Importing LNG to cover New Zealand's shortfall of gas is technically feasible but more challenging than expected, according to two new reports commissioned by five energy companies.
Conventional-scale LNG imports would help meet power demand in years when hydroelectric inflows are low, but the total cost to end users is estimated at NZ$170-210mn/yr ($102-126mn/yr) including costs of $10.12-10.37/MMBtu on a landed basis — or approximately NZ$17.83-18.27/GJ, based on a forward exchange rate of NZ$1.67:$1 — according to reports sponsored by New Zealand utilities Clarus, Contact Energy, Genesis Energy, Meridian Energy, and Mercury.
Major works to establish infrastructure such as port or pipeline upgrades have been estimated at NZ$190mn-1bn, a level of investment that holds risks given uncertainty about the country's future energy mix and need for imports.
Smaller-scale options using existing ports and involving imports from Australia via 15,000m³ vessels could provide an additional 7-10 PJ/yr (187mn-267mn m³/yr) or about one month's supply, but this could cost 25pc more than the large-scale option at about $11.41-11.92/MMBtu, or NZ$20.10-21/GJ .
Smaller-scale LNG infrastructure capital costs could be NZ$140mn-295mn, but securing offtake and a solution for storing imported LNG would need to be finalised first, the study said.
New Zealand's gas supply has plummeted after years of underinvestment in the Taranaki basin, the country's main source. Just 25.93PJ was produced in January-March, down by 19pc on the year, according to government data.
High prices are impacting the production of fertilizers and other industries. Wellington is looking to lure upstream producers via a NZ$200mn co-investment to buy stakes in new gas fields, while also working towards potential LNG import plans.
