LNG import terminal pitched as backup for renewables

The Government will move to contract the construction of a liquefied natural gas (LNG) import facility, positioning it as a critical backstop for New Zealand’s electricity system as renewable generation and electricity demand from electric vehicles continues to grow.

Energy Minister Simon Watts says the decision follows extensive analysis and the first stage of procurement, with the project aimed at strengthening energy security and supporting economic growth during the transition to a more electrified economy.

“New Zealand is experiencing a renewable electricity boom, but a rapidly declining gas supply has left our electricity sector exposed during dry years, when our hydro lakes run low,” Watts says.

“The result is greater reliance on coal and diesel, and ultimately higher electricity prices, putting more financial pressure on families and making businesses less competitive.”

Independent analysis from Sense Partners found higher energy prices had a significant impact on the economy, contributing to a $5.2 billion loss in GDP in 2025.

“For Kiwis that means fewer jobs, lower wages and a slower recovery as New Zealand emerges from a challenging period of high inflation and high interest rates,” Watts says.

Watts says the Government has taken steps to improve energy affordability and supply, including regulatory reform and enabling greater development of renewable and non-renewable resources.

“That includes fostering greater competition through tougher regulation of major energy companies and enabling greater development of New Zealand’s natural resources to unleash the supply of renewable and non-renewable energy.

“Establishing an LNG import facility is an important next step.”

The LNG facility would act as a flexible backup fuel source, reducing dry-year risk and helping stabilise wholesale electricity prices — a factor seen as critical to maintaining confidence in electrification, including EV charging networks and fleet transitions.

“Just having a reliable back up is expected to save Kiwis around $265 million per annum by reducing price spikes and lowering the risk premium built into power bills that exist because of supply challenges, equivalent to around $50 per annum per household,” Watts says.

“If domestic gas supply continues to decline and drive-up gas prices, the availability of LNG is estimated to be worth $1.2 billion per annum to the New Zealand economy by 2035. Access to LNG is also expected to protect around 2000 jobs from the economic impact of rising energy prices and gas shortages.”

The Government has shortlisted proposals and is moving toward commercial contracting, with a target of signing a contract by mid-2026. The facility could be operational as soon as 2027 or early 2028.

“Located in the Taranaki, the project will create jobs during construction and provide long-term skilled roles once operational, reinforcing the region’s role at the heart of New Zealand’s energy system,” Watts says.

The Government says LNG would be imported in large shipments only when required, limiting exposure to international gas prices and allowing flexibility as new low-emissions technologies emerge.

Further details on the procurement process and project milestones are expected to be released in coming months.