NEW ZEALAND OVERVIEW _______________________________________________________________________ 3 1. Energy Outlook _________________________________________________________________ 4 2. Oil ___________________________________________________________________________ 5 2.1 Market Features and Key Issues ___________________________________________________________ 5 2.2 Oil Supply Infrastructure _________________________________________________________________ 8 2.3 Decision-making Structure for Oil Emergencies ______________________________________________ 10 2.4 Stocks _______________________________________________________________________________ 10 3. Other Measures _______________________________________________________________ 12 3.1 Demand Restraint ______________________________________________________________________ 12 3.2 Fuel Switching _________________________________________________________________________ 13 3.3 Surge Oil Production ____________________________________________________________________ 14 3.4 Relaxing Fuel Specifications ______________________________________________________________ 14 4. Natural Gas ___________________________________________________________________ 15 4.1 Market Features and Key Issues __________________________________________________________ 15 4.2 Natural Gas Supply Infrastructure _________________________________________________________ 17 4.3 Emergency Policy for Natural Gas _________________________________________________________ 18 List of Figures Total Primary Energy Supply .................................................................................................................................4 Electricity Generation by Fuel ...............................................................................................................................5 Domestic Oil Production and Demand ..................................................................................................................6 Oil Demand in 2009 (kb/d) ....................................................................................................................................6 Oil Consumption by Product .................................................................................................................................7 Crude Oil Imports by Source .................................................................................................................................8 Oil Infrastructure Map...........................................................................................................................................9 Total New Zealand Oil Stocks by Type ................................................................................................................11 Oil Consumption by Sector ..................................................................................................................................13 Natural Gas Consumption by Sector ...................................................................................................................16 Gas Infrastructure Map .......................................................................................................................................17 NEW ZEALAND OVERVIEW New Zealand’s relative geographical isolation from the global oil market supply chain creates a particular challenge to oil supply security. Fortunately, New Zealand has relatively abundant domestic fossil fuel resources, compared to most IEA countries. It has large reserves of coal and some reserves of natural gas and oil. The country has been fully self-sufficient in natural gas supplies; however, domestic natural gas fields are declining rapidly. Oil consumption has grown steadily since the mid-1980s, and although there is some domestic production, imports are necessary to meet around half of New Zealand’s oil demand. Most imports are in the form of crude oil, primarily from the Middle East. Following an upgrade, New Zealand’s sole refinery is able to supply approximately 80% of the country’s product demand. New Zealand places no minimum stockholding obligation on industry, and until 2007, it relied on the industry’s normal stockholding practices to meet the country’s overall minimum 90-day net import obligation as a member of the IEA. Rising import dependency over the past decade resulted in the country being temporarily in a state of non-compliance with regards to minimum stock levels. In response to this, the New Zealand government acquired stockholding in other IEA member countries, in the form of ticket reservations, as of 2007. These tickets represent around 0.8 million barrels of public stocks in 2010 (down from 3.7 million barrels in 2007). Because of its growing domestic production in recent years, New Zealand’s net imports have dropped, thereby reducing its IEA stockholding obligation. All tickets are held directly by the New Zealand government, rather than through an agency on the government's behalf. In an IEA co-ordinated action, New Zealand would likely contribute to the collective response by releasing these public stocks and implementing a campaign for voluntary demand restraint. 3 NEW ZEALAND 1. Energy Outlook Compared to most IEA countries, New Zealand has relatively abundant domestic fossil fuel resources. It has large reserves of coal – a large share of which is exported – and some reserves of natural gas and oil. New Zealand’s TPES has more than doubled since 1973, growing from 8 million tonnes of oil equivalent (Mtoe) to over 17 Mtoe in 2008. Overall TPES has been relatively stable over the past decade, with the decrease in natural gas consumption being compensated for by an increase in renewable energies. Total Primary Energy Supply 1973 2008 Coal Hydro/Renew/ Coal other 16% 29% 10% Hydro/Renew. /other 34% Oil Natural Gas 37% Nuclear 3% Nuclear 0% 0% Oil Natural Gas 52% 20% 8 020 ktoe 16 906 ktoe *Data excludes electricity trade. Source: Energy Balances of OECD Countries, IEA The supply of natural gas has grown by an astounding 1117% over the 35-year period, due to the development of sizeable gas fields as of the 1980s. The country has been fully self-sufficient in natural gas supplies, but domestic natural gas fields are now declining rapidly. Because of New Zealand’s inability to import natural gas (no LNG terminals and no pipeline connections to other countries), gas consumption has declined somewhat in recent years, in line with declining production. The supply of renewables (and particularly hydro) has grown by 154% since 1973. Oil and coal, although also growing in absolute terms (by 47% and 41%, respectively, over the same period), have declined as a percentage of the country’s TPES. As for oil demand, eighty-three percent comes from the transport sector, and an additional 11% is consumed by industry. For natural gas, 57% of demand is for power generation, with industry ranking second with 32% of gas demand. 4 NEW ZEALAND Electricity Generation by Fuel 50 45 40 Other 35 Hydro 30 Nuclear TWh 25 20 Natural Gas 15 Oil 10 Coal 5 0 Electricity Useˆ Source: Energy Balances of OECD Countries, IEA The main input for power generation is renewable energy – particularly hydro power (51% of power generation in 2008), of which New Zealand has abundant resources. Nevertheless, natural gas remains an important source of electricity generation, accounting for a quarter of inputs in 2008. Successive governments have made a strong push for the development of intermittent renewable energies (e.g. wind, wave, etc.), and these renewable fuels (particularly, wind) are expected to contribute progressively more to the country’s power generation mix (with a long-term target of 90% of power generation from renewable energies). Whilst commendable from an environmental point of view, the intermittent nature of wind and other renewable sources means that power generation based on these intermittent renewables will require additional back-up capacity from hydro and hydrocarbon-based generation, and the bulk of this back-up capacity is expected to be gas-fired (mainly due to of the increasing economic costs of coal-fired generation, due to emissions). Thus, gas is set to play an ever-increasing role in the country’s power generation system, particularly in times of power crises. More importantly, because of the increasing reliance on gas-fired plants as back-up capacity, the electricity sector will be exposed to heightened dependence on gas-fired power generation in times of emergency, and times when power generation based on intermittent renewables (e.g. wind or wave) diminish temporarily. Thus, additional spare capacity for gas-fired generation will be required. 2. Oil 2.1 Market Features and Key Issues Domestic oil production All of New Zealand’s oil production is from fields in the Taranaki Basin, located on the west coast of the North Island. Most of the basin is located offshore, but the majority of small producing fields are onshore. Most oil produced in New Zealand is light, sweet crude. However, New Zealand’s sole refinery is geared towards sour crude. Thus, most oil produced in New Zealand is exported. All oil from New Zealand fields is transported to market via tanker. 5 NEW ZEALAND With the streaming of the Tui field and the recently commissioned Maari field, New Zealand’s total domestic oil production rate in 2008 reached 58 kb/d, an increase of over 40% from 2007. In 2009, New Zealand produced oil from 17 fields in the Taranaki region, with the two offshore fields, Pohokura (12.5 kb/d) and