Hon Simeon Brown 
Minister for Energy
 
Hon Shane Jones
Minister for Resources

There has been a material decline in gas production according to figures released today by the Gas Industry Co.

Figures released by the Gas Industry Company show that there was a 12.5 per cent reduction in gas production during 2023, and a 27.8 per cent reduction in gas production in the first three months of this year beyond what was projected.

Due to this significant reduction in gas production the Government has also been advised that some large gas consumers are expressing concern about their ability to secure gas contracts, says Energy Minister Simeon Brown and Resources Minister Shane Jones.

“The previous government stifled investment confidence in the natural gas sector. We are now seeing the serious impacts of these decisions with significant reduction in gas being produced which is leading to significant supply constraints and higher prices for consumers.” Mr Brown says.

“Reduced gas supply is forcing industrial users such as Methanex to reduce production. Less gas will also mean more coal will be needed to keep the lights on.

“The All-of-Government contract for reticulated natural gas is currently being negotiated by MBIE. This expires in September, and affects schools, tertiary institutions, and hospitals. Low production could mean higher prices and shorter-term contracts for these critical services.

“This is all a direct outcome of the last Government’s policy decisions which have disincentivised investment in gas production. This has seen a dramatic reduction in exploration for new gas resources since 2021, which would have brought online the gas supplies we now need. Maintenance drilling has also been suppressed, further reducing production from existing gas fields,” Mr Brown says.

Resources Minister Shane Jones says the low gas production figures are a hangover from the previous government’s policies that the Coalition Government will reverse.

“Gas supplies have fallen because of a long-term failure to invest, not because of some sudden, unexpected interruption to supply. Reduced gas production means reduced output from our manufacturers and exporters. It is a terrible threat to the economies of the regions where these industries operate and the jobs that they provide,” Mr Jones says.

“The Government will bring back investment confidence. We are working with the sector to increase production, and I will be introducing changes to the Crown Minerals Act to Parliament this year that will revitalise the sector and increase production.

“New Zealand has abundant natural resources, including energy resources such as natural gas. It is a tragedy to leave this abundance in the ground while our manufacturers suffer and our industrial base moves overseas. We are going to fix it.”

In response to this report, MBIE has stood up a Gas Security Response Group to coordinate gas producers, major gas users, and government agencies while supply is tight. The group will assess measures need to make sure that gas supply is available for its most critical users.

Notes:

• Throughout 2023, natural gas production was only 146.5PJ, significantly below forecasts of 167.5PJ.
• In the first three months of 2024, natural gas production was expected to be 42.6PJ, but only 30.7PJ was produced. This has materially changed forecasts and caused concern among gas users, as they look to confirm long-term contracts.
• The Government will introduce amendments to the Crown Minerals Act to restore confidence to the gas sector this year and is working on this as a priority.
• Natural gas in New Zealand is primarily used for chemical production such as methanol and urea, food processing, and electricity generation.
• The last time there was a major disruption in gas supplies:
  • Methanex closed Waitara and idled one Taranaki train
  • Norske Skog closed
  • The Marsden Point refinery closed
• Balance brought forward (and then extended) a plant shut in
• Several dozen large industrial customers were unable to secure gas supply contracts or paid very high prices for new contracts. This led to reduced operations and closures.
• The Gas Security Response Group will consist of MBIE (Chair), the Gas Industry Company, Electricity Authority, gas producers, and electricity generators who use gas – Genesis/Contact, and Methanex.

The group will be tasked with:

o verifying the immediate supply and demand information to make sure we have a true picture of the problem

o undertaking measures to make sure any impact of tight supply is managed by the large users who are best able to absorb the reduced supply

o coordinating across government, the gas sector and electricity use to help identify and resolve any problems

o providing advice to government on appropriate actions to ensure security of gas supply.

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