Falling Gas Output Signals Trouble for New Zealand’s Industrial Sector

• Gas production in New Zealand has decreased significantly in 2023.
• Energy and Resources Ministers cite poor policy decisions for current shortages.
• Government actions aim to restore gas industry confidence and output.

New Zealand is currently facing a significant threat to its energy security due to a marked decrease in gas production. This year’s figures, as released by the Gas Industry Company, indicate a 12.5% drop in gas production throughout 2023, with an additional 27.8% decline in the first quarter of 2024, compared to expectations.

According to Energy Minister Simeon Brown and Resources Minister Shane Jones, this substantial reduction has raised alarms among large gas consumers about their ability to secure future gas contracts. “The previous government stifled investment confidence in the natural gas sector. We are now seeing the serious impacts of these decisions with significant reduction in gas being produced which is leading to significant supply constraints and higher prices for consumers,” stated Minister Brown.

The decrease in gas supply has severe repercussions, forcing industrial users such as Methanex to scale back production. It also means that more coal will be necessary to maintain electricity supply, further emphasizing the issue’s gravity.

Minister Brown also highlighted the broader impacts of reduced gas output, particularly on essential services. “The All-of-Government contract for reticulated natural gas is currently being negotiated by MBIE. This expires in September, and affects schools, tertiary institutions, and hospitals. Low production could mean higher prices and shorter-term contracts for these critical services,” he explained.

Minister Jones referred to the situation as a lingering effect of the previous government’s policies, which the current Coalition Government intends to reverse. He announced plans to introduce changes to the Crown Minerals Act to revitalise the sector and increase gas production.

Amid these challenges, MBIE has initiated a Gas Security Response Group to coordinate efforts among gas producers, major users, and government agencies to ensure that gas remains available for critical uses.

The government’s commitment to restoring investor confidence and boosting production was echoed by Minister Jones: “New Zealand has abundant natural resources, including energy resources such as natural gas. It is a tragedy to leave this abundance in the ground while our manufacturers suffer and our industrial base moves overseas. We are going to fix it.”