Yesterday, I paid my house insurance again.

The house is still standing.

Nothing burned down.

Another year of terrible returns.

I should complain.

Which brings me to New Zealand’s proposed LNG import facility.

Interesting project…

So, of course… Everyone has an opinion.

Too expensive.

Ridiculous.

Essential.

A disaster.

And that’s before anyone opens the spreadsheet.

Here is how I look at projects like this one.

An insurance policy.

Domestic gas supplies are declining.

When the hydro lakes run low, we need something to fill the gap.

Preferably something more reliable than a minister looking at the sky – real story in Australia… that’s for another email.

The Government wants an LNG import facility operating in 2028 to provide that backup.

You pay to have an option available.

And hope you don’t need it.

A difficult concept in politics, where anything sitting idle apparently qualifies as a scandal.

Until it is needed.

Then the scandal is why you didn’t buy it earlier.

Ah… advisory… Beautiful profession!

Now…

Does calling it “insurance” make this a good deal?

Of course not.

I have read enough insurance policies to know that the premium is only the beginning of the entertainment.

There are exclusions.

Conditions.

And a delightful section explaining why the thing you thought you bought is not quite the thing you bought.

For LNG, the questions are practical.

Will the gas actually be available when we need it?

How quickly can it arrive?

At what price?

Who pays to keep the facility ready?

How much?

And what happens if our emergency coincides with everyone else’s?

An import terminal without access to fuel would be a rather expensive place to watch the sea.

Then there is procurement.

If we end up negotiating with one supplier before the key commercial terms are settled…

Please. Don’t do that.

Keep competition alive for as long as you can.

The supplier also has shareholders.

They will appreciate our urgency.

Financially.

But none of those concerns makes the need for backup disappear.

Every option has a premium.

Every option has limitations.

Even doing nothing has a price. It just sends the invoice later.

Imagine a dry winter.

Lakes low.

Businesses under pressure.

And the backup works.

Factories keep running. The lights stay on.

I suspect the premium will suddenly become a much less popular topic of conversation.

That would demonstrate the value of having cover.

We should still establish whether we are buying it well.

So the question I want answered is:

Is this the best insurance policy available for the risk New Zealand needs to cover?

Compare the alternatives.

The cost. The protection. The delivery date. The fine print.

Then choose.

Preferably before the house is on fire.

Insurance brokers become considerably less flexible at that point.

Use this information at your own risk.

For strong opinions about insurance and other infrastructure matters, click below.

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