$140m investment could allow LNG imports, but plans still on drawing board

Thursday, 10 July 2025

Energy companies have concluded the country could build the infrastructure it needed to import liquefied natural gas from overseas for an investment of only $140m to $295 million.

In 2003, Contact Energy and Genesis Energy estimated the cost of establishing a full-scale import facility at between $550m and $600m.

But almost a year after ministers signalled the Government was ready to help pave the way for imports to prevent future energy crunches, the ideas on how to do so still remain on the drawing board.

The spectre of government intervention in the gas market came after dwindling domestic natural gas supplies contributed to a spike in the price of both gas and electricity that resulted in some factories closing down or cutting back production.

Former energy minister Simeon Brown indicated last year that he expected a facility would be in place by winter next year, when power supplies are now next expected to be tight.

However, power companies including Genesis Energy appear to be increasingly leaning on coal to plug gaps in renewable electricity generation.

Commentary released today by the country’s four major power generators, Contact, Genesis, Meridian and Mercury, and gas company Clarus, confirmed speculation there had been only limited progress on the LNG concept since the Government’s statement last year.

The companies said in a joint statement that studies conducted between September and May showed importing LNG might be technically feasible but “more challenging than anticipated” and indicated support from the Government would be required.

Clarus chief executive Paul Goodeve told The Post the nature of that possible support was currently being discussed with the Government and “could take many forms”.

That included “providing financial support to develop the required facilities”, legislating consents for an LNG facility or changing energy sector regulations to better support security-of-supply options such as LNG, he said.

The cheapest option in terms of upfront costs would be to shuttle LNG from Australia to Port Taranaki in ships about the tenth of the size of conventional LNG carriers they said.

That would probably involve an upfront investment of between $140m and $295m, depending on how much onshore storage was built, and would allow energy companies to import about a month’s worth of the country’s annual gas demand each year in the form of LNG at a cost of about $20 a gigajoule.

Several issues would need to be addressed including securing interest from existing sellers to supply “a relatively small volume of gas”, they said.

A “conventional” solution that would allow gas to be imported in higher volumes to support the energy market through a “dry winter” could cost between $190m and $1b upfront, depending on the location and technology used.

That would be “a significant investment given the uncertainty around how often LNG imports would be needed”, they said.

The capital and operational costs of “port upgrades, regasification systems and storage” had been estimated at an additional $170m to $210 million a year, they said.

However, the ongoing cost of LNG at the port would be a bit lower at about $18/GJ.

Natural gas was trading on the spot market at $15.51/GJ on Wednesday but spiked as high as $55/GJ in mid-August and fell as low as $7/GJ the following month.

In recent years, the spot price of gas has been highly dependent on whether Canadian-owned chemical company Methanex is at full production, or freeing up its gas supply to on-sell to other customers.

Sources suggested the Government last year agreed to buy gas at a price of between $24/GJ and $30/GJ, excluding delivery, under an all-of-government contract, to supply the likes of schools, hospitals and prisons.