Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century Mining to Keep the Home Fires Burning - NZ's Energy in the 21st Century

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 2 NZ has enjoyed some of the cheapest energy of any OECD country over the past decades:  Cheap Maui Gas  Plentiful hydro

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 3 NZ Energy Supply and Use

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 4 NZ is Facing an Energy Crunch! - resulting from:  Demise of Maui Gas

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 5 NZ is Facing an Energy Crunch! - resulting from:  Demise of Maui Gas  Oil at $US60/bbl and beyond

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 6 Oil beyond US$60/bbl?

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 7 NZ is Facing an Energy Crunch! - resulting from:  Demise of Maui Gas  Oil at $US60/bbl and beyond  Hydro capacity being pushed

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 8 NZ is Facing an Energy Crunch! - resulting from:  Demise of Maui Gas  Oil at $US60/bbl and beyond  Hydro capacity being pushed  Insufficient Capital Investment Electricity consumption in New Zealand, 1947–2002 Source: New Zealand Official Yearbook, 1947–2002

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 9 NZ is Facing an Energy Crunch! - resulting from:  Demise of Maui Gas  Oil at $US60/bbl and beyond  Hydro capacity being pushed  Insufficient Capital Investment  Distorted thinking

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 10 Distorted thinking:  Results from poor or lacking information  We will find more cheap gas - convert it to electricity rather than reticulate it  Gas is clean -perhaps comparatively but still a fossil fuel that produces GHG  Coal is dirty - coal is a fossil fuel along with gas and oil  LNG will save us  NIMBY and BANANA  No nukes – the dangers of not going nuclear  Green Alternatives will save us  Hot air: Wind will save us  Groupthink?

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 11 Wind will save us:

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 12

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 13 The Outcomes:  Price increases  Shortages

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 14 The Outcomes:  brown outs

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 15 The Outcomes:  price increases  Shortages  brown outs  black outs

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 16 FFocused thinking

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 17 The Outcomes:  Price increases  Shortages  Recession

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 18 NZ’s Energy Sources

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 19 What has lead to the crunch? Oil:  Oil at $US60/bbl and beyond  depletion of world reserves  profligate use  emerging consumers

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 20 What has lead to the crunch? Maui Gas:  Too cheap  Take or pay  - Methanex 20%  - Electricity Generation 40%  - Huntly coal mine mouth generator run on 70% gas!!!

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 21 What has lead to the crunch? Electricity capacity:  Hydro capacity being pushed to limit  Insufficient investment in new generation  Current economic model failing (SOE’s)  Lack of responsibility for security of supply  No independent generators  Thermal coal supply inflexible  1.25 Million tpa import to Huntly!!

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 22 What can NZ do? Gas  price properly  develop / find more  reticulate and use directly

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 23 What about Coal?

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 24 Coal Coal kick started the industrial revolution - It can provide the transition to post oil and gas

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 25 NZ Coalfields Sub Bituminous 870Mt (18,000PJ) Bituminous 340Mt (9,000PJ) Lignite 7500Mt (110,000PJ) (NZ Consumption 750PJ/yr 2007)

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 26 What about the Cost of Coal? Estimated Cost of Mining North Island Thermal Coal Cost *NZ2006$ Rotowaro Callaghans OC3.7$/GJ Rotowaro Pukemiro OC3.9$/GJ Mokau OC4.3$/GJ * Maramarua OC4.5$/GJ Huntly West UG5.2$/GJ Ohinewai OC5.4$/GJ Maramarua UG5.8$/GJ Kawhia East UG5.9$/GJ Kawhia West UG6.3$/GJ Mokau UG7.0$/GJ Tihiroa UG7.1$/GJ Note * Estimated average discounted cost NZ$2006 of mining coal at a rate of 800,00tpa for at least 10 years, to mine gate after tax, excluding GST at a discount rate of 10% OC- opencast UG – underground

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 27 What about Pollution? Coal as a Fuel or as a Raw Material Don’t burn coal – refine it C + H 2 O + heat = CO + H 2

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 28 Fossil Fuels Price and Carbon Content (per GigaJoule) Coal Crude Oil Natural Gas Price NZ$/ GJ %150%100% Carbon Kg / GJ %143%100%

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 29 Global Warming - A theory Global or Urban warming! Effects: 1841 Ross Benchmark:

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 30 What about Environmental Costs? 2004 Cost of Generating UK Electricity from various fuels and new plant NZ¢/kWh NuclearGas CCGT Coal Pulverised Coal Fluidised Bed Wind Onshore Wind Offshore Basic Cost With CO2 $315/t * With CO2 $15/t (JPA) With Back-up Note NZ$=.35GBP, * A very high CO2 tax had been assumed in original work Source: The Costs of Generating Electricity, Royal Academy of Engineering, 2004

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 31 What can we as Mining Professionals do?  Encourage responsible investment in energy  Promote informed decision making  Encourage new techniques for utilising our natural resources including coal

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 32 What can we in NZ do?  Become better informed  Conserve  lobby for shrewd use and investment  Lifestyle  Be more efficient - insulate - heat pumps - gas for heating -  solar space heating or water heating

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 33 Solar

Ashby Consultants Ltd Mining to Keep the Home Fires Burning – NZ’s Energy in the 21st Century 34 Private Coal