Government responds to review of energy system

1 October 2025

The Government released its response yesterday to the Frontier Economics’ review of New Zealand’s energy system that it had commissioned earlier in the year.

Key outcomes for the gas sector include:

• Government support to evaluate and develop options for establishing a small LNG (liquified natural gas) import facility to back up New Zealand’s declining natural gas reserves if needed for dry years;

• A rejection of Frontier’s recommendation of merging the gas industry co-regulator Gas Industry Company (GIC) with the Electricity Authority;

• A Request for Information about how Government purchase of energy can help grow fuel supply (eg. biomethane);

• A requirement on GIC to provide greater transparency around the current status of gas reserves.

With respect to LNG, government will begin a process to “procure or underwrite, if required”, a liquefied natural gas (LNG) facility.

This is likely to be small-scale, potentially with a capacity of less than 4 Petajoules (PJs) per year, and will be expected to start delivering gas in time for winter 2027. A decision on whether to proceed will be made in December.

“As a general rule, the infrastructure costs associated with a large LNG facility are greater than for a smaller-scale facility, albeit the costs of the LNG might be higher for a smaller-scale operation,” the release said.

The recommendation to merge the GIC and the Electricity Authority was rejected as it was considered this “could disrupt investment and create uncertainty at a critical time”.

“Instead, the Government will focus on delivering Frontier’s recommendations for more gas market transparency, better electricity market monitoring, and faster rule-making, within existing structures.”

In terms of transparency of gas supply, the Government wants to ensure that gas and electricity markets have the information they need to plan for the future.

“The electricity market review highlighted that poor and delayed information about gas reserves, production, and demand is undermining confidence in the energy market.

“Incomplete data leads to inefficient investment, increased costs, and makes it harder for both gas and electricity markets to function effectively.

“The Government will establish a stronger gas information framework, ensuring timely, reliable, and transparent data is available to all market participants. This is essential to building an energy market that is efficient, competitive, and capable of delivering secure and affordable energy.

This will include:

• Reducing timeframes for MBIE to receive and publish gas reserves and production forecast data so the market has up-to-date visibility of supply from 2026.

• Directing Gas Industry Company to produce an annual gas supply and demand study that provides forward-looking insights, with the next report due at the end of 2025.”