Higher gas prices predicted Last updated 13:54 16/04/2009 Share Print Text Size Fairfax MediaPRICES FIRED UP: Prices for LPG and PNG are predicted to go as high as $25 per gigajoule by 2025 according to a new Electricity Commission report.Relevant offers Sharply higher gas prices are being predicted until the middle of the century, under scenarios in which the fuel has to be imported or if enough is produced for export.
In Electricity Commission forecasts published today, the only scenario where prices could eventually fall back toward current levels is a narrow window where no gas has to be imported but not enough is produced for export.
In any case, the commission expects production to rise in the next few years, to be followed by a drop from 2013 to 2018 caused by the production lead time of any new potential discoveries.
The report, which attempts to forecast the availability and price of gas for electricity generation until 2050, said the price for gas rose from $4 a gigajoule (GJ) in 2004 to $6.20GJ in 2007.
The most a generator running a combined cycle gas turbine would pay to be economic against other types of generators would need to be around $13GJ.
Under most production scenarios, the report forecasts prices of $19GJ or $25GJ by 2025
Lowest prices could be expected under a narrow band of production in which this country stayed decoupled from international liquefied natural gas (LNG) trading.
That would happen if enough gas was produced to meet demand but not enough to make LNG exports viable, the report said.
Under that scenario, prices are shown peaking at $13GJ in 2020.
The report pointed out that with lower or higher gas production scenarios the domestic gas price would be expected to be strongly influenced by the international LNG market and therefore likely to become more volatile.
Under all the gas production scenarios, the installed capacity of gas fired stations was seen staying relatively constant up to 2023, with consumption of gas declining as the price started to rise around 2017, the report said.
In cases where gas prices were high, more installed capacity using other technologies would be needed to meet demand.
According to the analysis, more wind generation would be needed between 2020 and 2030. Diesel peakers would also be built to balance intermittent generation from wind generation and supply reliable capacity at peak demand.
From 2030, coal carbon capture and storage (CCS) would be installed to firm up generation. But if that technology failed to develop further and become cheaper, more wind, diesel peaker and hydro generation would be needed after 2030.
As at January 2008, New Zealand had gas reserves of 2461 petajoules (PJ), with net production in 2007 of 165PJ. Production was expected to reach about 200PJ in 2009, with Methanex expected to be using 40PJ a year after restarting a methanol plant in Taranaki last October.
Five production scenarios were produced for the report. Under the "very low" forecast, production is seen dropping below 100PJ a year before 2020 and stabilising at 30PJ a year through to 2050.
Under the "medium" forecast, production would fall to a low around 70PJ by 2023 before edging back above 100PJ annually from about 2040.
The "very high" production forecast has a yearly peak of about 250PJ -- similar to the early 2000s -- by 2045.
- NZPA
LMP Price at posting:
10.0¢ Sentiment: LT Buy Disclosure: Held
