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Gas Established As Viable Option For NZ

Liquefied Natural Gas Established As Viable Option For New Zealand: Update on Contact Energy and Genesis Energy joint feasibility study

A joint study by Contact Energy Ltd and Genesis Energy into the feasibility of liquefied natural gas (LNG) has established it is a viable backstop fuel option for New Zealand that can provide added security of electricity supply.

Contact Chief Executive Steve Barrett and Genesis Energy Chief Executive Murray Jackson said it was vital that New Zealand had more certainty on fuel replacements after the Maui gas field runs down in 2009.

Maui produces around two thirds of the country’s natural gas and is used to generate around 25 percent of the country’s electricity.

“The rundown of Maui and increasing demand for energy threatens to put New Zealand into energy deficit at the end of this decade. From the study, we now know liquefied natural gas is a feasible and practical option for meeting the looming gap in New Zealand’s energy supply, should new sources of New Zealand natural gas not become available at a pace sufficient to meet demand growth.

“Our clear preference is for sufficient new sources of New Zealand natural gas to be discovered and brought to market.

“Both companies have initiatives underway to accelerate gas exploration in New Zealand.

“However, it would simply not be prudent in the meantime to rely on new gas discoveries to meet future demand.

“Contact and Genesis Energy both operate substantial gas-fired plant and have plans to add substantial, new, energy-efficient gas-fired generation capacity that would help meet New Zealand’s growing demand for electricity.

“If we are to be certain that we can run our existing plant and make timely investments in new plant, we need a backstop option to pursue in case insufficient New Zealand gas is found.

“The development of a liquefied natural gas alternative should not adversely affect local gas exploration, which at the present rate of discovery will not be able to meet the emerging gas gap.”

World-wide, the market for liquefied natural gas is growing. Plentiful supplies can be imported to New Zealand at between $6.50 and $7.50 per gigajoule - prices which are within striking distance of the expected future cost of local New Zealand gas. The required infrastructure could be built within three years.

If liquefied natural gas were required early in the next decade, construction would need to start in the next three to four years, with applications for resource consents required in the near future.

“Contact and Genesis Energy are committed to further work to ensure liquefied natural gas is available as a future option for New Zealand. The consortium is now underway with the next phase which is to identify the best sites for a liquefied natural gas receiving terminal and gas transmission route and commence work on detailed development plans.”

Mr Barrett and Mr Jackson say liquefied natural gas could supplement local gas supplies by meeting around half of the country’s gas needs, or if local supply were severely constrained liquefied natural gas could meet all of New Zealand’s requirements.

“We expect natural gas to play a key role in New Zealand’s future energy market, because of its cost, efficiency and reliability. It is also an environmentally attractive alternative to other fossil fuels such as coal or oil.”

Contact and Genesis Energy announced in October 2003 that they were initiating a joint study to investigate the feasibility of developing a receiving terminal for liquefied natural gas and the economics of importing liquefied natural gas to New Zealand.

The study’s analysis of market trends and pricing for liquefied natural gas (LNG) found that: The delivered cost to Auckland of LNG would be in line with post-Maui gas from indigenous sources, in range of NZ$6.50-7.50 per gigajoule The LNG market is expanding rapidly. There is plentiful supply of LNG available that can more than meet the relatively small volumes, in international terms, that New Zealand will likely require. There would be a number of suppliers who could provide New Zealand with LNG from 2010 onwards. Those supplies would come from either Australia or other locations in relative close proximity to New Zealand. Based on current estimates, an initial project could deliver 50-60 petajoules of supply per year - or around half the country’s gas requirements beyond 2010. Indigenous gas would provide the remainder. The volumes of LNG imported could be scaled up to meet increases in demand or shortfalls in local gas supplies, if required. A LNG receiving terminal and associated pipework would cost an estimated NZ $550-600 million (at a 60-petajoule capacity) and take around three years to construct once resource consents and an LNG supply contract had been secured.

Liquefied natural gas is an established and mature technology with a proven safety record. It is manufactured from natural gas which is super-cooled to minus 161 degrees Celsius to form a liquid which occupies only 1/600th of its original volume so it can be transported by ship at normal atmospheric pressure.

In New Zealand, a liquefied natural gas tanker would dock at port and its cargo would be converted back to natural gas from a super-cold liquid for distribution through the existing natural gas pipe network, along with domestically sourced natural gas.

Liquefied natural gas is the same fuel as the natural gas New Zealand has used for over 40 years. As such, it can be used without modification in the country’s existing gas infrastructure and gas-fired electricity generation plant.

Note: Presentation slides can be found at Contact ‘s website www.mycontact.co.nz.

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