Latest Zealand Races to Secure Energy Future with $1 Billion LNG Terminal
New Zealand’s National-led government is pushing forward with plans to construct a liquefied natural gas (LNG) import terminal on the North Island, a project estimated to cost over NZ$1 billion (approximately $600 million USD). The move comes as the nation grapples with dwindling gas reserves, increased reliance on hydroelectricity impacted by drought, and a need to bolster energy security.
Addressing a Critical Energy Shortfall
The decision to shortlist firms for the construction of the terminal reflects a growing concern over energy supply. In 2024, energy shortfalls led to production cuts in key industries like chemical and metals processing, as gas was prioritized for power generation. Energy Minister Simon Watts stated the terminal is expected to deliver approximately 12PJ (320 million m³) of gas during peak winter demand, covering roughly half of the country’s fuel reserve requirements.
Funding and Economic Impact
The project will be financed through an industry levy, estimated at NZ$2–4/MWh. The government anticipates that the financial benefits – projected at around NZ$10/MWh – will outweigh these costs. However, a 2025 report indicated that LNG imports could cost consumers between NZ$170 million and NZ$210 million annually, including a landed gas price of $10.12-10.37/mn Btu.
Balancing LNG with Renewable Energy Goals
While prioritizing LNG as a short-term solution, the government also emphasizes its commitment to renewable energy sources. Plans are underway to prompt-track wind and geothermal projects, including supporting deep geothermal exploration. This dual approach aims to provide both immediate energy security and a sustainable long-term energy mix.
Political Landscape and Industry Hesitation
The push for increased gas output is occurring ahead of November elections, with the government promising co-investment in new fields, particularly in the Taranaki basin. However, gas firms have shown reluctance to reinvest in New Zealand due to political uncertainty. Australia’s Beach Energy, for example, ruled out further spending in the country in 2025. The opposition Labour party has signaled its intention to reinstate a ban on offshore gas exploration, a policy previously in place from 2018 to 2025.
Taranaki as the Likely Hub
All shortlisted submissions for the LNG import terminal are located in the Taranaki region. A contract is expected to be awarded by mid-2026, with the facility potentially operational as early as mid-2027 or early 2028. The government estimates the facility could save New Zealand households around $265 million per year, roughly $50 per household.
FAQ
Q: What is LNG?
A: Liquefied Natural Gas (LNG) is natural gas that has been cooled to a liquid state for easier transportation and storage.
Q: Why does New Zealand need an LNG import terminal?
A: New Zealand’s domestic gas reserves are declining, and the country needs a reliable energy source, especially during peak demand in winter.
Q: How will the LNG terminal be funded?
A: The terminal will be funded through an industry levy on electricity, estimated at NZ$2–4/MWh.
Q: Will the LNG terminal impact electricity prices?
A: The government argues the benefits will outweigh the costs, with potential savings of at least $10/MWh, but consumer costs are estimated at NZ$170mn-210mn/yr.
Q: What is the government doing to promote renewable energy?
A: The government is fast-tracking renewable energy projects, including wind and geothermal power, and backing new deep geothermal exploration.
Want to learn more about New Zealand’s energy policies? Explore our other articles on sustainable energy solutions.
