Prime Minister Christopher Luxon casts doubt over whether plans to build a LNG import terminal will definitely go ahead

A question mark hangs over whether the Government will definitely go ahead with building a liquefied natural gas (LNG) terminal, with Prime Minister Christopher Luxon saying if the business case isn't good, the Government won’t be doing it.

Speaking to Newstalk ZB’s Mike Hosking on Monday, Luxon said; “for me, it’s coming down to the commercial business case”.

“I’m just brutally going to make a decision on the commercial case. If it doesn’t stack up, we won’t be doing it.”

Luxon’s comments cast doubt over whether the Government will definitely go ahead with an LNG import facility in Taranaki. And it comes less than a week since Energy Minister Simon Watts told reporters the Government wasn’t considering a pause on its plan and the LNG import terminal was proceeding to plan.

“We’re under commercial negotiation with a number of parties in order to shortlist to be able to perform a contract for consideration and signing," Watts said last Wednesday. “We remain on track to have that signed midway through this year.”

Luxon told Newstalk ZB the Government would make a decision when the procurement process finishes - this is expected to happen by the middle of the year.

“There’s a number of bidders in there, they’ve got a whole bunch of ideas … They’ve got to make it stack up and we’ll make a call.”

While the purchase of LNG was one thing, Luxon said, “we’ve got to make sure we’re getting this thing right sized and it’s fit for purpose”.

“I genuinely just want to make sure the cost benefit is there, the business case is right. If it’s a good business case, yep we’ll do it. If not, we won’t.”

In February the Government said a LNG import facility in Taranaki, which will cost "north of $1 billion," could be operating as soon as 2027 or early 2028 to remove the risk associated with dry years. The cost of the infrastructure will be paid for via a levy on electricity, and the cost connected with importing LNG will be paid by users of gas produced from LNG.

With ongoing conflict in the Middle East, the world’s biggest LNG production terminal has been knocked out. 

Qatar's Ras Laffan Industrial City - the site of the largest LNG production terminal in the world - was hit by missile strikes. This LNG terminal supplies one-fifth of the world’s super-chilled fuel and gas exports from the Persian Gulf supply about 20% of world demand.

In a statement, QatarEnergy's chief executive Saad Sherida al-Kaabi said: "The damage sustained by the LNG facilities will take between three to five years to repair. The impact is on China, South Korea, Italy and Belgium. This means that we will be compelled to declare force majeure for up to five years on some long-term LNG contracts.”

QatarEnergy expects that it would take up to five years to repair, impacting supply to markets in Europe and Asia. 

LNG is natural gas that has been cooled and liquified so it can be transported easily.