Energy crisis: Feasibility study under way on importing LNG, says Energy Minister

Wednesday, 7 August 2024

Imported gas could be piped to customers from early next year, and trucked in sooner at higher cost, sources suggest.

Work has kicked off to investigate the feasibility of importing liquified natural gas to New Zealand to combat the country’s unfolding energy crisis, Energy Minister Simeon Brown has announced.

Brown told Parliament that he met with representatives from the country’s four largest electricity generators on Wednesday and the message was “incredibly clear”.

“New Zealand needs more natural gas supply to secure confidence in our energy security,” he said.

Gas is used both directly as a fuel for industry and to generate electricity to meet peak-time electricity demand.

Simeon Brown says turning to imports would be “a significant thing”.

The Gas Industry Company, which works with industry and the Government to regulate the gas sector, was looking at the feasibility of importing LNG to improve gas supply “in the short to medium term”, Brown said.

It is understood LNG could potentially be shipped into Marsden Point or a gas pipeline offshore from Taranaki and then piped to customers by early next year at prices below that they are currently paying for New Zealand produced natural gas.

It could also be imported in a containerised form and trucked to customers sooner than that, but at a higher cost than a piped supply.

Brown said importing LNG was “a significant thing to have to be investigating as a country”.

Cabinet was briefed on the work programme on Monday.

“We must keep the lights on. We must support our industries,” he said.

The Gas Industry Company was also investigating how to increase investment in so-called “gas peakers” which can be used to burn gas to generate electricity at short notice, he said.

New Zealanders were now paying “the highest electricity prices in the western world”, with the wholesale price of electricity at one point spiking above $1700 a megawatt-hour on Wednesday morning, Brown told Parliament.

That is about 20 times the normal cost of producing electricity from solar farms or wind farms, assuming they can be used at capacity and not just to meet occasional periods of peak demand.

Brown noted several hundred jobs had been threatened this week at Oji Fibre Solutions’ Penrose Pulp Mill and Winstone’s pulp and timber mills in Ohakune, with high electricity prices cited as a factor in both cases.

The risk to those businesses was “devastating for the individuals, the families and the communities that rely upon these large employers”, he said.