Government’s LNG Terminal Plans Failed to Account for Global Price Spike

The New Zealand government’s plan for a liquefied natural gas import terminal in Taranaki did not account for the impact of international price spikes in its modelling, according to documents released under the Official Information Act.

The Ministry of Business, Innovation and Employment confirmed that the modelling done for the proposed billion-dollar facility did not consider the effect of major global price shocks, a revelation that has drawn criticism from energy sector leaders and climate advocates.

Prime Minister Christopher Luxon announced in February that the government would proceed with the LNG import terminal, with costs to be covered through an electricity levy. The facility was selected from a shortlist of five options deemed “timely, feasible and of sufficient scale to meet dry year needs” by MBIE.

Gentailer chief executives expressed doubts about the project at the energy sector’s conference last month, prompting the Prime Minister to state that the government would not proceed if the business case did not stack up.

Officials acknowledged that while the current conflict in the Middle East has created volatility in LNG prices, longer-term price projections remained consistent with the information used to base the decision. However, climate advocates described the omission of price volatility modelling as “remarkable” and questioned the facility’s viability.

The announcement has already influenced electricity forward prices, with MBIE noting that prices dropped substantially in the weeks following the government’s LNG terminal announcement.