NZ govt requests inquiry into gas pipeline profits

Energy Minister Pete Hodgson said earlier this month that he will ask New Zealand’s competition watchdog, the Commerce Commission, to report on whether more regulatory controls should be put on pipeline owners. The inquiry, expected to take up to two years, was a key decision by the centre-left administration after a wide-ranging review started last year with the aim of boosting efficiency in the gas industry.

Hodgson said that though some commentators believed pipeline owners were charging monopoly rents, pricing issues were complex and open to debate. “A formal inquiry by the Commerce Commission … offers the best way of dealing with the various monopoly issues, including appropriate asset valuation,” Hodgson is quoted as having said in a statement.

There are two main pipeline systems in New Zealand. The Maui link from Taranaki to Huntly transports gas produced under Maui gas contracts, and the Natural Gas Corp network of over 2,300km of pipes which through much of the North Island. A report commissioned last year as part of the review identified a widening gap between prices at the gasfield and those charged to consumers. The ACIL Consulting report said the ratio between home and industrial tariffs and wellhead prices was “much higher” than in the United States or Australia.

Natural gas currently supplies 30% of primary energy in New Zealand. 77% of gas production in 2000 came from the Maui field. About 36% of gas is for electricity generation, 44% is used for making methanol, and 14% goes to industrial and commercial use; only 2.5% is for domestic consumption. It is understood that, as expected, the government will drive for gas from fields other than Maui, reserves of which are depleting, to be allowed to be transported in the Maui pipeline.

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