Ports vie to build LNG import terminal for under $100m

It would cost as little as $80 million to set up the old refinery dock at Marsden Point to receive liquefied natural gas imports, or up to $180m to built the pipes and connections at Port Taranaki, according to new analysis by consultancy Enerlytica.
It could be even less: Port Taranaki has told ministers it could get underway for about $50m, using existing infrastructure.
The dollar figures are all much lower than those presented last year to the previous government (an unpalatable $140m to $624m) and these new costings create an opportunity welcomed by both ports’ chief executives.
It comes amid energy industry hopes of Government backing for a peaking-generation solution to help the country through future dry winters like this one.
A decision-in-principle on LNG imports is imminent from Energy Minister Simeon Brown. But further work would still be required on how and where to bring in the gas, who would finance the infrastructure, and whether the Government would want to fast-track resource consents.
Meridian Energy, which is 51 percent government-owned, wants to be in the consortium putting together a financial package to make it happen. Even though Meridian’s generation is 100 percent renewable, mainly from South Island hydro dams, it has to hedge for low lake levels by buying gas- and coal-fired electricity from companies like Contact and Genesis.
Is importing gas better than importing dirty Indonesian coal? “Oh, hell yeah,” says chief executive Neal Barclay. “Gas generation produces typically half of the emissions.”
So what the hedging means is that Meridian would be an end user of the imported gas, Barclay tells Newsroom. Like the rest of New Zealand, Meridian has an interest in ensuring this happens.
“At the moment, we’re not producing as much energy out of the hydro lakes as is needed to meet our customer commitments. So we have hedged. And that’s pretty bloody expensive.”
Should the Government have to pay to set up an LNG import terminal and pipeline? “I think the Government’s role in this will be facilitating – maybe some consents if we need to get them through.
“Will it happen? To me, it kind of makes sense. We don’t need gas for baseload because we’re replacing the baseload with renewables, but what we do need is flexibility to ramp up generation of times when the hydro inflows are low, and so having a source of very flexible gas may make sense.”
He says the gas would probably be sourced off the east coast of Australia, so it’s closer and cheaper. And it’s also counter cyclical to the European winter, when demand rises and prices rise.
“So we think that pricing for the product could be in the zone for what we need. The issue we’re working through, as a sector, is where would be the best place for this import facility, and who would be best-placed to invest in it?”
“As an electricity generator that needs to buy hedges from thermal generators, certainly Meridian would like to be part of the consortium that put together a financial package to make this happen.”
Either Port Taranaki or Channel Infrastructure’s import terminal at Marsden Point, near Whangārei, might be set up for a big chartered FSRU (floating storage regasification unit) vessel that would tie up at the dock and gradually pipe its gas ashore as needed, over weeks or months.
The FSRU would be refilled by big tankers, shipping in from Port Kembra in New South Wales, or further afield.
The gas would be unloaded and piped to Contact Energy’s big 377MW TCC plant and adjacent 200MW open-cycle peakers at Stratford, and maybe also to Genesis Energy’s Huntly power plant, which can run on gas or coal, and to a few smaller plants.
Contact had planned to shut down TCC this year – but this week, Contact Energy chief executive Mike Fuge told Newsroom that it may stay open. Analysts will look to the company’s full-year results, to be published on Monday, for confirmation.
Keeping it open is a decision that Kidd backs. “The prospect of losing TCC at the moment is not a good one. We we need as much capacity as we can get in the market. We don’t want to see anything that’s already there exit the market, because it’ll just exacerbate the problems.”
He says the previous government had rushed into its ban on new gas exploration, its 100% renewable target, and its Lake Onslow pumped hydro project. “You know, all well meaning,” he says. “But it really did have the effect of just putting barriers in the way of investment. And I think there’s an extent to which we’re getting what we deserve, at the moment.”
Responding to accusations of “profiteering” by the gentailers, and calls for structural interventions, the big power companies agree the real need is to spend billions building more renewable power plants to support New Zealand’s decarbonisation. But that also entails batteries and gas to get the country through dry winters, overcast days and calm airs.
“Let’s say we really don’t have enough water and we don’t have enough wind and we don’t have enough gas,” says Fuge. “If you want to solve that problem, then you actually have to find more gas and build more power stations, because it’s a supply side issue. Tinkering with the retail market ain’t going to help you.”
Enerlytica consultancy director John Kidd says LNG is effectively NZ$20-25/GJ at present – that’s half the local spot gas prices of around $50/GJ. And it’s also less than the cost of the gas obtained from Methanex, when it paused production this week and sold its gas back to Genesis and Contact for an estimated $135m.
Kidd says Marsden Point would be cheaper to build – closer to the $80m end of the range – but Port Taranaki’s existing berths and Maui pipeline might be more fit-for-purpose.
The New Plymouth option might require an outlay of up to $180m, but the numbers are only indicative at this stage, and would need to be formally scoped and costed by an engineering house as part of any next stage of work.
With offshore gas drilling slowing, and gas exports from Taranaki’s Methanex plant uncertain in the future, the region would welcome a new use for its infrastructure.
Port Taranaki chief executive Simon Craddock says New Plymouth is New Zealand’s premier energy port. “We believe Port Taranaki is best placed to support liquefied natural gas imports,” he tells Newsroom.
“We’ve contacted the Energy Minister Simeon Brown, and gas and electricity industrystakeholders, about developing a solution that utilises our existing tanker terminalinfrastructure and our connectivity to the Maui gas transmission pipeline. We estimate the cost could be within the vicinity of $50 million.”
He believes Port Taranaki can provide a low cost, high capability solution, that can be stoodup quickly to top-up the gas market when it’s needed, helping provide energy security andresilience in periods of low renewable electricity generation.
“The commercial considerations of LNG imports are much broader than the physicalinfrastructure and connection point, but we believe we have the critical elements in place tosupport LNG imports.
Craddock acknowledges there’s a lot to be worked through before a solution is determined, and says the port will continue to engage with the minister, government and industry.
Further north, Channel Infrastructure chief executive Rob Buchanan says its Marsden Point site could be suitable as an LNG import facility, with it’s deep-water harbour, jetty infrastructure and very large industrial site.
“It’s very early days and there is significant work that would need to be done,” he says. “That said, Channel Infrastructure is keen to lean into opportunities to support New Zealand’s energy security.”
Simeon Brown agrees on the need for more gas. He told Newsroom this week the Government was considering a range of options on how to address the country’s energy security.
“New Zealand is experiencing a fuel shortage,” he said. “We do not have enough natural gas to meet demand. That means that our manufacturers and exporters are reducing output.”
Relying more on gas would be an about-turn, after the previous government banned new gas exploration to mitigate climate harm – and there are critics.
David Tong, who leads the global industry campaign for Oil Change International, says top energy analysts in the International Energy Agency concluded last year that the so-called ‘golden age’ of fossil gas is over.
“The countries that are least dependent on international fossil fuel energy have avoided the worst energy price spikes since Russia’s 2022 invasion of Ukraine.
Tong has a particular interest in New Zealand gas and oil, as he’s based in Wellington. He argues New Zealand’s electricity system is suffering primarily from a decade or more of chronic underinvestment in renewable electricity generation.
“Desperately scrambling to secure more gas supply via digging back up the old, uneconomic proposal for an LNG import terminal will just expose Aotearoa to high prices for imported gas – and plainly contradict the objective of the Zero Carbon Act.”
He says there’s no justification for building new oil or gas import infrastructure. He points to independent studies showing that methane leakage in the gas supply chain can, in many cases, make it even worse for the climate than coal.