News
10/02/26
New Zealand plans LNG imports to tackle energy deficit
Sydney, 10 February (Argus) — New Zealand will abandon its long-standing gas
self-sufficiency and begin importing LNG from 2027, as the government races to
prevent future energy shortages after years of declining domestic output. The
government has shortlisted six contractors and will award a contract by
mid-2026, it said on 9 February, ahead of the completion of an LNG terminal,
expected to be ready as early as mid-2027 . LNG will supplement dwindling
supplies from New Zealand's Taranaki basin, where investment has stalled due to
political disputes over the future of fossil fuels. Construction costs for the
terminal are modelled at more than NZ$1bn ($600mn), with a levy on power
consumption to be imposed. Wellington says it cannot waste time in the face of
an energy crisis, despite the costs. The country suffered soaring prices in 2024
when low hydroelectric inflows and cold weather drew attention to the worrying
lack of back-up power. Future dry years could cause long-term effects on the
economy, the government said, adding that urgency is now required. Last resort?
New Zealand utilities sponsored a report into options for LNG importation in
2025. It found that LNG imports are feasible and large-scale shipments offer the
lowest cost of supply. LNG is one of the most expensive fuels and more solar,
wind and geothermal power should be partnered with coal and diesel peaking
plants instead, say critics, including renewables lobby Rewiring Aotearoa. But
gas-fired generation is the best insurance against dry years due to its ability
to back up renewables and cap the price of gas, which could soar again due to
rapidly depleting fields, the government said. New Zealand could take as little
as 12PJ of gas or about 218,000t of LNG, which could help smooth electricity
supply in the winter of a dry year, the government said. The country's business,
innovation and employment ministry (MBIE) prepared alternative options including
biomass or coal-fired power plants, diesel-fired generation and new renewable
projects, but none provided the speedy solution Wellington was seeking. No
takers New Zealand is not a gas-poor country. Its relatively small population
and industrial base, including methanol, metals refining and food manufacturing
sectors, were reliant on Taranaki basin gas plants for many decades, with
surplus supplies to firm the grid at times of low hydro inflows. But a cratering
of investment in the sector followed a 2018 decision by the previous Labour-led
government to end the awarding of new exploration blocks outside of the onshore
Taranaki basin. Gas production fell on the year for the eighth consecutive
quarter in July-September 2025 , MBIE data show, with 2027 annual output
predicted at just 95 PJ/yr, from 107 PJ/yr in 2025. The "structural and
significant" gas shortage is leading to increases in electricity prices , a
leading energy executive warned in 2025. Meanwhile, investment in
electrification and new sources of energy, such as hydrogen, have failed to
materialise, leading the National-led government to reverse the ban on
exploration in 2025 . Importing LNG is de facto recognition that with broad
opposition on the political left to increasing gas output, the country cannot
expect any fresh investment in the sector, a point echoed by Australian
independent Beach Energy, which is shifting its focus to Australian markets from
New Zealand due to political uncertainty in the latter. New Zealand's stance on
gas has been noted across the Tasman Sea. Victoria state, a gas-hungry
jurisdiction that banned onshore exploration last decade and continues to
restrict unconventional gas production, has softened its language in recent
years, wary of the enormous cost facing the state should supplies deplete. With
LNG imports considered increasingly likely , particularly if coal-fired
generators are retired as expected, the role of gas in backing up New Zealand
and Australia's vast renewable power capacity is becoming increasingly accepted
by policymakers. By Tom Major Send comments and request more information at
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