Several years of negative commentary for the gas industry have continued in the latest annual report from MBIE

By Eric Frykberg

More evidence has emerged about the dire state of the gas industry in the publication, Energy in New Zealand 2025, by the Ministry of Business Innovation and Employment (MBIE).

The evidence shows the supply of natural gas for 2024 was 115.70 petajoules (PJ), a decrease of 20.9% on the previous year. 

This was mainly due to existing wells producing far less gas than they planned to.

Natural gas in New Zealand is used for manufacturing chemicals such as fertiliser and methanol, for electricity generation, for producing industrial heat, for operating boilers and heaters in hospitals or schools, and for residential cooking and heating.

Its decline over many years has been repeatedly blamed on the previous Government’s ban on new offshore oil and gas wells, though the Labour Party denies that it is responsible.   

But the new report from MBIE shows not just a steady decline in the past, but a serious decline forecast for the future.

Production at several wells slipped badly. These included the Maui and Pohokura fields.

In addition, there was less-than-expected production from the Kupe KS-9 well, which began production in January 2023.  A graph from MBIE shows New Zealand’s main gas fields generally falling short of expectations, with just three doing better than they thought they would. 

New Zealand's deteriorating gas supply has had knock-on effects for several years.

For example, Taranaki’s Methanex plants, which transform natural gas into the liquid fuel, Methanol, have reduced or even stopped production, so that gas can be freed up for electricity generation at Huntly or at some other thermal power plant.

The consequent tight supply of electricity has led to reduced production at the aluminium smelter in Southland. Critics have alleged that New Zealand is de-industrialising to keep the lights on.

The MBIE report supports this argument, saying a 22% decrease in gas use was caused mainly by production cuts at Methanex.  

MBIE reported on gas reserves as well as gas usage. The report says reserves at January 1, 2025 were estimated to be 948 PJ, a drop of 27% on January 1, 2024 figures.

“While some of this drop was due to natural gas extracted for use over the course of 2024, around 66% of the drop is due to gas field operators revising their estimates of field reserves,” the report says.

“Production will continue to decrease year-on-year, with annual production likely dropping below 100 PJ in the next two years.”

New Zealand’s gas predicament morphed into major changes in the coal industry.

Although overall coal production declined, due in part to failures in the rail system used for transportation, coal for electricity generation rose.

Part way through the year, the electricity company, Genesis, resumed the importation of coal, mainly from Indonesia.  Then, a few weeks ago, four electricity companies agreed to stockpile coal for ten years for emergency generation. 

Overall, 85.5% of electricity in 2024 came from renewable sources, down from 88.1% in 2023. Hydro generation was down to its lowest level since 2013.   However solar, wind and geothermal electricity rose to record levels.

Overall renewable energy production increased 4% on 2023 levels.

The MBIE report stops at the end of last year. "But the trends have continued this year,” BNZ economists said in their latest Manufacturing Snapshot.

“In Q1, commercial gas prices were 20.7% above year earlier levels as demand bumps up against limited domestic supply. In response, some industrial gas users have been forced to cut staff, increase prices or reduce production.”

Meanwhile, the impact of tight gas supplies will be limited for residential gas users, since they account for only about 2% of total consumption.  However, the problem will definitely cause the prices they pay to rise, and any consequent decline in gas usage could compromise the economic viability of gas pipelines.

The lobby group Energy Resources Aotearoa also says the whole industry is maintaining a laser-like focus on ensuring it remains a critical part of our energy system for decades to come.

"Sadly, we’re witnessing the consequences of a shrinking domestic gas supply: higher prices, the doubled use of imported coal for electricity generation, and uncertainty for industrial users," says CEO John Carnegie.

"New Zealand households aren’t yet facing gas rationing, but they can expect steadily rising bills as supplies shrink and costs are spread over fewer users. Unfortunately, the 2024 drop in reserves and production continues to persist into 2025 – this is only getting worse."

Carnegie says the latest data underlines why the Government’s focus on measures that can rebuild our reserves, like reopening exploration and committing $200m in co-investment, is vital to avoid further instability.