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Energy and Minerals

New Zealand has significant natural energy resources, with good reserves of coal, natural gas and oil/condensate, extensive geothermal fields and a geography and climate which have supported substantial hydroelectric and wind power development. The main minerals mined, in addition to coal, are gold, silver, quartz, iron sands, various other industrial minerals and gravel for road construction.

Programmes for the exploitation of New Zealand's energy resources were accelerated after the first oil shock in 1973. Oil and gas exploration was increased and energy conservation programmes were developed and promoted. As a result, New Zealand is able to supply a significant proportion of its oil and gas requirements from domestic sources.

There is a renewed interest in the development of energy and mineral resources to contribute to economic growth. The Exclusive Economic Zone and Continental Shelf Act passed in 2012 requires all petroleum and mineral operations within the EEZ and continental shelf to seek consent from the Environmental Protection Authority. Within New Zealand's territorial waters, operators are required to be permitted through the RMA.

Natural gas: Natural gas is currently produced from 19 fields and wells in the Taranaki region of the North Island, with production dominated by the onshore Pohokura oil and gas field, the large offshore Maui field and smaller onshore fields. There are three main groups of users of gas in New Zealand: electricity generation; petrochemical production; and fuel for industrial purposes.

Gross natural gas production was 228.0 petajoules in the year to June 2015 up from 217.7 petajoules in the previous year. Natural gas production declined sharply after the Maui field peaked in 2001, before stabilising through to early 2007. Production has since increased with the continued development of new smaller and more diverse fields and the introduction of the onshore Pohokura oil and gas field in 2006. The offshore Kupe oil and gas field, which commenced production in December 2009, has become a significant producer.

Oil: New Zealand's crude oil production was 94.1 petajoules in the year to June 2015 (around double the amount produced in 2006) of which 96.8% was exported. New Zealand exports light crudes, while importing heavier crudes suited to its refining plant at Marsden Point in Whangarei. While New Zealand is still a net importer of oil, crude oil exports remain important with the value of crude oil exports accounting for 1.7% of total goods export values in the year to September 2015.

Crude petroleum production has been increasing since the second half of 2006 when the Pohokura field commenced production. The Tui Area Oil Fields, located in the offshore Taranaki basin, commenced commercial production in the middle of 2007 and produced 32.5% of New Zealand's oil in the 2009 year. New Zealand's production of crude oil was further boosted in late 2008 as Maari, a new field also located off the Taranaki coast, started production. The Maari field reached full production in June 2009, around the same time that production from the Tui fields began to decline.

Coal: Coal is New Zealand's most abundant energy resource with the total in-ground resource estimated at more than 15 billion tonnes. Of this, 8.6 billion tonnes are judged to be economically recoverable from 42 coalfields. Of this amount, 80% is relatively low-grade lignite, located mainly in Southland, 15% is sub-bituminous, located mainly in the Waikato region south of Auckland and 5% is bituminous, located mainly on the West Coast of the South Island. Lignite is used mainly for industrial fuel and sub-bituminous coal for industrial fuel, steel manufacture, electricity generation and domestic heating. Bituminous coal, which is typically very low ash, low sulphur coking coal, is mainly exported for metallurgical applications.

In the year to June 2015, total coal production was 3.8 million tonnes, a 13% decrease over the previous year. Coal production is centred in the Waikato region (mainly for several major industrial users and the nearby Huntly power station), the West Coast of the South Island (mainly for export) and Otago/Southland (mainly for local industrial markets).

Electricity: The New Zealand electricity market is structured around the following key participants:

Generators - generate electricity at power stations throughout the country and sell that electricity to the wholesale spot market.

  • The National Grid - Transpower, a State-Owned Enterprise (SOE), is the owner and operator of the national grid which comprises the towers, wires and cables that transport electricity from power stations to distribution networks and to large industrial users. Transpower is also the System Operator responsible for scheduling electricity generation to meet consumer demand and for the maintenance of system voltage and frequency.
  • Distribution Network Owners - own the distribution networks that carry electricity from the national grid to residential, commercial and some industrial users. There are currently 29 businesses that operate distribution networks. The prices that distribution businesses can charge are regulated by the Commerce Commission. Distribution costs (also called lines charges), which comprise fixed and variable components, are charged to retailers, who then incorporate the charges into their retail pricing.
  • Retailers - buy electricity from the wholesale spot market and on-sell it to end consumers, at market prices determined by each electricity retailer.
  • Consumers - nearly two million, ranging from households to large industrial users, may choose supply from any retailer operating in their area.
  • Regulators - the Electricity Authority oversees the electricity market.

Most New Zealand electricity generation and retailing is undertaken by five large, vertically integrated generator/retailers: Mighty River Power; Contact Energy; Genesis Energy; Meridian Energy; and Trustpower.

Collectively, these companies account for over 90% of both electricity generation and customer market share. All are listed companies with their shares quoted on the NZX Main Board. Mighty River Power, Genesis Energy and Meridian Energy are currently majority Crown-owned companies while Contact Energy and Trustpower are privately owned.

New Zealand's total installed generation capacity is approximately 10,000 MW. More than half of generation in 2014 was from hydro stations. Almost 80% was from renewable sources - including geothermal, wind, biomass and solar as well as hydro. New Zealand does not directly subsidise renewable generation. Other fuel types in New Zealand's generation mix include coal, oil/diesel and natural gas.

Residential households accounted for approximately a third of total electricity consumption by volume. Most residential demand is for water heating, space heating and refrigeration. The commercial and industrial sectors make up the balance of consumption. New Zealand Aluminium Smelters (NZAS) is the largest single user of electricity in the country, accounting for approximately 15% of national electricity demand in 2015.

Wholesale spot electricity prices are set each half hour through an auction pricing mechanism whereby generators submit offers to sell electricity, and retailers and large consumers submit bids to buy electricity. The lowest cost combination of generation offers which satisfy demand are accepted. The spot price for the half hour is normally determined by the highest price within the accepted combination of offers.

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