The Government's announcement that it would offer to buy a 15% stake in new gas field developments came out of left field in an otherwise predictable Budget 2025.
Perhaps that's why no one asked about it during the Budget lockup press conference. Willis eventually had to ask if anyone had a question for Resources Minister Shane Jones.
But she needn’t have worried about the policy going unnoticed. Always a showman, Jones kicked off his Budget speech in Parliament by offering the Green Party a sniff of crude oil from the Māui fields, harvested in 1969.
“Because this Budget is the real oil: $200 million dedicated to accelerate, de-risk, enable your nation—our country, fellow MPs—to take a cornerstone in recovering a foundation industry destroyed by the last regime,” he told them.
In 2018, the Labour–NZ First Government passed a law halting new oil and gas exploration permits. Jones and his party reluctantly voted for the bill, but now calls it "the worst decision made in the history of our nation."
At the time, his defence was that existing exploration permits, some valid until 2030, would remain in place, and active gas fields would continue production until 2050.
But the plan didn’t unfold as expected. International investors saw the writing on the wall and lost interest in funding risky exploration projects in a country phasing out gas.
B***ger off
Andrew Jefferies, chief executive of Echelon Resources, said it was like “putting a big signpost in your front lawn saying bugger off, we're not interested in having you here.”
His firm, then called NZ Oil & Gas, held a permit for a promising block off Canterbury’s coast and had secured international partners to fund the first well.
“Within a week those international partners had gone, and they are not coming back,” he said.
Establishing new gas fields can take a decade and cost over a billion dollars. Investors were unwilling to make that commitment with a Government working against them.
To make matters worse, output from existing gas fields has declined and is now insufficient to meet demand from electricity generators and industrial users. When power shortages hit last year, it was partly due to the lack of natural gas — though the link to the exploration ban remains speculative.
Search for certainty
The Coalition has now reversed the exploration ban. But Jones said overseas investors were still telling him they lacked confidence that the government would "stick by its word."
This has led Jones to search for a way to block a future Labour–Green government from reinstating the ban and reassure international investors that it is safe to set up new gas fields.
Initially, he sought advice on providing an insurance bond that would pay out if the government restricted sector activity. This idea didn’t take off and has seemingly been replaced by the $200 million co-investment fund.
“You can't totally prevent green madness in the future, but by committing the Crown to a fellow partner, it would be an extraordinarily difficult step, if not impossible, to immolate such an investment,” he told Interest.co.nz.
The fund has a dual purpose: to impose a fiscal cost on any future government that moves against the sector, and to serve as an incentive to attract wary investors back into the market.
Jones will head to Singapore in the coming weeks to promote the sector and explain how the fund will help protect oil and gas interests.
Other ways
Even if he succeeds, it could be many years—if not a decade—before new gas fields begin supplying energy. Critics argue that this time and money should be spent transitioning away from natural gas to lower-emission energy sources.
Natural gas makes up only a small share of New Zealand’s overall energy use, but it remains essential in regions like Taranaki and underpins the electricity supply during dry weather.
The drop in gas production last year, combined with low hydro storage, sent electricity prices to record highs. This forced manufacturers like Methanex’s Motunui plant, Winstone Pulp’s mills, and Oji’s Penrose facility to scale back or shut down.
Still, critics argue that the solution isn’t more oil and gas exploration, but helping these industries transition away from fossil fuels. That could mean switching to electricity or hydrogen, alongside investment in batteries and renewable generation to manage supply.
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