3. Imported LNG#
New Zealand does not yet have LNG importing capacity, but may install one in future.
Previous versions of TIMES-NZ considered the costs of LNG import terminals under different configurations, allowing the model to choose between different terminal options based on overall costs and the requirements of the energy system. In the current model build, we instead assume a fixed install date of the standard terminal configuration in 2027 in the Steady scenario.
For LNG import terminal cost modelling, we reference recent reports from Gas Strategies prepared for the New Zealand market. Specifically, we look at the standard configuration option, which allows for flexible wholesale purchasing[1]. It is possible to also model other approaches, such as the small-scale configuration[2], but this is not used in the current model version.
3.1. Standard configuration details#
The standard configuration includes a bespoke FSU (Floating Storage Unit) and onshore regasification. The original report notes capital expenditure may range between $189m and $1,000m, with annualised costs over a 15-year duration of $170m-$210m. We assume the annualised cost represents the annualised capital cost and ongoing annual operational cost.
For the purposes of TIMES-NZ, we require separate capital and operational expenditure costs, in order that scenario-specific costs of capital can be modelled. To calculate this from the aggregate annualised costs presented in the report, we take the midpoint of the annualised cost range, being $190m, and assume that this is a 50:50 split of annualised capital cost and operational cost. In the current model inputs, this is represented approximately as a capital cost of $800m and an annual fixed operating cost of $90m.
In the current model inputs, the standard terminal is represented as a single 40 PJ/a configuration. We therefore assume full flexibility of purchasing within that terminal capacity, rather than unlimited annual deliveries.
The landed cost of LNG under this configuration is estimated between 17.83 and 18.27 NZD/GJ, depending on market conditions. In the current model build, this is represented as 20 NZD/GJ in the Steady scenario. Note that these prices are based on forward market prices and scenario assumptions. International LNG prices have stabilised in recent years, but have shown historical volatility, so these figures are subject to error.
We assume a fixed install date of 2027, which is the earliest possible date the terminal may be operational[3].
Note
Capital and operating cost specifications are important if allowing the model to choose between different terminal options, or whether to import LNG at all.
Because installation dates are fixed in current TIMES-NZ scenarios, these cost specifications are less important, but still contribute to total system cost reporting. They remain in the model to allow simple adjustment to LNG import optimisation modelling methods if desired.
3.2. Assumptions summary#
Variable |
Standard terminal |
|---|---|
Annual maximum output |
40 PJ/a[4] |
Capital cost NZDm |
800 |
Operating cost NZDm pa |
90 |
LNG commodity cost NZD/GJ |
20 |
Output fuel |
NGA |
Availability |
Available to the natural gas market in the Steady scenario |
Installation date |
2027 |
Note that we assume that LNG consumption will be subject to the same emissions factor as domestic natural gas. Additional emissions factors associated with regasification or leakage of LNG are not currently included. The LNG commodity and terminal are further locked to the North Island in the source inputs.
Because we currently set fixed install dates for terminals, assuming a single terminal is installed in 2027, the modelling solution is straightforward. Note that if you wished to expand the method to allow the model to choose optimal installation dates for the terminal, a Mixed Integer Programming[5] solution would be required to ensure that no partial terminals could be constructed.