Shane Jones’ nightmare: No gas for most from 2029 and ‘rust-belt decline’

Monday, 15 September 2025

One problem facing the Government is the possible shut down of the long-serving Maui gas field, perhaps as soon as next year.

ANALYSIS: NZ First deputy leader and Resources Minister Shane Jones delivered head-turning warnings to his boss Winston Peters in a recently released briefing paper on the challenges facing the electricity and gas sectors.

He went so far as to say that if the country didn’t find new gas or displace its use in electricity generation, there would be “no gas available for industrial, commercial or domestic use from 2029”.

Before anyone bins their gas-water heater or shutters their cafe, it is worth noting that Jones can be prone to hyperbole and talks a big game.

He suggested in the same briefing paper, for example, that renationalising the entire electricity system might be an option for that industry if all else failed to improve energy security and affordability.

The fact the share prices of major generators showed no obvious reaction on the day that was reported, drifting up a few cents in line with normal ups and downs, signals how much attention financial markets paid to that threat.

Buying back the 49% of the shares in Meridian, Mercury and Genesis that the Government doesn’t already own and all of Contact would cost about $23 billion at their current market values.

And then what? Immediately, trash that huge public outlay by requiring they sell electricity nearer cost price?

If Jones was considering renationalising power firms without compensation, how would that rank against the “sovereign risk” he has claimed flowed from the previous government’s ban on new offshore oil and gas exploration permits?

GasNZ chief executive Jeffrey Clarke says homes and small businesses accounted for less than 13% of gas demand last year and are likely to have gas “for a long time” if only because because they are a profitable part of the market and other customers will drop out of the market before they do.

Rhetoric aside, Resources Minister and deputy NZ First leader Shane Jones is on the warpath over the risk of accelerating de-industrialisation.

Yet there is meat in the detail of Jones’ 20-page memo to his boss.

There is no disputing that gas production is tailing off faster than previously forecast and that is going to necessitate some difficult choices as electricity generators, large industrial and chemical users of gas vie for the remaining supplies.

The Ministry of Business, Innovation and Employment reported gas production fell 21% last year and estimated gas reserves fell a whopping 27% as producers also revised down their best guesses of what was still left in their fields.

Problems have been mounting in the electricity sector.

The Major Electricity Users Group reported on Friday that industrial firms had to pay 21% more for electricity in the year to March than the year prior, when they had experienced a 12.5% price rise.

A third double-digit price rise was likely in the current year, executive director Karen Boyes forecast.

The key theme in Jones’ paper was the threat of gas shortages and high electricity prices leading to the “de-industrialisation” of New Zealand, and Boyes said it was little wonder there were such warnings in relation to electricity prices.

“If this goes on, more businesses will close.”

When it comes to gas, the most immediate challenge facing the Government may be what, if anything, to do about the possible impending closure of the Maui gas field offshore from Taranaki.

The ageing field last year remained the country’s largest producer, accounting for about a quarter of the 115 petajoules of natural gas New Zealand produced.

But there are concerns the pressure in Maui’s reservoir may drop below the level at which its gas will continue to flow some time towards the end of 2027.

Worse, gas industry sources believe the field will require somewhere between $50m and $100m of maintenance work mid-next year, raising the possibility its Austrian operator OMV could elect to forego the investment and simply close the field then, given the short remaining life it may have.

There are mutterings, also, that the fourth biggest-producing field, Kupe, may soon be in a similar boat.

If Methanex takes down the Maui gas field with it when it closes, one runway for managing the decline of gas would be shortened.

Gas from the Maui field is largely used to supply the country’s largest industrial user of gas, Canadian methanol producer Methanex, and gas industry sources assume their fortunes are inextricably linked.

The suggestion being that if Methanex closes, Maui may too, and then the gas Maui currently supplies Methanex might not be available to other gas customers as has often been assumed.

OMV would only confirm the 50-year old Maui field was “approaching the end of its productive life” but that no final decisions had been made regarding the timing of its closure.

In the meantime it continued to play a vital role in supporting New Zealand’s gas supply, it said.

“Despite substantial investments in recent years aimed at extending the field’s viability, official disclosures indicate a significant decline in gas output.”

Jones’ paper and industry sources make clear there could be a lifeline for Maui if an adjoining reservoir, Maui East, was drilled to top up the gas field.

One complication is the gas in Maui East is 40% carbon dioxide, a gas so inert it is commonly used in fire extinguishers.

Jones advised in his briefing paper that Methanex could use natural gas with high levels of carbon dioxide in its manufacturing process, but only if it could be safely piped to its factory which in July appeared unclear, while other gas users could not.

It is understood that sequestrating the carbon dioxide by stripping it out at the gas field and re-injecting it underground is an option but would be expensive.

And if the gas was piped ashore and the carbon dioxide separated out there, then there would be charges to pay under the Emissions Trading Scheme (ETS).

Jones suggests government help for a plant to strip carbon dioxide from Maui East — and potentially another high-CO2 onshore gas field that Greymouth Petroleum has been evaluating at Kaimiro — and exempting the emissions from the ETS.

He says that carbon dioxide could be used domestically, as is CO2 stripped from Todd Energy’s Kapuni gas field in Taranaki.

“Exempting stripped CO2 from the ETS may just tip the business case for production and distribution of domestically produced CO2.”

In fact, he floats the idea of exempting carbon emissions from electricity generation, as well, which would create a much larger hole in the ETS regime.

Even the first suggestion might be controversial.

The Post’s back-of-the-envelope calculations, as yet unconfirmed by operators or officials, are that the gas proposal could see a few million tonnes of carbon dioxide enter the atmosphere over the life of the two fields, outside of the cap created by the ETS.

If correct, that volume of emissions might normally generate a bill of a couple of hundred million dollars for carbon credits.

Jones has described himself as the number one doubting Thomas on “climate religion”, but allowing more off-ledger emissions might be a tough call for Energy Minister Simon Watts.

Watts also holds the climate change portfolio and is attempting to maintain the line that New Zealand could still meet the emissions pledges it signed up to through the Paris Agreement.

Then there’s the legitimate question of whether government help for a carbon-stripping plant would amount to an disallowed fossil fuel subsidy.

Watts has already shot down another of the big three gas ideas that Jones put forward in his paper to Peters, dismissing Jones’ suggestion the Government could divert gas away from electricity generation and reserve it for industrial and residential use.

Jones’ third big idea would be to mine more domestic coal and build a new 300-megawatt coal-fired power station to reduce the electricity industry’s reliance on gas.

He doesn’t spare power companies or government officials from a tongue-lashing.

The big gentailers had been “extremely effective in limiting the addition of new generation and shutting out new entrants over many years”, he told Peters.

MBIE will always favour market solutions and the Electricity Authority industry regulator “lacks fortitude”, he also says.

Jones’ re-nationalisation idea may be a throw-away line as there are cheaper ways to reform the electricity sector, and not all his other suggestions may appeal.

But it does seem clear he is not about to lie down on energy reform. Call it nostalgia for a bygone era perhaps, but this is not all bluster.

He sets out what ultimately concerns him in the final words of his report to Peters. “Without profound action, the die is cast; a rust-belt decline with a widening gap in societal well-being.”