Ministers say importing LNG will stabilise the energy system and save millions. Opponents argue it’s a short-term fix we could end up regretting for decades, writes Catherine McGregor in today’s excerpt from The Bulletin.
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A back-up plan for dry years
The government has confirmed it will fund the development of a liquefied natural gas (LNG) import facility, almost certainly based in Taranaki, arguing it will protect households and businesses from future energy shocks. Energy minister Simon Watts said the facility would provide a reliable back-up fuel source when domestic gas supply tightens or hydro lakes run low, helping to avoid the sharp electricity price spikes seen in recent winters. According to government modelling, the scheme could leave New Zealanders about $265m a year better off overall, even after the cost of the infrastructure is factored in.
The terminal is expected to be operating by 2027 or early 2028, with a contract to be signed by the middle of this year. As The Post’s Tom Pullar-Strecker reports (paywalled), the infrastructure costs will be covered by a levy on electricity users of between $2 and $4 per megawatt hour – roughly $15 to $30 a year for the average household. Watts said Cabinet had made a definitive decision and would not revisit it, describing the move as “swift and decisive action” to provide energy security.
Gas shortages and an energy crunch
The decision follows a steep and faster-than-expected decline in domestic gas production, particularly from Taranaki fields, combined with a series of dry winters that have constrained hydro generation. As Russell Palmer recounts for RNZ, in 2024, low hydro inflows and gas shortages pushed electricity prices sharply higher, forcing some manufacturers to close temporarily or cut production. Officials warned that gas supply was likely to remain tight, and the government commissioned an independent review into the situation last year. That review concluded that importing LNG made little sense if it was used only as an occasional emergency back-up, because of the large fixed costs involved – a conclusion that ministers have largely rejected.
The argument for LNG imports
The government’s core case is that LNG offers a relatively fast and flexible way to stabilise the system until renewable capacity grows to fill the supply gap. Unlike large onshore terminals, LNG can be imported using floating storage regasification units – specialised ships that store LNG and convert it back into gas. As Pullar-Strecker reported in 2024, Port of Taranaki has said this approach would require only minor onshore work, lowering upfront capital costs compared with permanent infrastructure.
Watts has also argued that LNG would be brought in only when needed, reducing exposure to volatile international gas prices. Its supporters describe LNG as an insurance policy: expensive to build, but cheaper than widespread blackouts, factory closures or prolonged price spikes.
The case against
Critics argue the plan risks locking New Zealand into expensive fossil-fuel infrastructure just as cheaper renewable options become available at scale. Writing for RNZ last year, Kirsty Johnston reported that reaction from all sides of the energy industry – other than the gas industry itself – was “a collective groan”, with energy commentator Larry Blair calling LNG a short-term band-aid rather than a solution. He said LNG would only buy some time while the government searches for a longer-term fix, describing it as “like jamming a finger in the dike to hold back the flood”.
In a letter to Watts, parliamentary commissioner for the environment Simon Upton questioned whether the decision was being properly thought through. “If the Government is going to use public money to enable an LNG facility that will potentially be with us for decades to come, it should at the very least have looked closely at what the alternatives are,” he wrote. Others argue that LNG does little to address deeper market problems, delays the transition to cheaper renewables, and exposes New Zealand to global fuel price shocks – turning a short-term fix into a long-term liability.
