The New Zealand government is moving forward with plans to construct a liquefied natural gas (LNG) import terminal, a project intended to bolster the nation’s energy security and mitigate price volatility. The initiative, announced on , will require taxpayer funding but is projected to save New Zealanders approximately $265 million annually by reducing price spikes and lowering risk premiums, according to Energy Minister Simon Watts.
The decision comes after a period of debate regarding the feasibility and cost-effectiveness of LNG imports. Last year, a report commissioned by the gas and power industries, conducted by UK-based Gas Strategies and Wood Beca, found that the costs of a traditional LNG import terminal would be “prohibitive.” The report highlighted challenges posed by New Zealand’s coastal conditions and existing port configurations, requiring significant capital investment to accommodate large LNG vessels. Subsequent analysis focused on smaller-scale solutions, the results of which are expected to be released in the coming weeks, according to Clarus’ chief operating officer Iwan Bridge.
Despite the earlier concerns about cost, the government is proceeding with the project, framing it as a crucial component of the country’s energy infrastructure. “It will mean that Kiwis will not need to suffer through an endless series of winter bill shocks,” Watts stated. The terminal is expected to be operational at the earliest next year.
The rationale behind the LNG terminal centers on providing a buffer against dry year risk – periods when hydroelectric generation, a significant portion of New Zealand’s electricity supply, is reduced due to low rainfall. LNG can be imported in large volumes, stored, and then regasified for use, offering a readily available alternative energy source. John Carnegie, chief executive of Energy Resources Aotearoa, described the terminal as a “vital part of the overall puzzle” of New Zealand’s energy system security, adding that it would “place downward pressure on wholesale electricity prices and reduce the risk premium in the out years.”
However, the project isn’t without its critics. A 2025 Frontier Report, commissioned to review the electricity market, cautioned against relying on LNG except as a last resort, arguing that the high fixed costs would not be justified if used solely to address dry year risks. This suggests a concern that the investment may not deliver the anticipated economic benefits if not utilized strategically.
The announcement has already sparked debate, with environmental groups voicing strong opposition. Greenpeace has labeled the decision “dirty, dumb and expensive,” arguing that it will hinder New Zealand’s progress towards its carbon targets. A similar sentiment was expressed in an open letter from 350.org.nz, which argued that investing in an LNG terminal would “waste hundreds of millions of taxpayers money, lock customers into a more expensive energy future, increase exposure to international price shocks and make it increasingly challenging to meet carbon targets.”
The government’s decision to move forward with the LNG terminal also involves the introduction of a new levy to finance its construction. This detail has drawn criticism, with some questioning the fairness of burdening taxpayers with the cost of a project that was initially deemed potentially uneconomical by industry-commissioned reports. ThePost.co.nz reported on a recent exchange between National and Labour parties regarding this levy, highlighting the political sensitivities surrounding the project’s funding.
Meridian Energy’s incoming chief executive, Mike Roan, indicated that a large-scale LNG facility is no longer under consideration, suggesting a shift towards the smaller-scale solutions identified in the second report commissioned by Clarus and other gentailers. This pivot suggests a recognition of the cost challenges associated with a large-scale import terminal, but also raises questions about the potential capacity and effectiveness of a smaller-scale alternative.
The Taranaki region is expected to benefit from the construction of the facility, with potential economic gains from the project. announcement signals a commitment to bolstering New Zealand’s energy infrastructure, but the long-term economic and environmental implications remain a subject of ongoing debate. The success of the project will likely hinge on careful management of costs, strategic utilization of the LNG supply, and a commitment to integrating it effectively within New Zealand’s broader energy mix.
