Without enough gas to back up renewable generation, power bills go up, factories shut down
For generations, New Zealand's energy story was written underground, in vast gas fields that quietly powered homes, factories, and turbines. Now those fields are closing ahead of schedule, and the nation finds itself navigating a narrowing corridor between the fossil fuel era it is leaving and the renewable future it has not yet fully built. The gap between those two worlds is where electricity prices spike, factories fall silent, and workers wait. How a country bridges that gap — and whether it treats the bridge as temporary or permanent — will define its energy character for decades to come.
- New Zealand's natural gas reserves fell 11.5% in a single year, with anchor fields Māui and Pohokura shutting down a decade ahead of schedule, leaving the country's energy system scrambling for footing.
- When gas tightens and hydro lakes run low, wholesale electricity prices surge to levels that force energy-intensive manufacturers to halt operations — a preview of what could become routine.
- A 2018 ban on new exploration permits, combined with over a billion dollars in failed domestic prospecting, has left the country with few short-term domestic options to replace what is being lost.
- The government is pressing ahead with a costly LNG import terminal and a $200 million Gas Security Fund, betting that imported liquefied gas can hold the system together while renewables scale up.
- The OECD warns that the terminal risks entrenching fossil fuel dependency, and that broader reforms — flexible electricity markets, non-gas backup generation, reinvestment by state generators — remain unaddressed.
- The clock is running: fields that once seemed distant in their decline are nearly empty, and the window for an orderly transition is closing faster than policy has moved.
New Zealand is running out of gas faster than its energy planners anticipated. In the year ending January, the country's natural gas reserves dropped 11.5 percent — a steeper fall than projected — as the major fields underpinning the electricity system approach their end. The Māui field will stop producing entirely by the close of this year. Pohokura, another cornerstone of national gas infrastructure, will follow in 2033 — a full decade sooner than previously forecast. Only Mangahewa offers a modest extension, expected to run until 2035. These are not minor revisions. They represent a structural shift in how New Zealand powers itself.
The effects are already being felt. When gas supplies tighten during dry years — when hydro reservoirs run low and wind generation underdelivers — wholesale electricity prices spike sharply enough to force energy-intensive manufacturers offline. Factories that depend on reliable, affordable power are finding neither. Workers face layoffs. Households face rising bills. The system is straining even as renewable capacity continues to grow.
The OECD recently diagnosed the problem plainly: mature fields have underperformed, the 2018 exploration ban constrained future supply, and more than a billion dollars in development investment since 2020 has failed to uncover commercially viable new reserves. Policy uncertainty and weak revenue prospects have discouraged the investment in backup generation that a renewables-heavy grid requires. The country is edging toward an energy security crisis.
The government's central response is an LNG import terminal, a project exceeding a billion dollars currently in procurement. Energy Minister Simeon Brown has been direct: without gas backup for renewables during poor conditions, prices rise, factories close, and jobs disappear. Alongside the terminal, the government has reversed the exploration ban, established a $200 million Gas Security Fund, and enabled carbon capture technology to extend the life of existing extraction.
The OECD's endorsement of the terminal is cautious. It acknowledges the supply security benefit but warns against treating import infrastructure as anything other than a temporary bridge — a stopgap while storage and fully renewable capacity are built out, not a permanent fixture. Its broader recommendations — non-gas backup investment, flexible demand markets, redirecting state generator profits into new capacity — have yet to be adopted. The fields that sustained New Zealand's energy system for decades are nearly spent, and the path forward remains only partly drawn.
New Zealand is running out of gas faster than anyone planned for. In the year ending January, the country's natural gas reserves dropped by 11.5 percent—a steeper decline than energy planners had anticipated. The reason is straightforward: the major fields that have powered the nation's electricity system for decades are exhausted, and they're being shut down ahead of schedule.
The Māui field, which has been in slow decline for years, is now expected to stop producing entirely by the end of this year. Pohokura, another cornerstone of the country's gas infrastructure, will follow suit in 2033—a decade sooner than previously forecast. Only Mangahewa offers a small reprieve, expected to continue operating until 2035. These aren't minor adjustments to long-term plans. They represent a fundamental shift in how New Zealand will generate electricity and power its industries.
