Genesis Energy and Contact Energy made the long-awaited announcement this morning, saying the selection of Port Taranaki as the preferred site for an LNG import terminal was all about preserving future options.
In a joint statement, Contact chief executive David Baldwin and Genesis CEO Murray Jackson said the companies would soon start the process of obtaining all the necessary resource approvals for a possible LNG import terminal at the Port Taranaki site later this decade.
Jackson said Port Taranaki had been selected as the preferred site - ahead of the other contender, Marsden Point in Northland - because of the Taranaki region's world-class experience in handling natural gas and hydrocarbons, its deepwater port and its existing natural gas distribution infrastructure.
"New Plymouth is regarded as New Zealand's energy capital for a very good reason.
"The residents understand energy and the importance of New Plymouth as a national energy hub to both the local and national economy," Jackson said.
He added that in the event of a future gas shortage, the LNG option could provide New Zealand with a secure and safe supply of natural gas until new domestic discoveries were made and brought to market.
The proposed terminal would involve a new purpose-built berth at the end of the main breakwater inside the port, with the LNG being piped alongside the breakwater and stored in a new tank at Contact's New Plymouth power station.
Baldwin reiterated the companies' preference for using indigenous gas.
"Both Contact and Genesis Energy have a strong preference to use domestic natural gas," he said.
"This announcement of a potential site for an import terminal is all about preserving future options. It is simply prudent commercial risk management."
The companies - New Zealand's largest gas users - have previously said any LNG project, including berthing, storage and regasification facilities, could cost about $NZ500 million ($A442 million).
Once regasified, LNG gas could easily be piped into the nearby Maui pipeline for transportation north or into the Vector network for distribution south.
Most LNG would be used in the companies' gas-fired power stations in Taranaki, Waikato and Auckland.
The firms believe they can import LNG - about 50-60 petajoules per annum or just under half the country's annual gas usage - at an estimated price of $NZ6.50-7.50 per gigajoule. Only a dozen or so shipments per year, probably from Australia or Indonesia, would be needed.
They have also said they intend deferring making the actual decision to import LNG, probably until at least 2008-09, with any importation not starting until 2010-13.
The two companies have signed a memorandum of understanding and created a new joint venture company, Gasbridge, that will run a community consultation process on the proposal and manage the resource consenting process.
"While this announcement is simply about developing a future option, it is important that residents understand the proposal - in particular that LNG is safe and that any future import terminal would meet very high international safety standards," Jackson added.
It is known Port Taranaki had been the frontrunner since May, with its ambitious $NZ100 million expansion plan aimed at winning any LNG trade.
New Zealand faces a potential gas supply shortfall later this decade because of declining production from the offshore Taranaki Maui gas-condensate field, even though first gas from the smaller near-shore Taranaki Pohokura field is now flowing and the more southern Kupe field is scheduled to start in the first half of 2009.
