High power prices to persist as gas shutdown continues
High power prices may persist for another month with full production from the Pohokura gas field not expected to resume before late November.
Output from the offshore field, the country’s biggest, was reduced about three weeks ago after the venture discovered a shutdown valve on the project’s offshore production platform was not operating as designed.
The shutdown, coupled with falling hydro storage, pushed wholesale electricity prices to a 13-month high this week and has seen Genesis Energy ramp up production from its dual-fuel Rankine units at Huntly.
Operator Shell said a replacement valve has been tested and prepared for installation, while plans for its installation are being developed. The firm is also advancing work to replace a section of the flexible pipeline that brings the field’s gas and condensate to shore.
“The current forecast is that Pohokura offshore production will not resume before late November when both valve and section replacement work is complete,” Shell said. “It is currently anticipated that offshore production will resume at unrestricted rates at this time.”
Pohokura is owned by Shell, OMV and Todd Energy. It typically delivers more than 70 PJ of gas annually from five offshore wells and three wells drilled from onshore. Output from the onshore wells is unaffected.
Earlier this year the venture halted production from the platform while suspected leaks in the pipeline were investigated.
Wholesale power prices averaged $290 a megawatt-hour at Otahuhu on Tuesday when modest wind generation compounded the impact of the reduced gas supply and declining hydro storage. That was up from about $102/MWh at the end of September.
National hydro storage been relatively static in recent weeks – when usually it would be rising with the spring melt. It is now about 21 percent below average for this time of year, according to NZX Energy data.
Snow pack in Meridian Energy’s Waitaki catchment is about average for mid-October, but storage at Manapouri and Pukaki is below average.
NIWA last week forecast average temperatures for much of the country through to December, but normal to below-normal rainfall.
On Wednesday, Genesis noted the “material change” in the power and fuel markets in recent weeks due to declining hydro storage, the drier outlook, and the Pohokura shutdown. Increased international coal prices and a falling exchange rate were also having an impact, it said.
“This has resulted in elevated wholesale electricity and gas prices which has led to hydro conservation, and Genesis being called on to support the gas and electricity markets with our flexible, dual-fuelled thermal assets.”
Newsroom is powered by the generosity of readers like you, who support our mission to produce fearless, independent and provocative journalism.