Contact chief executive Steve Barrett and Genesis chief executive Murray Jackson told a Wellington media conference this morning that their joint study had established that LNG was viable for New Zealand.
With the likely loss of the Maui field, which produced about 66% of New Zealand's gas needs, in 2008-09, the country needed more certainty on fuel replacements, they said.
"The rundown of Maui and increasing demand for energy threatens to put New Zealand into energy deficit . . . from the study, we now know liquefied natural gas is a feasible and practical option for meeting the looming gap in New Zealand's energy supply,” they said in a statement.
The men reiterated their preference for indigenous gas, although they conceded new gas was unlikely to fill the gap, given the present rate of exploration. "Our clear preference is for sufficient new sources of New Zealand natural gas to be discovered and brought to market.”
Both companies had recently initiated measures to accelerate domestic gas exploration, but they said it would not be prudent in the meantime to rely on new gas discoveries to meet future demand.
Barrett said the likely delivered cost of LNG would be NZ$6.50-7.50 per gigajoule - prices which were “within striking distance” of the expected cost of post-Maui gas from indigenous sources.
Jackson said a 50-60PJ per annum receiving and regasification facility - probably at either Marsden Point or Port Taranaki - should not adversely affect local gas exploration.
Even if the domestic market could produce an additional 60-80PJ of new gas “we will still need to import LNG; there’s plenty of room for both gas and LNG,” Jackson said, referring to fears that LNG will crowd out indigenous gas and stifle domestic exploration.
An initial 60PJ LNG facility would be able to meet about half this country’s gas needs. If domestic gas supply was “severely constrained” then a 120PJ facility could meet all of New Zealand’s requirements. A 60PJ facility and infrastructure, costing NZ$550-600 million, could be built within three years.
Barrett said New Zealand had to concentrate on cost-effective renewables, maximise indigenous gas and consider switching to LNG before the end of the decade.
The long-run marginal cost of electricity from an Auckland combined cycle power station fired on imported gas (LNG) would be about 6.8c-7.5c per kilowatt-hour, excluding any future carbon charges.
Jackson said such developments as Pohokura and Kupe “are only just managing to keep up with existing gas demand” and did not take into account New Zealand’s continued economic growth and increased electricity usage (over 2% per annum).
The men said the next phase - to identify the best site for a LNG receiving terminal and gas transmission route, as well as starting detailed development plans - was already underway and should be completed within a year.
Contact and Genesis Energy - which together account for 95% of the gas used in electricity generation and supplied to retail and industrial customers - commissioned their LNG feasibility study in October 2003.
