Market should decide who secures dwindling supply of gas, says energy minister

Tuesday, 19 August 2025

Energy Minister Simon Watts has brushed off the suggestion that the Government should play king-maker as manufacturers and electricity generators compete to secure dwindling supplies of natural gas.

Fertiliser company Ballance, which is the country’s second-largest chemical user of gas after Canadian-owned ethanol-maker Methanex, warned earlier this month that it might need to close its Kapuni urea plant in South Taranaki which employs 120 staff, if it was unable to secure an “affordable supply”.

NZ First deputy leader and associate energy minister Shane Jones told RNZ that the Crown needed to contemplate “a triage system” so power companies — which burn gas to produce electricity — didn’t drive other businesses and manufacturers out of existence.

But Watts made clear to The Post that he was reluctant to get involved in gas allocation.

“The question around government intervention is one in which, politically, there will be different people with different views,” he said.

“My view is that the market should be determining the allocation of that gas, and if government believes that it should be starting to get involved and choosing who gets what, then quite rapidly, the problem becomes my problem.

“The issue that I and others have responsibility for is to make sure that the government sector — hospitals and education — have gas and I'm confident that we've got that in place.”

The first half of The Post’s interview with Watts, on the possibility of additional regulations for the electricity sector, can be read here: Energy Minister believes surgical intervention could fix power market.

A survey published by BusinessNZ and energy management company Optima last week highlighted the fact that different consumers of gas were paying very different prices for the resource.

Some businesses were paying less than $15 a gigajoule (GJ) while others reported paying more than $25/GJ.

Consumers pay much higher prices, north of $35/GJ, while Methanex — the country’s largest gas user — is believed to be paying no more than $6/GJ under a contract that is due to expire in 2029.

That has led to suggestions that the economy would benefit if Methanex permanently shut its remaining manufacturing facility in Taranaki and returned the gas it consumed to the market.

Normally under a market system, it would be the entity that could only afford to pay the lowest price for a commodity that dropped out first.

However, the gas industry has argued Methanex plays an important role underpinning demand for gas, thereby encouraging exploration, and in “balancing the market” by voluntarily reducing methanol production and reselling its gas to others when demand is high and supply low.

Climate Justice Taranaki held a protest outside Methanex’s factory on Sunday, criticising its entitlement to free carbon credits issued by the Government to offset its carbon emissions, and calling for its closure.

Spokesperson Tuhi-Ao Bailey said 95% of the methanol Methanex produced was exported to create “fuels, plastics and other chemicals”.

“Communities in Aotearoa shouldn't be subsidising a Canadian corporation while struggling to heat their homes,” he said.

Watts said the Energy Efficiency and Conservation Authority was looking at opportunities to reduce gas demand, to take some of the pressure off supplies.

He noted 25 of the 66 respondents to the BusinessNZ survey had signalled they could transition to a different fuel for at least some of their needs.

But any decision around when Methanex and Ballance exited the market was “a decision for those entities, not for government”, he said.

“At what price can they get gas that allows them to be to break-even and be financially sustainable; Ballance has a price point for that, and there’s a market price for gas.

“Methanex gets its gas primarily from Maui and it's a conversation around how long they can get that gas for, and when that gas is not available then that’s where they are.”

If the Government decided to subsidise the gas for Ballance, “I've got a ‘molecules problem”, Watts said.

“I can’t magic up gas. I've simply moved the problem from ‘entity A’ to ‘entity B’.”