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Planning needed now for LNG backstop option

24 March 2006

Planning needed now for LNG backstop option

Contact Energy and Genesis Energy today said a proposal to import liquified natural gas (LNG) would only proceed as a backstop option to ensure New Zealand did not run out of natural gas.

Contact Energy Chief Executive, David Hunt, and Genesis Energy Chief Executive, Murray Jackson, said while a final decision on whether to proceed with the LNG proposal would be left as late as possible, planning and preparation were required now.

"It is the preference of both companies for domestic natural gas to meet New Zealand’s demands and both Contact Energy and Genesis Energy have been actively searching for it," said Mr Jackson.

"However New Zealanders need to know that we are committed to ensuring there is sufficient natural gas to keep our factories and our electricity plants running.

"Importing LNG may have an important role to play in bridging a gap in supply of natural gas in New Zealand and we are planning to ensure this option is available if required."

Mr Hunt said a recent tightening of electricity supply, driven by low hydro lake levels, has reinforced the importance of secure and flexible thermal electricity generation.

"Around a quarter of New Zealand’s total electricity is generated with natural gas and this is becoming increasingly important to New Zealand in balancing the natural fluctuations inherent in wind and hydro generation.

"New Zealand cannot afford to have this electricity generation capacity stranded without a secure and reliable fuel source," said Mr Hunt.

Natural gas is also a major fuel for some of New Zealand’s largest industries.

As part of the planning for the possibility of LNG imports, Contact Energy and Genesis Energy commissioned LECG to examine the macro-economic impacts of importing 60 petajoules of LNG per annum.

The findings show that this level of imports would add 1.1 per cent to New Zealand’s total imports, an impact similar to New Zealand’s total annual import of cosmetics.

Mr Jackson said natural gas was the cleanest-burning thermal fuel and New Zealand had world-class experience in handling natural gas and established distribution infrastructure to safely transport natural gas.

LNG has an exceptional safety record, having been safely shipped around the world for more than 40 years.

"It is important for New Zealanders to understand that the LNG option will only be pursued as a last resort. It is also important for people to understand that if we are to be ready with the LNG backstop, we need to plan for it now," said Mr Jackson.

Contact Energy and Genesis Energy are currently considering a preferred site for a LNG import terminal and expect to announce the preferred site by mid 2006.


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