Ballance Agri-Nutrients Kāpuni plant may need to temporarily close. Photo: 123RF
One of the country's biggest fertiliser plants may temporarily shut due to concerns about its gas supply.
Ballance Agri-Nutrients said its Kāpuni plant might have to temporarily close, with a significant impact on jobs, if an affordable gas supply, needed in production and as an ingredient in their fertiliser, could not be secured.
Last month the company ended its manufacturing operations in Mount Manganui, resulting in 60 job losses.
Chief executive Kelvin Wickham said they would they pay the plant's workers during any hiatus, which they say might last up to four months.
"We've got about 120 people on site. If we have to go into a short-term shut down we want to keep them all fully employed."
He said workers would be maintaining the plant to ensure it was ready for operatios at the end of a shut down period.
They would be importing fertiliser to cover any shortfalls, he said.
Wickham said the business was planning for a range of eventualities and working to keep options open should it not secure gas before its current contract ends on 30 September.
"While New Zealand's gas market is dynamic, the increasing pace of declining gas supply and the impact of this on price will continue to pose challenges for the energy sector and for New Zealand. Although we remain optimistic about securing short-term supply, we're also pragmatic and planning for other outcomes. Right now, it's prudent to plan for a short-term shutdown.
"We recognise the significant impact even a short-term shutdown would have on our employees, shareholders, the wider agricultural sector and the Taranaki regional economy," he said.
"Like many businesses we're impacted by dwindling New Zealand gas supplies.
"We've been working hard to secure a reliable gas supply agreement at a price that is affordable for the business and our shareholders as New Zealand farmers and growers.
"Our current gas supply agreement expires at the end of September and without a reliable and affordable supply, we are unable to keep the plant operational."
The Kāpuni urea plant, operational since 1982 and employing around 120 people, manufactures about a third or 260,000 tonnes of New Zealand's urea annually, specifically for use as a nitrogen-rich fertiliser.
GasNZ declined to comment.
Len Houwers of the Major Gas Users Group said there had been a significant lack of investment since 2018.
Many in-field gas developments had not been as successful as expected.
"Instead of replacing reserves from wells that normally would have been expected to produce… they all had very disappointing outcomes.
"People weren't expecting to invest in further drilling for a while. So with declining reserves and gas fields you end up with a supply crunch. On top of that we had a couple of dry winters that called on thermal generation to provide electricity security."
He said electricity generators outbid industrial customers looking for gas.
"Contact had bought essentially the gas supply going to Ballance from October 1. Basically Contact outbid Ballance for the supply they already had."
He said the gentailers could afford to pay more than industrial users.
"Industrials that are export exposed have to compete with imported urea and there's a ceiling on the price that's sensible for them because beyond a point it makes more sense to import the product."
Houwers said New Zealand was not short of gas as much as it was short of investment confidence.
"If you're faced with a multi-decade investment programme but you don't have political consensus on what the role of gas is and whether it's valuable or not, you won't get parties coming here and investing, putting their capital at risk in case the government changes again or someone stands up and makes another captain's call on what we do with our natural resources. That's been chilling in terms of investment."
He said there was a significant cost to shift from gas supplies to electricity.
"We haven't really got clarity as a nation in terms of what energy means for our economy and no political consensus about how to develop that going forward."
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