Petroleum Exploration and Production Association of New Zealand

19 October, 2007 NEWS RELEASE

Red lights flash over climate change policy

New Zealand’s policy for dealing with climate change deserves to loose popular support because it is not soundly based, says the Petroleum Exploration and Production Association.

“Red lights should be flashing all round government when major business sectors find reason to question the economic assumptions of the programme,” says the Executive Officer of the Petroleum Exploration and Production Association, John Pfahlert.

“Our association finds recent assertions from the Minister of Energy that sources of wind and geothermal energy are more affordable than gas to be misleading.”

The final energy strategy states that new geothermal, wind and gas fired power generation are all available at around the same price. However the strategy assumes a figure of $9/gigajoule for gas and an emissions price of $25/tonne of CO2 equivalent emissions.

“Under these assumptions of course renewable energy looks better. The fact remains that the wholesale gas price currently being paid in New Zealand is between $5.50 and $6.50 per gigajoule, which makes it one of the cheapest sources of energy available. The only reason that gas will be less attractive in future is that the present Government wishes to tax it out of existence.” said Mr Pfahlert.

“The Minister has also intimated that domestic gas reserves are running out. That is simply untrue. At current rates of consumption (160J/PA) we have at least 10-15 years of gas resources ahead of us.

“How the Minister can believe that banning new gas fired power generation will keep electricity prices down defies logic. Almost all new sources of renewable electricity will be more expensive than the public are currently paying.

Mr Pfahlert said major business groupings shared his association’s concerns about assumptions made for an emission trading policy and the new energy strategy.

“All these organisations are looking for an enduring solution to deal with climate change. They want it to be soundly based on thorough economic analysis that stands up to scrutiny. New Zealand householders along with industry and commerce face higher costs as a result of much of what is proposed.

“Unless it can be demonstrated through clear and robust economic analysis that the programme is soundly based it may well sink under a weight of public scepticism.” -ends

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