Latest / Best of Business / Bruce Aitken: former CEO of Methanex on the company halting production in New Zealand

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Bruce Aitken: former CEO of Methanex on the company halting production in New Zealand · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: Now, the country's largest gas user, Methanex, is pulling out
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  Speaker 2: of New Zealand. It has sold its gas to Genesis.
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  Speaker 2: It will shut down its New Plymouth operations in the
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  Speaker 2: first quarter of next year. It says New Zealand's declining
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  Speaker 2: gas supply and uncertainty over future supplies have made its
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  Speaker 2: operations unsustainable. Bruce Aitken is a former president and CEO
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  Speaker 2: of Methanex and with us.
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  Speaker 1: Hi, Bruce. Hi there, Lisa. Good evening.
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  Speaker 2: This was inevitable, wasn't it?
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  Speaker 1: This is just another consequence of the decision that was
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  Speaker 1: taken in 2018 to stop exploring for natural gas in
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  Speaker 1: New Zealand. And, you know, we're paying for the economic
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  Speaker 1: consequence of that. We have been over the last six
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  Speaker 1: years and will continue paying over the next decade. So
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  Speaker 1: it's a pretty sad day in a lot of ways.
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  Speaker 1: But it's a consequence of one silly ideological decision. Mm-hmm.
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  Speaker 2: What is this going to do to the gas price
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  Speaker 2: for households?
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  Speaker 1: Really, I don't know. I think the big issue is
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  Speaker 1: around electricity. The banning of natural gas was all about
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  Speaker 1: reducing greenhouse gases, and here we are, we're burning coal
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  Speaker 1: to replace the gas that we could have been using
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  Speaker 1: our own domestically produced gas. So, you know, we've done
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  Speaker 1: nothing to reduce greenhouse gas emissions. And in the meantime,
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  Speaker 1: we've messed up the electricity market because we no longer
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  Speaker 1: have a backup power supply for dry years. So I
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  Speaker 1: think that's the biggest consequence. It's the worry about electricity.
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  Speaker 2: What's it going to do to our ability to find
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  Speaker 2: future gas and get the gas we already know is
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  Speaker 2: out there out of the ground? Because presumably if Methanex
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  Speaker 2: is gone, This is just going to reduce what the
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  Speaker 2: energy sector does in terms of maintaining and finding.
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  Speaker 1: Absolutely. That was the big asset of Methanex was to
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  Speaker 1: the New Zealand economy, was that it represented a demand
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  Speaker 1: for gas. So if someone goes out there and finds
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  Speaker 1: a big pool of gas, at least there was a
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  Speaker 1: market for it. Now there's not much of a market
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  Speaker 1: for it. So it reduces the incentive to go out
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  Speaker 1: and spend the billions of dollars you need to invest
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  Speaker 1: to develop a natural gas supply. for this country.
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  Speaker 2: What's it going to do to the Maui gas field?
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  Speaker 1: I think that we're reaching an end anyhow. I don't know.
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  Speaker 1: I'm not expert enough, but I think we are. We
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  Speaker 1: are nearing the end of what would be a reliable
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  Speaker 1: long-term gas supply that backs up the electricity market.
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  Speaker 2: Bruce, there are some people out there who swear black
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  Speaker 2: and blue that there are huge pockets of gas, and
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  Speaker 2: we know where they are. We just need to get
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  Speaker 2: the drills in the ground and get them out. But
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  Speaker 2: doesn't the fact that Methanex has given up in New Zealand,
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  Speaker 2: and these people have done their due diligence, they'll have
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  Speaker 2: done all the analysis, doesn't that indicate that it's a
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  Speaker 2: vote to say we're not going to get the gas
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  Speaker 2: out of the ground?
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  Speaker 1: Well, I think the comment is correct, that New Zealanders,
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  Speaker 1: they call it gas-prone. So if you drill enough wells,
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  Speaker 1: you'll find gas. The problem is it takes years and
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  Speaker 1: years to develop it, and you spend billions of dollars.
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  Speaker 1: And what you want, before you do that, you want certainty.
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  Speaker 1: What we've taken away from Explorers for Gas is certainty.
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  Speaker 1: When the political parties are saying, even if they find it,
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  Speaker 1: they're going to cancel it again, and... You know, there
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  Speaker 1: is no certainty. So no one's going to invest the
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  Speaker 1: money that you really need to find the gas that
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  Speaker 1: is almost certainly there. But, you know, it's not just
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  Speaker 1: a matter of drilling a hole. It's a long-term program
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  Speaker 1: where you spend lots of money and, you know, there's
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  Speaker 1: a very high likelihood you would be rewarded with a
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  Speaker 1: natural gas supply out of that investment.
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  Speaker 2: Do we still need to build the LNG terminals?
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  Speaker 1: It's a different issue. That's all about electricity, and I'm
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  Speaker 1: probably not very expert on that. LNG is purely to
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  Speaker 1: try and back up peak power demands when we don't
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  Speaker 1: have enough hydro. And as good as solar and wind are,
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  Speaker 1: they don't provide the answer to that. So what we
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  Speaker 1: need to do is find a solution to peaking power.
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  Speaker 1: That's why natural gas is so good at that. Coal
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  Speaker 1: is the next best option, so... I think if we
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  Speaker 1: don't do LNG, we're sentencing ourselves to consuming a lot
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  Speaker 1: more coal for a lot longer.
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  Speaker 2: Yeah, Bruce, it's good to talk to you, mate. Thank
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  Speaker 2: you very much. Bruce Aitken, former president and CEO of Methanex.