Minister reveals gas industry shakeup

By CHRIS DANIELS energy writer

The Government's review of the gas sector has been unveiled, and the industry is preparing for an electricity-style shakeup.

Energy Minister Pete Hodgson has called for industry self-governance, backed by a threat of official regulation, and a Commerce Commission inquiry into monopoly pricing thrown in for good measure.

Natural Gas Corporation, which owns almost every major gas transmission line in New Zealand, will watch proceedings with interest. It has decided to concentrate its entire business on gas transmission and electricity metering.

Hodgson is asking for a formal inquiry into whether regulatory control should be introduced in the area of gas transmission.

The inquiry, to be run by the Commerce Commission, is predicted to take between 18 and 24 months to complete.

The Government's review is dictated by the rapid depletion of the massive Maui natural gas field and its eventual replacement by several smaller fields.

The Maui pipeline, which runs from Taranaki to south of Auckland, will be opened up to non-Maui gas.

Maui gas, available at very cheap prices, has dominated the gas industry for the past 20 years.

When it runs out, there is likely to be a need for a wholesale gas market. Competing parties will be able to move gas from a variety of new fields to their customers.

Many are also expecting the gas demand to change, as Canadian methanol manufacturer Methanex, which uses more than 40 per cent of all Maui gas, is likely to leave New Zealand.

Echoing the approach taken with the electricity industry, Hodgson said the Government favoured an industry-led solution for the gas sector where possible, but was prepared to use regulations where necessary.

This was reflected by his invitation to the industry to set up a governing body to manage the market and associated rules.

This body must "be representative of all stakeholders" including consumers, with an independent chairman and a majority of independent members, appointed after consultation with the Energy Minister.

Hodgson has assigned this group a number of jobs, including the improvement of arrangement for wholesale gas trading, developing an "open access regime" for all transmission pipelines and developing model contracts for gas consumers.

Hodgson acknowledged the allegations that gas pipeline charges were excessive, but said the issues were not straightforward and that there was room for debate.