LNG Plan Sparks Showdown In Parliament

Amanda
Gillies
Sharon
Brettkelly, co-host of The
Detail

Imported liquified natural gas could be
a stopgap insurance policy against dry years – or an
expensive, dirty fuel that will hit Kiwis in the
pocket

The Government’s proposed
plan to import liquefied natural gas detonated a
political fight this week – not over energy, but over
whether Kiwis are about to be hit with a
new “gas tax”.

“If it looks like a tax and it
quacks like a tax, it’s a tax,” was the echo throughout
parliament, and fiercely debated on talkback
radio.

But behind the rhetoric sits a serious problem:
New Zealand’s domestic gas supply is shrinking, electricity
demand is rising, and officials warn the country risks
shortages without backup fuel.

So imported LNG, most
likely from Australia, is being pitched as that
backup.

The plan would see New Zealand import
super-cooled natural gas, shipped in from overseas, stored
and regasified for use in electricity generation and
industry.

Newsroom senior political reporter
Marc Daalder tells The Detail it’s a proposed stopgap
– insurance against dry years, dwindling gas reserves, and
rising demand.

“Every once in a while, it rains less
than you’d like it to, particularly in autumn and
winter.

“That means our hydro lakes run low, and we
can’t necessarily rely on things like wind, [as] it tends to
be less windy when it’s less rainy; or solar in the winter
when the sun isn’t shining, the sun’s gone down at the time
we have our peak power demand, which is usually around 6 pm
in July or August when people get home and turn on the heat
and start cooking dinner, and suddenly the country’s power
demand spikes.

“So renewables on their own aren’t able
to fill that gap. We burn fossil fuels instead in dry years
… but the problem is that we don’t have quite enough
fossil fuel generation and quite enough supply, particularly
of gas, to be able to reliably access it when you need it in
a dry year.

“And that’s because of the second problem
that’s going on, which is that our gas reserves are
dwindling. They have essentially fallen off a cliff in the
last few years.”

Not for want of trying, he says, with
$1.5 billion spent on drilling 53 different exploration
wells.

“A few of them have had small successes, but
it’s turned out that the big, big fields that we have relied
on for quite a long time have just started coming up
empty.”

He says LNG is more expensive than domestic
gas – about double the price.

“The theory is, on the
government’s part, this is a backstop. The gas is available
if we need it in a dry year, yes it’s more expensive, so it
won’t be used otherwise.”

Daalder warns that,
potentially, LNG could be dirtier than coal.

“There
has been some research recently to suggest when you account
for the emissions that go into producing the gas, into
converting it to LNG, the leakages that occur while it’s
being shipped across the ocean, and then it has to be
regasified, and then distributed around a country like New
Zealand, then actually LNG is potentially as dirty or
dirtier than coal when you take that full supply chain into
account.”

Questions remain

Martin Gummer,
managing director of Optima, which looks at energy
management solutions, tells The Detail that he
largely supports the move, saying gas remains critical for
manufacturing, food processing, and electricity
reliability.

“You’ve got heavy industry, major
manufacturers, steel, wood processors but also a wide
spectrum of intermediate-sized businesses such as food
products,” says Gummer. Schools and hospitals are also big
gas users.

Gummer wrote an open letter to the prime
minister that was published in the NZ Herald last December
which was critical of the government’s handling of the
energy problem and called for an urgent “bold, decisive”
strategy.

As the country fast runs out of natural gas,
Gummer says the LNG announcement won’t address all the
concerns and there are still questions over the date of
opening of a new plant and the price customers pay for the
gas.

“While LNG is not a perfect answer, there is no
perfect answer, it is probably the next best and most
sensible interim step that needs to be taken.”

A
missing part of the jigsaw is a funding stream – or subsidy
– to assist industry to transition to renewable energy
sources.

Check out how to listen to and follow
The Detail here.

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