Iran could spell the end of the gas levy: Government changes messaging on LNG plan
Monday, 30 March 2026
The Government’s plan to build a liquefied natural gas (LNG) import terminal is wavering, with Prime Minister Christopher Luxon notably softening his language on Monday morning.
“Despite how it has been represented, we’re in a procurement process,” he told RNZ’s Morning Report, when asked if the Government was backing down on its plan.
“It’s purely going to come down to the economic return and the cost-benefit in the commercial case. If it’s not an attractive commercial case, we won’t be doing it. If it is, we will consider to progress it.”
At a glance, these statements make sense. LNG prices have risen by 143% in Asia since the Iran War started, according to Reuters, so who wouldn’t want to make a carefully reasoned decision?
But on a closer look, the comments represent a substantial departure from the Government’s previous messaging on the topic.
The plan for a Taranaki-based LNG import terminal was announced by Luxon and Energy Minister Simon Watts on February 9. Speaking to reporters at a post-Cabinet press conference at the time, the pair confirmed six proposals had been short-listed and the plan was all go.
“We will be moving by June to lock that down to one player,” Watts said.
Most of the announcement was dominated by arguments about whether the “levy on electricity” planned to fund the $1 billion investment was a simple levy, a tax, or something else entirely.
But any debates around the terminal itself were deemed well-settled by the Government on the basis that it would bring energy costs down for New Zealand households.
“Cabinet has made a definitive decision to build an LNG terminal. [We will not be] going back to Cabinet for a follow up conversation,” Watts said.
“That decision has been made. It’s been delegated to relevant ministers, and we’re going to get on and make this happen.”
The timing is important here - the Government’s announcement came before the Iranian conflict and before global LNG prices jumped faster than the price of oil.
But Labour’s energy spokesperson, Megan Woods, questioned the rationale at the time, arguing the move would “expose New Zealand households and businesses to extremely high energy costs”.
“LNG is a global market. When it spikes it doesn’t just spike in one part of the world, it spikes globally,” she said.
Over the past few weeks, reporters have continued to ask Watts about the viability of the LNG plan.
On March 3, one month after that post-Cabinet press conference and a few days after the Iran War started, Watts stood by it.
“Well, I think the announcement that we’ve made in regards to building an LNG capability … is the complete opposite of naivety. We don’t have LNG fuel sources in a dry year, and that’s why power prices have been spiking,” he said.
Asked whether the global price volatility shown amid the Iran crisis risked making it an uneconomic investment, Watts said no.
“The reality is, we have a molecules problem. We do not have sufficient domestic gas to make power in a dry year. That’s the problem statement,” he said.
On March 24, he hadn’t changed his tune.
“Cabinet made a categorical decision, a decisive decision, to build an LNG importation terminal. Why? Because we’ve got high electricity prices, because we don’t have enough gas to make electricity in a dry year. It is a very simple solution,” he said.
But come Monday, the prime minister appeared to be backing down, telling RNZ it was a question of commercial viability.
It’s a sentiment he repeated on Newstalk ZB.
“I’m brutally going to be making a decision on the commercial case. If it doesn’t stack up, we won’t be doing it,” he said.
“There’s a number of bidders in there, they’ve got a number of ideas. Some will be light touch, some will be golden engineered and, essentially, they’ve got to make it stack up and we will make a call.”
Stuff understands any formal decision on the programme won’t be communicated until the procurement process ends in mid-June.