LNG in New Zealand

Why do we need LNG?

Dry year risk and gas supply

New Zealand has a highly renewable electricity system. Around 60% of our electricity comes from hydro (rainfall), which means we are very vulnerable to ‘dry years’. Dry years are periods of time when low rainfall means we can’t rely on the hydro lakes we generally use to generate electricity. Dry years are unpredictable - we only know we have a dry year once the water is already running out. Periods of low sun and wind can make the problem even worse.

Normally, New Zealand relies on gas and coal to keep the lights on and the economy running during dry years. But our domestic gas production is falling fast. All of New Zealand’s major gas fields are in decline and coal can’t fill the gap on its own (we don’t have the capacity to burn more in existing generation plant). This means there’s a risk that in a dry year:

• Power stations can’t get enough fuel to generate electricity.
• Gas is diverted to electricity generation leaving other users short and affecting businesses.
• We have electricity shortages and/or very high prices.

Renewables can’t fix the problem yet

New Zealand has a huge pipeline of renewable energy projects in place. We are on track to have a 95% - 98% renewable electricity system. But most renewables depend on the weather, which means they are unreliable in a dry year. Potential renewable solutions to the dry year problem – like batteries or other energy storage technologies – aren’t yet big, cheap or fast enough to cover the gap in our energy system for weeks or months of low hydro, sun and wind.

Even with more grid-scale renewable energy projects being built, our energy system still needs a solution to the dry year problem that works regardless of the weather, can supply a large amount of storable energy, and can be available in New Zealand in the short term.

Dry year risk costs the economy

Dry year risk is priced into electricity contracts, which means it’s driving up household and business power bills every year.

Here’s a snapshot of how high energy prices impact the economy:

• $30-$50/MWh risk premium added to forward wholesale electricity prices.
• $5.2 billion loss in GDP in 2025 alone.
• 1.65% cut in household spending and 1.4% less in real wages by 2025.
• $275 million loss in NZ trade balance in 2025.

Without a solution to the dry year problem, the impacts could get even worse for households and businesses.

That’s why the Government is currently managing a procurement process for LNG import facility services. An LNG import facility could be in place as soon as 2028.

You can read about other work programmes to improve energy security and affordability here:

Review of electricity market performance

What is LNG?

LNG is natural gas that has been cooled to its cryogenic liquid form so it can be transported and stored easily and safely. LNG will help address the problems in our energy system by:

• Providing a back-up fuel option for electricity generation when we need it and ensuring energy shortages don’t happen. It will fuel our existing gas-fired generation.
• Lowering electricity prices by reducing the risk priced into power bills.
• Providing a gas supply for businesses and industries that play an important part in the economy and still rely on gas, buying them time to consider the best long-term energy solution for their needs.

LNG supports renewables and lower emissions

LNG will work alongside renewables as New Zealand becomes a mostly renewable electricity system. In fact, LNG will help renewables grow, the economy electrify, and reduce our emissions:

• LNG will make electricity prices more stable, which will give more households and businesses confidence to electrify.
• Renewable energy developers will know they have a reliable back-up to generate electricity during dry years, which will help them build more wind and solar projects.
• Electricity generators will use more clean, cheap hydro to make electricity, instead of holding it in reserve in case we have a dry year.

Importantly, LNG buys time for other renewable solutions to the dry year problem – like long-duration storage – to develop.

Savings for the economy and consumers

Having access to LNG will reduce power price spikes and lower the risk premium that is currently built into power bills. Evidence shows that simply knowing we will have access to LNG in New Zealand has lowered future wholesale electricity prices for 2028/2029 by $20/MWh. This means:

• Savings of $800 million per year for the economy.
• Savings of roughly $140 per year on the average household power bill.
• Growing New Zealand’s GDP by roughly $1.2 billion per year by 2035, and saving over 4,900 jobs by 2032, compared to a scenario where domestic gas prices continue to rise.

Lower electricity prices will also reduce the costs of producing goods and services, delivering long-term economic benefits for New Zealand.

