Gas not the way out of an energy crisis, expert warns

An Australian energy analyst is warning New Zealand against importing liquified natural gas, saying it is extremely expensive and energy intensive.

Mark Ogge, a climate and energy expert at the Australia Institute, said if he had five minutes with Energy and Resources Minister Simeon Brown, he would recommend investing more in renewables instead.

"I would tell him to only import liquified natural gas if you like your energy very, very expensive, and if you want it to be very emissions intensive. Otherwise go for renewable energy, with storage, which is cheaper and virtually zero emissions."

Speaking after the Cabinet meeting on Monday, Brown said the government will greenlight construction of a facility to import liquefied natural gas, as part of a suite of measures to tackle energy security.

He said gas was needed to make up the energy shortfall in dry years, but existing domestic fields have produced less than expected this year, leading to a shortage that has pushed electricity prices to untenable levels.

Liquefied natural gas, or LNG as it is commonly known, is currently trading for about 25 New Zealand dollars per gigajoule, which is half the price of domestically sourced natural gas.

But according to Ogge, that's not a fair comparison. "If you compare imported LNG to crazy domestic spot prices, yes it will be cheaper. But the point is, any gas a finite resource and it is very expensive. The better alternative is to build more renewable energy, with storage."

What is LNG?

LNG is gas that has been cooled to negative 160 degrees and converted to a liquid state for shipping and storage. It is approximately 600 times smaller as a liquid than in its gaseous state, making it more efficient for transport.

At its destination the gas is transferred into storage tanks where it sits, frozen, until needed. It is then re-gasified and transported through the local pipeline distribution network to consumers.

This flexibility makes LNG a good option for New Zealand, said John Kidd, head of research at Enerlytica.

"It's not just about extra petajoules of gas coming into the system," he said. "LNG enables dynamic dispatch into the market when it is required, which fits very well with the requirements of power generation."

He said that LNG can be stored for at least a full winter without degrading in quality, which would provide New Zealand with the security of an additional energy source to pull on quickly when needed.

No New Zealand port had the infrastructure required to handle LNG imports at this stage. But according to Kidd the onshore infrastructure requirements are minimal.

"[Enerlytica] did some initial scoping last year, and we were looking at a cost range of 80 to 100 million dollars for infrastructure," he said. "On the global market, storage and regasification increasingly take place on floating vessels. So once some offloading infrastructure and a few pipes are in place, floating LNG vessels can come and go as needed."

But even with this flexibility, Kidd warned that LNG should not be seen as a replacement for domestic natural gas. He'd prefer it work in parallel to provide the flexibility New Zealand desperately needs.

"Indigenous gas is the preferred source of gas for the New Zealand market, but the fields we have can't just ramp up production to meet demand," he said. "That's where LNG becomes interesting - when flexibility and variability are needed."

A step away from climate goals

Mark Ogge said if the government was serious about the climate, they would pursue renewable exclusively over LNG.

Speaking after Cabinet on Monday, Infrastructure Minister Chris Bishop announced a range of plans to remove barriers and reduce consenting times for renewable energy projects.

According to Ogge, that's not enough. Natural gas is a fossil fuel, meaning any use contributes to global warming. But with LNG, the impact is even bigger.

"In Australia we use more gas liquifying the gas and processing it for export than we use for any other use in Australia," he said. "It uses about 10 percent of the energy that the gas would produce, just to liquefy it."

"Then on top of that you need additional energy to ship it, and and more again to re-gasify it at the other end."

Plus, the more time gas spends being processed, the more opportunity there is for leakage. Ogge said it's tough to get an accurate estimate of the methane leaked, because companies make assumptions about leakage rather than measure it.

"Methane leaks at every stage of the process - when the gas is extracted, from the pipelines, at the LNG facilities, in shipping, and during re-gasification. In Australia when we have measured it, we've found it to be far higher than the gas companies are reporting," he said.

This impact won't show up on New Zealand's carbon accounts, but that doesn't mean the process is green.

"The emissions would be accounted for in Australia, or wherever the gas is put through that energy-intensive liquefaction process. So from a New Zealand perspective it would look greener in the national accounts than it is."

But by importing it, New Zealand was the country creating the demand and bringing about the emissions, he added.