The group favours an all-embracing Emissions Trading Scheme (ETS), which should include agriculture, saying if there is adequate international action, carbon pricing will ensure the most efficient, lowest-emission sources of energy will be developed.
Though it supports tree planting as an important carbon offset the group notes that beyond 2050 carbon sequestration will reach an economic viability limit because land for new forests will be used up.
PEPANZ, representing energy businesses and their service providers, made its points in Parliamentary submissions on the Government’s legislation ending new offshore oil and gas exploration.
The group has a net zero emissions committee to ensure it has a role in reducing emissions and smarter use of oil and gas. It does not attack the Government over its action but indicates its view of some naivety in Prime Minister Jacinda Ardern’s comments the world accepts its future isn’t fossil fuels.
It said oil and gas provide 60% of NZ’s total energy needs and over half the world’s total needs.
Research by the International Energy Agency shows global energy demand is forecast to increase by 30% by the year 2040, the equivalent to adding another India and China to demand.
An expanding renewable energy sector is forecast to provide 40% of that increase but that leaves a whopping 60% of new demand to be met from other sources.
The agency concluded that in 2040 oil and gas will still provide half of the world’s energy needs. Natural gas use is expected to grow by 45% to make up a quarter of all energy and while growth in oil use will slow, and decline for road transport, it will remain the biggest source of energy.
The submission said NZ produces all the natural gas used domestically and advocated its importance as a replacement for coal in industrial use because it could halve the rate of carbon emissions.
It also said NZ’s oil is lighter and sweeter with less carbon than many other world oils and requires less intensive extraction and refinery processes.
PEPANZ warned against carbon leakage, which will occur if NZ oil and gas production is ended and has to be replaced both here and in some overseas uses by supplies with greater emissions levels, meaning a NZ-only ban will increase world emissions.
A good ETS process could help avoid carbon leakage.
It said NZ has just 10 years of known natural gas reserves and the ban on offshore exploration means the prospect of new finds is reduced.
The Government also plans to review onshore Taranaki permits beyond 2020.
If supplies run out NZ will have to import gas for industrial use at a greater cost or develop more renewable energy at an unfeasible rate.
It might have to use more coal, despite its higher emissions, or import liquefied natural gas from Australia or the United States, which are expanding their industries.
If NZ is to use new renewable electricity generation to meet expected demand growth including electric vehicles, a 35% increase in generation will be needed, which would be both challenging and expensive.
But some industrial processes, including milk processing, will still need the heat generated by gas.
If NZ moves away totally from petrol, diesel, coal and gas then double today’s electricity generation will be needed.
That means doubling the number of the 17 existing wind farms and building a range of new dams and power stations, with the resource consent issues that would entail.
PEPANZ quoted a report by Concept Consulting Group that said displacing existing uses of gas is one of the least economic ways of decarbonising the economy.
Its submission said NZ produces 15 million barrels of oil a year compared to Saudi Arabia producing 10m barrels a day of much heavier oil.
Another comparison was China, which uses coal for 66% of its electricity generation and is building new coal-fired power stations.
In NZ coal is responsible for 7% of greenhouse gas emissions and that will be significantly reduced if natural gas is used instead for industrial heating.
NZ-produced natural gas satisfies just over 20% of energy needs, including 14% of the electricity generation.
About 400,000 homes, small businesses, schools and hospitals are gas-users.
The submission said the oil and gas industry delivers major benefits contributing about $2.5 billion a year to the economy and employing about 11,000 people.
About $1.5b of oil is exported each year.
On average,the Government receives about $500m a year in royalties and taxes.
