Report tips Methanex will close NZ operation next year, gas production plummets
Thursday, 12 March 2026
The country’s largest gas user, Methanex, will close early next year, but the Maui gas field will shut down with it, leaving natural gas in even shorter supply, a report commissioned by the country’s quasi-gas regulator is assuming.
The report, produced for the Gas Industry Company by consultant PwC and released on Thursday, also assumes another major gas user, fertiliser-maker Ballance, will exit the natural gas market next year.
But it nevertheless warns of additional “demand destruction” as domestic gas production continues to decline steeply, forcing other buyers to cut back on their use of the fuel.
That would still be the case even assuming imported LNG is brought into the equation from 2028, though that would lessen the impact, the report forecasts.
Read more:
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The Government has announced it intends to underwrite the construction of a gas import terminal, adding up to 12 petajoules (PJ) of gas to the market each year from 2027 or 2028.
Methanex has not confirmed plans to close its one remaining factory in Taranaki but has scaled back its local operation in recent years to reflect declining gas supply and announced last week that it had written down the book value of its operations here from $82m to zero.
Commenting on whether it might mothball its remaining plant, chief executive Rich Sumner told analysts on a conference call that the company was “watching things really, really closely”.
“We're working with gas suppliers as well as the Government to sustain the operations, but it is a tough outlook right now,” he said.
Sumner noted New Zealand’s gas fields were “very mature” and there was “not a lot of new exploration going on”.
Ballance has similarly not confirmed it intends to stop converting natural gas into urea at its factory in Kapuni, but has periodically warned of the risk of a temporary closure and has been planning for a partial switch to green hydrogen.
Chief executive Kelvin Wickham said the Gas Industry Company report’s suggestion that the Kapuni gas-to-urea plant would close imminently “doesn’t reflect the business' perspective on its longer-term outlook”.
“Ballance’s long‑term gas contract ended in September last year, however since then we’ve secured additional gas in multiple tranches from a range of suppliers. The most recent extended operations through to the end of June,” he said.
“Ballance remains very active in the gas market and, through ongoing engagement across the sector, we’re becoming more assured about the likelihood of securing longer‑term supply. This allows us to approach the future with growing confidence rather than pre‑determined assumptions about closure.”
In an “increasingly uncertain global environment” secure access to fertiliser mattered for farmers and the wider economy, he said. “The uncertainty caused by the situation in the Middle East highlights how critical local resilience is for New Zealand.”
The Gas Industry Company report acknowledged the assumption Methanex and Ballance would exit the gas market in 2027 was “uncertain”.
But it said it was based on “an assessment of current stress these plants face due to high gas prices, gas unavailability, and international competition for production outputs”.
It has frequently been suggested that Methanex’s exit from the market, in particular, would bring significant relief to other gas users, freeing up supplies for them and buying them more time to transition away from the fuel.
But the Gas Industry Company report implies any relief would very quickly get lost in the mix of declining gas production.
The closure of Methanex and an end to Ballance’s use of natural gas would free up 27.7PJ of gas, it estimated.
The closure of Methanex and an end to Ballance’s use of natural gas would eliminate 27.7 PJ of gas demand, it estimated.
But it forecasts the supply of domestic gas would drop by a larger amount, from 112 PJ last year to 71 PJ in 2028, meaning that even with the closures and the availability of LNG, the gas market would be tighter than it is today.
Next year could be a crunch year for the electricity market, especially if imported LNG was not available by then, the report said.
“While it is too soon to know whether 2027 will be a dry year, significant security of supply risk hangs over this year.
“Indigenous gas supply will likely be insufficient to meet dry year requirements. Transpower is already monitoring this, but careful management of energy system resources is needed,” it warned.
Gas prices would stabilise at roughly their current level based on its assumptions, so long as LNG was brought into the market.
But without LNG, prices would continue to steadily climb it warned.
The report forecasts residential customers will be slow to move off gas, regardless.
Consumers and small businesses only accounted for 8% of gas demand and were reluctant to switch away, it said.