The detailed funding model for the LNG import facility is currently being developed.

New Zealand's LNG import facility

The Government will contract an experienced provider to build, own, operate and maintain an LNG import facility. Both shortlisted providers are proposing floating storage and regasification facilities inside Port Taranaki. The LNG itself will be procured separately from the import facility.

How an LNG import facility works

Importing LNG is a well-established practice around the world. LNG is stored at -160 degrees, "regasified" or warmed into its gas form, and then sent to the gas distribution network. This natural gas is just like the natural gas that is produced in the Taranaki region and supplied via pipeline across the North Island.

Typically, LNG import facilities involve a ship-based storage system (Floating Storage Unit), which receives LNG deliveries from a second ship (LNG Carrier) when needed.

Over 45 countries around the world import LNG – including the United Kingdom, the Netherlands, Germany, the United States, Australia, Singapore, Japan and South Korea.

LNG import facilities operate safely in urban areas without affecting the public, including in the United States, Spain, Italy and Korea. There are 28 existing LNG import facilities in Japan – a seismically active country – and most are near major cities like Tokyo and Osaka.

Safety

Although LNG is a new energy source for New Zealand, LNG importation is a proven, safe technology. Here are the key facts you should know:

• Natural gas and LNG are not toxic. LNG is non-flammable and non-explosive in its cryogenic liquid form.
• Liquid LNG is heavier than air. In the event of a release, it warms and returns to its gas state, which is lighter than air. The gas rises quickly and disperses on its own.
• LNG is not oil. It does not leave a persistent spill or residue – it does not leave a slick, coat shorelines, or affect wildlife in the way an oil or fuel spill could.

LNG importation is managed by a well-established industry made up of international providers with a strong track record in safely delivering LNG imports and constructing and operating LNG import facilities. These providers are subject to the International Gas Carrier Code.

During the procurement process, MBIE will evaluate proposals based on safety and feasibility, with advice from an expert engineering firm. This includes looking at the potential (though unlikely) risks to recreational port users and local residents. MBIE will not recommend that the Government progresses with an import facility we or our external engineers have any safety concerns about, and the import facility will not be established if the provider cannot meet all the applicable safety standards.

Once selected, the developer will provide a design notice to WorkSafe for feedback, and then a full safety case to be accepted or declined.

Emergencies relating to LNG are rare, but the developer will still need to include emergency response plans in their safety case. These are developed with emergency services, civil defence organisations and Port Taranaki.

Environmental impacts

Any environmental impacts will be determined by the configuration of the LNG import facility and how it operates, which will be confirmed once we identify a preferred provider later this year.

The Government is committed to ensuring environmental impacts are well managed in line with established practice and will continue to work closely with local iwi and hapū, regional councils and the relevant regulators on environmental impacts and hazard management.

Environmental performance is one of the key criteria MBIE will consider when comparing potential solutions. MBIE is and will continue to communicate with a range of groups on assessing and minimising potential environmental impacts, including the Port, local iwi and hapū, and the Regional and local Councils.

The developer’s environmental impact assessment of the proposed LNG import facility will be carefully reviewed and tested by regulators and by MBIE.

We will be very mindful of important local features like:

• Ngāmotu Beach
• the protected view from the new Ngāmotu Marae
• marine protected areas around the Ngā Motu / Sugar Loaf Islands
• the Tapuae Marine Reserve.

The contract for the import facility will include decommissioning obligations covering both on and offshore infrastructure. Once selected, the developer will engage closely with the Taranaki community and users of the marine area on environmental and cultural considerations.

Project updates and next steps

The procurement process is actively underway. The Government has shortlisted two potential providers, and expects to identify a preferred provider later this year.

More information

Read our fact sheets on the LNG import facility procurement process:

You can access proactively released briefings, Cabinet papers on the LNG import facility project, and relevant modelling here:

Read the Minister for Energy’s press releases:

Delivery LNG to support energy security(external link) — Beehive.govt.nz

Securing New Zealand's energy future(external link) — Beehive.govt.nz