LPG - New Zealand's 'forgotten fuel'
Despite declining indigenous production, New Zealand’s LPG sector has the potential to contribute much more to New Zealand’s energy system than it currently does, according to John Kidd, director of research at Enerlytica.
Speaking at GasNZ Forum 2024, Kidd said he often feels “people in Wellington” tend to look past the LPG sector’s important role in New Zealand’s energy environment.
“It’s the forgotten fuel.”
It has come into its own in natural disasters, keeping customers connected. “It keeps proving itself time and time again, year after year."
Kidd said Enerlytica was interested in what LPG could do beyond what it is currently doing: “Its ability to contribute more into the [energy] system in terms of power generation or blending it into local [gas] systems, using the infrastructure that we already have in place.”
There is both indigenous supply but with the ready ability to tap into non-indigenous supply as well to be able to meet market demand, he said.
“You can ensure the supply is never interrupted because you have multiple channels to call on.”
Five of New Zealand’s top six natural gas fields are LPG capable, Kidd said.
But there had been a large reduction in local LPG production since the Kupe field had started to decline – although despite its decay, Kupe still accounted for over 50 percent of indigenous production.
It currently produces 66,000 tonnes of the 129,000 tonne national total – an important contribution to New Zealand’s annual demand of 200,000 tonnes.
But with the failure of recent new wells in the Kupe field, “we’re going to see a continuation of the decline we’ve seen over the last decade or so”, he said.
But LPG continues to be an increasingly popular fuel, he said.
“On a demand basis, LPG has been going really, really well – that hasn’t changed at all in the last few years.
“It fascinates us just how strongly LPG continues to perform on a demand basis compared to other fuels.”
Currently there are near on 300,000 LPG connections in New Zealand, compared to just 164,000 10 years ago.
The fuel was an extremely popular one, both on the basis of connections and in comparison with other fuels, he said.
While there had been a decade of zero growth in electricity demand since the global financial crisis, that was entirely different for LPG, he said.
Although New Zealand is still in the import market; “That’s the reality”.
But there was plenty of infrastructure in place to be able to support that, and “some of that infrastructure is heavily underutilised and we could do a hell of a lot more with what we have than what it does currently”.
“It’s an expensive option, but all options are currently expensive.”
New Zealand imported LPG from anywhere in the world, servicing the South Island market, which was primarily an import market, he said.
“The South Island [market] is agnostic as to where the LPG comes from – whether that is the North Island, Australia, or from wherever.”
Kidd said it was likely that over the next two years the North Island would flip to being a net importer of LPG as well, because of the decline in Kupe production which wouldn’t be able to meet North Island demand.
But the point was that this was no problem, he said.