LNG deal believed imminent — focus must now shift to future after natural gas
Monday, 25 May 2026
OPINION: The Government is poised to announce a deal for an LNG import facility at the Port of Taranaki, which may come as early as this week, according to industry sources.
Former energy minister Simon Watts announced in February that the Government would commission a facility, paid for by a levy on electricity, capable of receiving 12 petajoules (PJ) over a three-month period from the winter of 2028 onwards.
The goal would be to ensure there was enough gas to generate electricity in “a dry winter”, without starving industrial users of the fuel and risking a repeat of the 2024 energy crunch.
Initial indications suggest the facility — which could potentially be largely provided by a mobile, floating re-gasification ship moored at the port — would cost about $2 billion to lease and operate over 15 years.
Read more:
Dry year power shortages may need LNG but could it be cheaper?
Inside Cabinet’s case for importing LNG ‒ and the puzzles that remain
Labour energy spokesperson Megan Woods touts fourth Rankine as alternative to LNG
However, earlier industry research suggests it could come in cheaper.
Nit-picking over the details of the investment aside, environmentalists might be advised to swallow this one as “a necessary evil” and now focus on the longer game.
Domestic natural gas production is expected to crash from about 200 PJ a year in 2014 to about 70 PJ a year when the import facility comes online.
It is proving a difficult, “lumpy” decline to manage, as major industrial users such as the Marsden Point oil refinery and Methanex drop out of the market and the country’s ageing gas fields, such as Maui and Pohokura, start to splutter and head towards closure.
Many industrial gas users in particular just don’t have the option of quickly switching to electricity.
As such, a modest level of LNG imports should perhaps be seen not so much as a big, future bet on fossil fuels, but rather as the beginning of the end, part of a managed decline — a crutch that marks the step on the way to palliative care.
The OECD in its recent report on New Zealand advised that LNG could improve energy security, but that New Zealand should use it only as “a short-term transition tool”.
It suggested it could, for example, be a stepping stone to pumped hydro, which could provide a sustainable solution to the country’s energy-storage problem.
Finance Minister Nicola Willis appears to be on approximately the same page.
“We agree with the analysis of the OECD that an LNG facility would be a short to medium term option,” she said when discussing its report.
“Over the longer term, we would want enough investment in other renewable options that we do not need to be as reliant on that imported gas in the future.”
It is also encouraging the Government is tipped to announce that it will be investing more resources helping transition those gas users who can switch away from gas to do so.
But that is not enough. Given the length of time it takes to put in place major energy infrastructure, the Government should be acting to create the post-LNG future now, even before the ink dries on a terminal contract.
Simply assuming a whizzy advance such as ‘super-critical geothermal’ will pick up the burden down the track doesn’t cut the mustard, although it is an exciting technology.
Nor will thinking that generators will eventually “overbuild” enough renewable electricity to make the ‘firming’ problem go away.
They are incentivised to under-invest in generation, under current market settings.
Rather, it is likely to require starting the journey to pumped hydro — Lake Onslow or something like it — now.
In parallel with LNG imports, the Government should also finally get cracking on efforts to ensure there is a supply of biomethane produced from organic waste, and perhaps ‘green’ hydrogen.
They will be needed to provide a secure and sustainable fuel source for the small proportion of customers that will never easily be able to switch away from natural gas.
Labour energy spokesperson Megan Woods proposed an interesting alternative to LNG imports at a select committee hearing last week, if that could be stood up in time.
Her proposal would involve Genesis Energy investing in a fourth Rankine turbine at its Huntly Power Station to burn carbonised wood waste — usually just referred to in this context as “biomass” — in place of any reliance on LNG for electricity generation.
Evidence provided by Genesis chief executive Malcolm Johns suggested there might not be much in it cost-wise.
And it would be fair to claim that, as a locally sourced fuel, the use of biomass would be the better option in terms of energy security.
But the Ministry of Business, Innovation and Employment favoured temporary LNG imports over a long-term expansion of Huntly, in part because it viewed increased thermal capacity at Huntly as a negative from an emissions perspective.
And that might be the right call, even if that extra turbine was burning biomass.
After all, any biomass that was burning in a fourth Rankine turbine is “green” fuel that wouldn’t be available to the other three Rankine units.
So unless New Zealand had a big enough supply of biomass to fuel all four Rankines, the additional turbine would be likely to mean more coal consumption, relative to what might otherwise be achieved.
Regardless, the die on LNG appears to have been cast.
The next task will be to ensure the country needs to rely on it for as short a time as possible. The planning for that should start now.