LNG terminal back on after April Cabinet decision – report
A ship carrying liquefied natural gas. Photo / Getty Images
The Government has recommitted itself to building an import terminal for liquefied natural gas, paid for by a levy on energy companies.
Earlier this year, the Herald reported, citing sources inside the Government, that the Government was reconsidering the idea in light of skyrocketing liquefied natural gas (LNG) prices resulting from the war in Iran.
Prime Minister Christopher Luxon appeared to confirm this reporting publicly, softening the Government’s earlier stance on the facility and saying if the business case for the terminal did not stack up, “we won’t be doing it”.
On Tuesday, BusinessDesk reported Cabinet had another look at the terminal in the last week of April, in the context of the Middle East conflict, but decided to press ahead with it.
When the Herald first reported on wobbles with the terminal plan, the lead minister was Simon Watts. The April decision was made after a reshuffle resulted in Simeon Brown taking the portfolio.
Asked for comment on this, Energy Minister Simeon Brown’s office said in a statement: “The minister has been clear that the procurement process for an LNG [terminal] is underway and is being considered in the context of the conflict in the Middle East.”
Luxon said the Government was still going through a “procurement process” on the LNG terminal.
He said there was “no change” to the Government’s position on the terminal, which was to continue with the procurement process.
Luxon said the terminal was designed to lower power prices by removing dry-year risk.
This is when power prices rise because the hydro lakes that form the backbone of New Zealand’s generation are lower than usual. Currently, this risk is built into power prices. The Government says the LNG terminal would reduce prices by removing this risk.
Last week, the OECD, a group of mostly wealthy countries, warned the Government that the terminal risked pushing prices up.
The organisation said that “LNG will help restore security of supply” but warned that the terminal “risks locking in fossil fuel dependence”.
The report said LNG “should be treated as a transition fuel only”.
Labour Leader Chris Hipkins called the facility a “gold-plated bad idea”.
“It is going to cost every New Zealand household more money in their power bills, it’s going to raise the cost of power in New Zealand and it is going to make New Zealand more dependent on highly volatile fossil fuels,” he said.