Government sticking by LNG plan in wake of Middle East conflict
Monday, 23 March 2026
The Middle East conflict hasn’t given the Government cause to rethink its plan to facilitate imports of Liquefied Natural Gas, Energy Minister Simon Watts has made clear.
Watts announced last month that the Government planned to spend about $2 billion over 15 years on a terminal to import LNG, with the outlay recovered through a levy on electricity.
However, there has been speculation the Government might revisit the plan in the light of the conflict in the Middle East.
The price of LNG has spiked in some markets as a result of the conflict in the Middle East.
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Qatar accounted for about 20% of global LNG exports pre-conflict but about 17% of its production is expected to be offline for up to five years as a result of Iranian attacks on its Ras Laffan production facility, potentially reducing global supplies of the fuel by about 3%.
Watts said while the short-term outlook for LNG was “subject to change” as a result of the conflict, production in the medium to long term was still expected to increase as a result of new production coming online.
Forecasts produced by the International Energy Agency late last year suggested global LNG production would increase by about 50% by 2030, he noted.
The IEA predicted about half of that extra production would come from the United States and about 20% from Qatar, with the biggest slice of the remainder coming from Canada.
“There are a wide range of non-Middle East sources for New Zealand to import LNG,” Watts said. Options included the US, Australia, Canada, Malaysia and Indonesia, he said.
New Zealand’s ‘dry year’ problem when hydro inflows were low, along with the domestic gas situation, were “significant issues that require action”, Watts said.
A report released earlier this month by the country’s quasi-regulator, the Gas Industry Company, forecast domestic gas production would drop from 112 petajoules last year to 71 PJ in 2028.
That would leave New Zealand in shorter supply even if its largest gas user, Methanex, dropped out of the market next year, it forecast.
The import facility the Government intends to underwrite would allow up to 12 PJ of LNG to be imported in years when it was needed to balance the gas market.
LNG importation remained “the best solution available” to mitigate the country’s dry year problem, when it didn’t have sufficient domestic gas to make electricity, Watts said.
Without imported LNG the price of domestic gas could cause “significant economic destruction”, he said.
“The counterfactual to LNG is not ‘continuing as we are’.”
Labour energy spokesperson Megan Woods said LNG was “always incredibly risky for New Zealand”.
“It has huge potential to actually drive up our energy costs and that’s only been brought into sharper relief by the last three weeks,” she said.
“We can see that LNG isn’t any security panacea, it has huge risks around it, and one of the things that the Government has to come clean on is their plan is not just to use it as an ‘insurance’ product,” she said.