Future without Maui gas fields biggest challenge - Hodgson

5.00pm

The cancellation of Project Aqua is a blow to New Zealand's future electricity generation, but the biggest energy challenge is facing the future without the Maui gas fields, Energy Minister Pete Hodgson said today.

Speaking at a national energy conference in Auckland, Mr Hodgson rejected criticism that the demise of the South Island hydro scheme posed a threat to New Zealand's energy supply.

"Given that power from Aqua was due to come on progressively from 2009 till 2012, there does not appear to be any good reason to fear that alternatives might not be brought onstream in time," Mr Hodgson said in notes prepared for the speech.

"Rather than causing any immediate problems, the cancellation of Aqua brings about a major realignment further out."

While Project Aqua had "loomed large in the country's energy future", other generation projects that otherwise would not have been viable until the end of the decade would now be brought forward.

It was "patently untrue" that investment in new generation had almost stalled, Mr Hodgson said.

"The total coming on from this year until 2007 is about 840 Megawatts."

Despite Mr Hodgson's positive outlook he said there were "real challenges ahead".

Hydro power's "massive dominance" of New Zealand's electricity supply would gradually be eroded.

Wind and geothermal power would grow but were unlikely to be the main answer to New Zealand's problems.

"Gas has been the main fuel for new thermal generation in the last couple of decades, given the abundant and flexible supply from Maui," Mr Hodgson said.

"Facing the future without Maui is probably the biggest energy challenge ahead of us."

Total known gas reserves might get New Zealand through to 2015.

"But there are no known supplies beyond that, and this is a country that has allowed itself to believe that there was always loads of proven unavailable gas. More exploration is needed."

Mr Hodgson said the Government expected to make decisions creating a "more positive environment for gas exploration" within two months.

- NZPA