Minister sticks to guns on LNG, saying price outlook for imported gas remains favourable

Tuesday, 31 March 2026

Energy Minister Simon Watts has reiterated that Cabinet made “a definitive decision” to buy an LNG import terminal, amid speculation that some ministers are having second thoughts in the wake of the war in the Middle East.

Labour Party leader Chris Hipkins called on Tuesday for the initiative to be scrapped but did not spell out an alternative.

Watts said he didn’t feel undermined by Prime Minister Christopher Luxon’s comment that he would make the final decision on the investment around the middle of the year.

Cabinet had delegated the authority for himself, Finance Minister Nicola Willis and Infrastructure Minister Chris Bishop to sign a contract following negotiations with potential suppliers, Watts repeated on Tuesday, making clear he continued to see little alternative to facilitating the import of LNG.

Read more:

• PM says he’ll make final call on LNG terminal, Energy Minister suggests not much has changed

• Dry year power shortages may need LNG but could it be cheaper?

• Inside Cabinet’s case for importing LNG ‒ and the puzzles that remain

“We’re proceeding with the procurement process as planned. Cabinet has made that decision. What the prime minister has outlined clearly is any procurement process needs to make sure that we’re getting a good deal and we’re going to make sure we do that,” he said.

“We don’t believe that this is in the position where it’s going to be falling through,” he added.

Luxon said yesterday that he would make the final decision on the investment based on whether the business case stacked up.

“We’ve got to look at the commercial case for the LNG import facility. If it doesn't stack up, we won’t be doing it,” he said when asked for further comment.

Asked whether he felt undermined by Luxon’s comments, Watts said “absolutely not”.

“The prime minister and I are very much aligned. We’re in a procurement process. We both are absolutely aligned that we need to make sure that if we’re going to do a deal, we need to make sure that’s a good deal for New Zealand,” he said.

Willis said the commercial, financial and practical case still needed to stack up and it was “pretty obvious to everyone that the world has changed since that proposal first progressed through Cabinet”.

“When we go to make those decisions as delegated ministers, we’ll need to look at what’s changed and see whether it still stacks up, so I’m certainly not going to be doing a pro forma signature on that one,” she said.

“We’re not bound to sign a contract. I would never sign a contract if it wasn’t in New Zealanders’ best interests and we still need to make that judgment,” she said.

Gary Holden, managing director of Lodestone Energy, one of the country’s largest solar farm operators, tacitly endorsed LNG imports in a letter that was released by the Environment Ministry last week supporting the Lake Onslow pumped hydro scheme, describing the two developments as “of equal importance”.

However, the major gentailers have been cool on LNG imports amid signs the Ministry of Business, Innovation and Employment may be coming around to the view that they would need to be obliged to pay for imports of the gas itself, if it was to play the Government’s desired role in the energy system.

Watts said a report commissioned by the Gas Industry Company showed “the counterfactual of not having gas in our economy is catastrophic for regional jobs and GDP growth”.

“We need the capability to import and then we need to do long-term contracting to get that gas when we need it,” he said. “The major issue that we face as a country is we don’t have enough gas to make electricity in a dry year. The way we deal with that is through importation.

“It is a molecules problem, and the need to make electricity in a dry year relies on us having gas. The only way we can do that is through importation, and that’s the process that we’re following at the moment. That is not only what Cabinet has agreed with, that’s also what the official advice is,” he said.

He played down the likely impact of the conflict in the Middle East on the longer-term price of LNG.

“Increased supply coming from the US and Canada — 50% more than baseline over the next five to 10 years — gives us confidence that the overall LNG price, when we look to purchase it in two to five years from now, is going to be different from spot prices today,” he said.

Hipkins said he was “formally calling on the National Government to scrap the LNG import terminal”, describing it as a multibillion-dollar waste of money.

“There are a lot of options for New Zealand to transition to renewable energy, including changes to the way our market operates, and those are things that Labour prioritises,” he said.

Labour energy spokesperson Megan Woods said “storage is absolutely the problem”.

“We’ll be releasing our policy which will address those issues. We will be releasing our policy before the election.

“But what we can say is LNG is not the answer,” she said.