Vector unveils fuel-import plan

Plans to build a "virtual pipeline" of tankers shipping compressed natural gas (CNG) across the Tasman have been unveiled by the energy network company Vector.

Huge new gas fields in Papua New Guinea are being brought into production in the next few years and New Zealand is seen as a perfect customer because it needs to replace the depleting Maui gas field.

As well, big electricity generators Contact and Genesis are well advanced on plans to import liquefied natural gas (LNG) to fuel their power stations past 2010.

Michael Cummings, acting divisional CEO of gas for Vector, outlined plans for CNG yesterday at a national power conference in Auckland, saying the fuel could provide the "optimum outcome" for New Zealand, since it did not require customers to bring in the huge quantities that LNG needed.

Prices would be higher than gas found locally, but cheaper than importing it in the liquid form.

Vector last year joined forces with oil and gas company Oil Search to look into the idea, which would plug New Zealand into pipelines arriving at Gladstone, on the Queensland coast.

The news about CNG is the first public sign of an international gas development from Vector, which partially privatised and floated on the stock exchange last year.

Since it bought NGC last year, Vector has become New Zealand's largest gas transmission and distribution company and is the third largest wholesaler of natural gas. Vector's partner in the CNG study, Oil Search, is incorporated in Papua New Guinea. Listed on the Australian and Port Moresby stock exchanges, it owns 70 per cent of the country's oil reserves and more than half its gas reserves.

Oil Search is not talking exclusively with Vector and has been in discussions with Todd Energy, Genesis and Contact. The PNG Government is the major shareholder in Oil Search, which has a market capitalisation approaching US$3 billion ($4.5 billion).

Its website says that it is talking to "a number of potential buyers with a view to signing indicative terms agreements in 2006, in order to progress the project".

One supporter of importing gas is Contact Energy chief executive David Hunt, who told the conference that proven gas reserves were not enough to meet existing demand by the end of this decade, let alone new stations.

Responding to criticism that importing gas would be an unnecessary demand on a creaking balance of payments, Hunt said that at $400 million a year, the planned gas imports would cost about the same as the country's imports of cosmetics.


Compressed natural gas

* An emerging technology
* Would be brought to NZ in ships.
* Can be piped straight into the national grid.
 
Liquefied natural gas

* Would also be shipped to NZ.
* Needs to be converted back into gas at a plant before it can be put in the national system.
* There is a large world market in LNG but the price is rising due to the oil price.