Channel’s “precinct landlord” concept would seek to unlock value over time as high-quality tenants were attracted to the site.
Chief executive Rob Buchanan said the company’s strategy was focused on maximising the long-term value of the land and using its existing storage assets, jetty and pipeline to attract tenants drawn to Channel’s land and the complementary infrastructure.
”Executing on these opportunities would build additional long-term, diversified, contracted revenue that is not dependent on fuel volume, from its current level of around 50%, while boosting New Zealand’s energy resilience, and supporting decarbonisation.”
Imported LNG has become a hot topic in the energy sector as New Zealand faces dwindling indigenous gas supplies, with the problem coming to a head in August.
Gas is seen as a transition fuel – a means to fill the gaps as New Zealand builds more renewable assets to achieve net carbon neutrality by 2050.
Buchanan told a presentation that installing an LNG terminal would face challenges.
While the site itself would be well-placed with its jetty, a natural deep water port and an existing gas pipeline, there were hurdles.
“Firstly, the gas pipeline to the site has a relatively narrow gauge, so it would be difficult to get volume through into the main transmission network that would be required to run a large gas-fired power plant.
“It’s not an unsurmountable hurdle but it is a hurdle.
“Secondly, Channel is only interested in being an infrastructure provider – we have no interest in taking on commodity or trading risk exposure.
“That being said, the site is pretty well set up for it and we are open to all suggestions for maximising the value of this significant land that we have to support resilience in New Zealand’s electricity system.”
Buchanan said Channel was able to accommodate gas-fired power generation on the site, which was one way it could use the LNG.
“The other thing that we could do – and we think it would be much quicker than supporting imports of LNG, is diesel-powered generation.
“It would be faster to build and would have a lower capital cost because all the necessary assets already exist.
“The benefit of diesel generation is that it could be stood up to enable New Zealand’s transition to 100% renewables and then stood down once this had been achieved.”
Buchanan said Channel would not need to invest in picking winners, without the technology and development risk.
He noted the Government was consulting on whether to increase the country’s diesel reserves, which could provide Channel with opportunities.
“We also see opportunity to repurpose some of our existing tanks for low carbon, bio, or renewable fuels storage.
Channel also released details of fuel demand outlook in a report from advisory group Envisory – formerly Hale & Twomey.
The outlook showed that Channel’s long-term business would be underpinned by jet fuel demand and the need for a liquid fuel decarbonisation pathway for aviation, albeit the near-term demand may be impacted by economic conditions and aircraft availability.
The report said aviation fuel growth is forecast to continue out to 2060, with continued demand for diesel and petrol to 2060 and beyond for some use cases.
The recently announced potential Seadra Consortium biorefinery project contemplates annual rental of about $6–$7 million, which implies a land value of $550 per square metre for the 18-20 hectare parcel of land to be potentially occupied by the bio refinery.
Channel is not the only oil facility looking to reinvent itself.
In Australia BP’s Kwinana Energy Hub is getting involved in alternative fuels, as is Viva Energy’s Geelong Energy Hub.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
