Warning on LNG imports

Imported liquefied natural gas (LNG) will make New Zealand dependent on foreign supply, says an independent study on thermal energy needs.

The year-long study by the Canterbury-based Centre for Advanced Engineering found an upturn in gas exploration has had some initial success but warns against plans to import LNG as a substitute for indigenous reserves.

Centre executive director George Hooper said the study was the first fully independent assessment of thermal energy supply and demand.

It looked at all major thermal fuel options - indigenous gas, imported gas, coal, coal-seam gas and various petroleum gas distillates.

Hooper said the forecast decline in the giant Maui gas field offered an opportunity for energy exploration which could avoid the need to import thermal fuels.

Cheap Maui gas had been used to produce up to 30 per cent of the country's electricity needs for the past 25 years.

"With the rundown of the Maui field, the energy sector now faces a difficult transition to alternative fuel sources, raising concerns about economic competitiveness, environmental outcomes and costs for consumers," Hooper said.

"The key difference between the Maui era and now is that the remaining thermal reserves are low relative to our rate of consumption.

"The situation has given upstream companies a much improved business case for investment and exploration."

The survey forecasts a supply gap in indigenous natural gas from about 2012 unless new discoveries are made. 

It says an early commitment to imported LNG will discourage new prospecting.

The centre estimates a likely LNG price in the region of $8.70/GJ (gigajoule), based on a dollar at 55USc and oil at around US$30 a barrel.

"We should be extremely wary about what bringing in higher-cost fuels will mean for New Zealand's energy security in the long term.

"If LNG is established, we will continue to be over-dependent on one type of thermal fuel, just as we have been with Maui gas."

- NZPA