New Zealand looks to Australian LNG imports

JUST A MONTH after the New Zealand government launched a nation-wide review of its gas policies and energy security, it has begun seeking proposals for new LNG import terminals to obtain gas from Australia.
New Zealand looks to Australian LNG imports New Zealand looks to Australian LNG imports New Zealand looks to Australian LNG imports New Zealand looks to Australian LNG imports New Zealand looks to Australian LNG imports

Paul Hunt

Senior Journalist: Energy & Commodities

Paul Hunt

In January, Energy News revealed that the gas industry body and co-regulator, Gas Industry Co (GIC), would conduct an "investigation of the security and certainty of gas supply" at the request of New Zealand energy minister Megan Woods.

This week the GIC began requesting proposals for importing LNG to meet a significant supply glut in the New Zealand gas market.

The oil and gas lobby group - Petroleum Exploration & Production Association of New Zealand - has condemned the call for proposals of LNG import terminals, calling it "crazy."

"It means we'd be funding the Australian economic recovery instead of generating the jobs and royalties here in New Zealand," PEPANZ chief John Carnegie said.

"If we're going to keep using natural gas until at least 2050, as the Climate Change Commission [of New Zealand] acknowledges, surely it's better to produce it locally."

The move to find proposals to build LNG import infrastructure comes just a week after one of the biggest chemical manufacturers in the country announced it would close a major plant costing hundreds of jobs.

Methanex NZ will close its methanol plant in Waitara Valley, New Plymouth, due to insecure gas supply.

Methanex uses nearly half of New Zealand's gas production to create methanol at its plant.

The company said it was preparing to make redundancies at its Waitara Valley plant but would keep two other plants operational for now.

New Plymouth mayor Neil Holdom called the closure "inevitable" given the New Zealand government's decision to "end the oil and gas industry."

Three years ago, the Jacinda Ardern-led Labour government abolished new offshore gas exploration permits and limited new gas extraction permits to the onshore Taranaki Basin, a move condemned by industry peak bodies and the opposition.

Since the government introduced the bans, major oil and gas companies have left the jurisdiction citing business insecurity.

Most recently Beach Energy surrendered three permits in the offshore South Island. 

Beach's decision came just weeks after OMV surrendered its permits, though it still operates the Pohokura field but will divest that eventually.

Even before the bans came into place supermajors Shell and Anadarko left Kiwi waters, with Austrian OMV taking Shell's portfolio.

This lack of exploration and production investment, and subsequent lack of new gas supply, has only been exacerbated by an unexpected fall in production at the Pohokura field - the largest gas field in New Zealand.

Production from the offshore Pohokura field - which provides over a third of gas supply - has been declining faster than expected and left the market short of supply during unexpected shutdowns.

The GIC noted production from Pohokura had fallen from 200TJ per day at its peak to about 130TJ/d, currently.

This caused wholesale electricity prices to skyrocket well above $100/MWh with pumped hydro storage unable to keep up with demand.

Operator OMV has attempted to extend its field by installing a massive compressor to increase production and reach deep reserves, however this is only expected to secure more supply for two years.

The GIC inquiry into gas security is expected to be pubished in the coming weeks.