'Disaster' warning on gas imports

By BRIAN FALLOW

Meridian Energy chief executive Keith Turner has stepped up his attack on rival generators' proposals to import liquefied natural gas, saying it could take New Zealand down a path to economic and social disaster.

Genesis Energy and Contact Energy, which have large investments in gas-fired generation, are looking at importing LNG as a backstop option if new gas fields are not found fairly soon. Even with the development of the Pohokura and Kupe natural gas fields and the likely end of petrochemical production by Methanex, they say the exhaustion of the giant Maui field will leave a widening gap between gas demand and supply from 2008.

But in a speech to Wellington Rotarians yesterday, Turner said relying on imported LNG for electricity generation put the country at risk of a repeat of the oil shocks of the 1970s, which he said were directly linked to the social pain of the 1980s economic reforms.

"Having built up a massive reliance - one could almost say addiction - to a cheap imported fuel, we suffered huge upheaval and dislocation when that fuel suddenly became very expensive.

"What made it expensive were major, powerful economic and geopolitical forces over which we had no control. This is exactly the scenario we are setting ourselves up for if we go down the imported LNG path."


Turner accused the proponents of LNG of running a campaign of misinformation about the cost and reliability of renewable energy sources such as wind and hydro.

"There is enough wind and hydro power to provide secure supply for the next 15 years at a price well below coal or LNG," he said.

But Genesis chief executive Murray Jackson said if Turner was claiming "wind and hydro can be done cheaper than LNG, that doesn't conform with our assessment".

Genesis and Contact say gas from imported LNG could be delivered to Auckland for between $6.50 and $7.50 a gigajoule and that electricity generated from it in a modern, combined-cycle plant would cost between 6.8c and 7.5c a kilowatt/hour, excluding any future carbon tax.

"We can't get wind power costs down below that," Jackson said.

Turner told the Rotarians: "If you think prices have risen steeply lately, that is nothing compared with what could happen if electricity prices were based on an imported fuel and access was disrupted in some way."

But Contact spokesman Pattrick Smellie said the lesson of the oil shocks was that "people want security of supply and that can be achieved by exploiting a number of energy sources and spreading your risks that way".

Two dry years in the past four suggested that New Zealand should be spreading risk away from too much reliance on renewables.

"We haven't shied away from the fact that this is an imported fuel and there are exchange rate and global market issues to manage," Smellie said.

"But we are not saying the whole country should switch to LNG. Rather, we have come up with a size of plant that ensured the domestic gas industry continued to thrive.

"If Meridian knows of some way to replace Maui with wind farms at economic prices in a way which is not going to cause community uproar, that would be fantastic. We are just not terribly sure it can be done."

Power games

* Generators Genesis and Contact face a shortage of natural gas from the end of the decade.

* They say imported liquefied natural gas could be a viable fuel for electricity generation. They portray it as a backstop option in case not enough New Zealand gas is found.

* But Meridian, which produces hydro and wind power, says these will be cheaper and, if properly integrated, will deliver security of supply as well.