The consequences are already visible. When gas supplies tighten, wholesale electricity prices spike. During dry years—when hydroelectric dams run low and wind generation falters—these price increases become severe enough to force energy-intensive manufacturers to shut down operations temporarily. Factories that depend on reliable, affordable power are finding neither. Workers in those sectors face the prospect of layoffs. Households see their power bills climb. The system is being pushed toward its limits even as renewable energy capacity grows.
The Organisation for Economic Co-operation and Development, in a report released recently, laid out the problem clearly. Mature gas fields have underperformed expectations. A 2018 government ban on new exploration permits, imposed during the Labour administration, has also constrained supply. Despite more than a billion dollars in development investment since 2020, efforts to find commercially viable new gas reserves have largely failed. The OECD warned that policy uncertainty and weak revenue prospects have discouraged investment in the backup generation systems New Zealand needs as it transitions away from fossil fuels. The country is approaching a genuine energy security crisis.
The government's response centers on importing liquefied natural gas. The Ministry of Business, Innovation and Employment is running a procurement process to build an LNG import terminal—a project that will cost more than a billion dollars. Even the recent spike in global LNG prices, driven by conflict in the Middle East, hasn't deterred the effort. Energy Minister Simeon Brown has acknowledged the problem directly: without sufficient gas to back up renewable generation when conditions are poor, power bills rise, factories close, and people lose jobs.
Beyond the import terminal, the government has reversed the exploration ban and established a $200 million Gas Security Fund to support new domestic production. It is also enabling carbon capture and storage technology, which can make continued gas extraction cheaper and easier. The OECD, however, has suggested a broader set of solutions: the government should invest in non-gas backup generation, create markets that reward flexibility in electricity demand, and ensure that state-owned generators reinvest profits into new capacity rather than paying out excessive dividends. These recommendations have not been adopted.
The OECD's position on the LNG terminal itself is cautious. While it acknowledges that importing liquefied gas would help restore supply security, it warns that doing so risks locking New Zealand into continued fossil fuel dependence. Any LNG import infrastructure should be treated as a temporary measure—a bridge to a future powered entirely by renewable energy and storage, not a permanent solution. For now, though, the government is moving forward with the terminal as the centerpiece of its energy security strategy. The clock is ticking, and the major fields that have sustained the system are nearly empty.
Notable Quotes
Gas is used to generate the electricity that keeps the lights on when the sun's not shining, the wind's not blowing and the lakes are low. Without enough gas to back up renewable generation, power bills go up, factories shut down, and Kiwis lose their jobs.— Energy Minister Simeon Brown
Policy and weak revenue uncertainty have stalled investment in new firming despite rising demand, leaving the system close to security limits even as renewables investment grows. Immediate action is needed to restore resilience and affordability.— OECD report
The Hearth Conversation Another angle on the story
Why are these gas fields running out so much faster than expected? Did something change in how they're being used?
The fields themselves are just old. Māui and Pohokura have been producing for decades. They're mature reservoirs—the easy gas is gone, and what remains is harder to extract. Producers have revised their estimates downward because they now understand how little is actually left.
So this isn't about increased demand or wasteful consumption?
Not really. The decline is about geology and depletion, not behavior. What's changed is that we're now facing the reality of what happens when your primary backup fuel disappears just as you're trying to move away from fossil fuels entirely.
The government banned new exploration permits in 2018. Did that create this shortage, or just make it worse?
It made it worse. The ban meant no new fields were being developed to replace the old ones. But even with a billion dollars spent on exploration since 2020, companies haven't found commercially viable reserves. The real problem is that New Zealand's geology may simply not have enough accessible gas left.
What happens to electricity prices if there's no gas to generate power during a dry winter?
They spike dramatically. Gas plants run when hydro dams are low and wind isn't blowing. Without that backup, prices can surge enough to force factories to shut down temporarily. It's not just about cost—it's about whether the system can keep the lights on at all.
Is the LNG import terminal a real solution, or just buying time?
It's buying time. The OECD says it could help, but warns it might trap New Zealand in fossil fuel dependence. The government is treating it as necessary for now, but the long-term answer has to be renewable generation and storage, not importing gas indefinitely.
What would the OECD prefer the government do instead?
Invest heavily in non-gas backup generation—geothermal, battery storage, demand management. Create markets that reward flexibility. Stop paying out excessive dividends from state-owned generators and reinvest that money in new capacity. The terminal might be necessary, but it shouldn't be the only strategy.