SMELLIE SNIFFS THE BREEZE - Ghosts of Thinking Big

SMELLIE SNIFFS THE BREEZE - Ghosts of Thinking Big

By Pattrick Smellie

Sept 25 (BusinessWire) - After a hiatus of almost 30 years, big energy is back.

Big energy and big minerals. It's tempting to call it Think Big, but that would send the wrong signals.

The Key government's targeting of New Zealand's mineral wealth looks far less like a potty idea dreamed up an interventionist Prime Minister than it does a plan to drive some growth in this feeble little economy of ours.

Put aside for a second - but no more than that - the question of what this implies for our national carbon footprint, because that's not a trivial question when the government plans to chase New Zealand's mineral wealth far harder than anyone since Rob Muldoon.

This week's Solid Energy announcement that it wants to make fertiliser from South Island lignite coal makes it a lot clearer why the Key Government is scared to expose new heavy industry to the price of carbon.

For all that Solid Energy says such plant would be "fully carbon-compliant from day one", its proposal to turn great scads of the crappy, crumbly, watery, self-combusting lignite of the lower South Island into synthetic natural gas implies a big jump in the country's total emissions of carbon and nitrogen. The carbon will come from the gasification of coal, while the nitrogen will come from making that gas into fertiliser.

This development is worth billions of dollars and hundreds if not thousands of jobs. Under the government's proposed Emissions Trading Scheme, new carbon and nitrogen-spewing plant would not face an upper limit on emissions growth as long as the plant is working more efficiently than its Australasian peers.

As a new piece of kit, there shouldn't be too much doubt about that.

However, since nitrous oxide already makes up 16% of New Zealand's greenhouse gas emissions and agriculture is going into the ETS one day, the use of nitrogen-based fertiliser is a major challenge.

Equally, however, if New Zealand could stop importing 500,000 tonnes of the stuff annually, export another 750,000 tonnes and make it at home in an efficient, carbon-conscious way, where's the harm?

Farmers are going to use the stuff anyway, and Ravensdown's competitor, Ballance, is already using Taranaki natural gas to make the same kind of fertiliser at one of the original Think Big projects, the privatised Kapuni ammonia urea plant.

So it's hardly experimental technology, even if the highly skilled petrochemical workforce that built Think Big from the late 1970's has become a bit thin on top, let alone thin on the ground.

If you can make nitrogen from a syngas feedstock, you can also make diesel and petrol, although those processes are closely guarded commercial secrets held by Shell, Mobil, and SASOL, the Springboks' principal sponsor.

Lignite is most valuable on a per tonne basis as fertiliser, says Solid's New Energy general manager, Brett Gamble, although the quantities required are too small to do justice to the enormous lignite coalfields of Southland.

Making liquid fuels would also be achievable, partly because of the size of the resource, which is likely to keep growing as the economics of coal gasification improve in line with the long term increase in the price of oil. As oil prices have risen, more expensive extraction techniques, as well as carbon mitigation actions, have become commercially feasible.

The Government then looks at the jobs promise and greater self-sufficiency in a key agricultural input and rightly finds it very hard to turn away, especially in a world that just got more precarious for indebted small nations that rely heavily on reputation to keep their foreign credit lines open.

The minerals chase is an important, but not the only part of a bigger story the government is putting together, and which may have the capacity to capture enough public imagination to create some common purpose.

Another leg of the story is that New Zealand is a "big" country. Federated Farmers chief executive Conor English made an impassioned contribution to public debate this week. He observed what so few New Zealanders realise: this is a big country with a small population, not a small country. Our coastline is that of the continental United States, our landmass that of Britain or Japan, our Exclusive Economic Zone is enormous.

There are bugger all of us about, compared to either Britain or Japan, and we have a lot of good farmland in a world whose population is growing fast and wants more food.

Downsides? We may have too many ports, both ship and air, too much local government, far too many electricity network monopolies, and will always struggle for the scale that makes the US or China such exciting markets where unimaginable riches can be made.

However, if New Zealand can make agriculture crank the handle harder, and that will eventually require farmers to get with the programme and let Fonterra loose with external capital, and the country's mineral and energy wealth is more actively mined, then concrete steps towards the goal of "catching Australia" become visible.

This is the conundrum the Key government faces. It has realised that you have to do real, big things to change a stuck or semi-broken economy like New Zealand's, and that always carries political risk.

If it can find a national narrative that honours farmers while forcing them to accept their responsibilities with respect to climate change; maximises abundant water resources as a national competitive advantage; and embraces the fact that oil has suddenly jumped to being our largest export to Australia and third-largest export earner and there's plenty more where that came from, New Zealand could be onto something.

Pity about the carbon, though.

(BusinessWire)

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