Only ‘minor work’ needed to import LNG, says Port of Taranaki boss

Friday, 1 November 2024

Liquified natural gas could be imported without a major investment in an onshore import terminal and despite the west coast’s challenging weather, Port of Taranaki chief executive Simon Craddock says.

It has frequently been assumed importing LNG would require many hundreds of millions of dollars of up-front investment.

But Craddock said LNG could be imported at low-cost with “only minor onshore infrastructure work” by making use of a specialised ship called a floating storage regasification unit.

However, while the investment bar on importing LNG may be lower than feared, speculation has emerged that coordinating an industry plan to import gas is proving more complicated than initially envisaged.

An industry source said one difficulty building a business case for LNG imports was that it would always be worthwhile for the country’s largest gas user, methanol-maker Methanex, to shed production and on-sell its gas supply at any price above which importing LNG would be profitable.

Energy ministers Simeon Brown and Shane Jones announced in August that the Government planned to help facilitate imports of LNG as a key plank in their response to what was described as a winter “energy crunch”.

Their goal has been to alleviate a shortage in domestic gas supplies that this winter resulted in factories closing and higher electricity prices.

The Gas Industry Company, a quasi regulatory body, is understood to be leading the attempt to coordinate the necessary investment.

Brown and Jones were due to report back to Cabinet by yesterday on ways the Government could assist.

A spokesperson for Brown told The Post on Tuesday that work was still ongoing and announcements would be made “in due course”.

Craddock said Port Taranaki had made it clear it was interested in providing the infrastructure for LNG imports and spoken with “key players in the energy industry and with Government”.

It is understood the cheapest way of importing LNG would be to make use of a floating storage regasification unit (FSRU) that would periodically visit the port along with a tanker carrying liquid LNG to convert that into a gas and pipe it ashore.

“Under that scenario, the port would receive infrequent and small packages of LNG, with an FSRU coming to port for those transfers,” Craddock said.

“In the short to medium term, floating regasification is likely to provide a quick solution to meet dry-year cover and add resilience to the energy system,” he said.

“We believe Port Taranaki is well-placed to provide a low-cost, high-capability solution.”

But he cautioned the commercial considerations were “complex and much broader than the physical infrastructure and connection point”.

“It will be for those involved in the energy market to decide if and when investment is made,” he said.

There has been speculation the weather in Taranaki might complicate the task of using its port to import LNG, but Craddock indicated that was not a show-stopper.

“Because of its west coast location, Port Taranaki is exposed to long period wave (LPW) events and strong winds. To manage this, the port deploys additional ship’s lines and dynamic mooring system ShoreTension,” he said.

“We would manage visits around LPW events.

“As we do for any other vessels, should there be an LPW while the tanker and FSRU are in port, we would assess whether the vessels need to leave the port and anchor offshore.”

Josh Adams, a spokesperson for the Major Gas Users Group, which represents most of the largest industrial users of gas, said its members would be closely watching what happened to gas prices over the next few days as Methanex brought one of its Motunui plants back online.

The plant would usually consume about 20% of the country’s natural gas but closed temporarily in August to free-up gas for electricity generators and other gas users.

Methanex has since confirmed it will indefinitely mothball its other plant at Motunui, which had been idle since March due to the difficulty of securing sufficient gas.

The later August closure and strong inflows into hydro lakes in September resulted in the spot market price of gas crashing from its winter high of about $55 a gigajoule to between $5/GJ and $10/GJ over the past few several weeks.

Prices collapsed to just $2.95/GJ on Wednesday.

Adams expected gas prices would “bump back again to something above $10 or $12” once Methanex restarted production, but said the bigger concern was what would happen to prices next winter.

“The price of gas could be very expensive – more expensive than we have seen for a long time,” he said.

“I couldn't put a number on it, but things got as high as $50/GJ this past winter and you could easily see similar prices, but maybe a little bit more sustained.”