, reliable and environmentally sustainable manner.
Gas is most often used in industry when alternative energy can’t produce high temperatures as economically.
The cost of a unit of energy from electricty for industry averages more than six time the equivalent cost of gas*
The highest value use of gas tends to be to support electricity when renewable sources can’t supply enough energy for New Zealand’s needs. Then, short term prices for gas tend to rise to the level set by electricity markets.
*Modelling for Gas Industry Co by Sapere, dividing total energy usage by the total cost of supply including distribution, transmission, and marketing, but excluding carbon costs.
Most gas is sold under long-term contracts.
Gas fields are usually only developed when upstream producers can secure long term contracts to sell the gas they expect to produce.
Gas spot markets are mainly used to buy and sell gas for pipeline balancing.
Natural gas has been produced commercially in New Zealand since 1959. Before then all gas sold in New Zealand came from coal.
Gas is in transition, but some gas will be used in a 2050 net zero economy.
About 50-110 PJ of gas will be used in 2035 and 26-50 PJ in 2050 for some petrochemical, industrial, commercial, agricultural and residential use.
This is consistent with the Climate Change Commission emissions reduction pathway.