Consumption of natural gas dropped to its lowest level since 2011 last year, and the Ministry of Business, innovation and Employment is warning that gas supply may be falling faster than previously expected.
MBIE’s latest Energy in New Zealand report notes 45.5% of the primary energy supply came from renewable sources in 2024 – a record high.
Just over 85% of all electricity was from renewable sources, down from 88.1% the year before. The fall was driven by low inflows to hydro lakes in dry conditions through May, June and July, which prompted electricity spot prices to soar.
Total energy consumption dropped 2.1%.
But the supply of gas was down 20.9% compared to 2023, mostly because of natural field decline.
Total gas use in the economy dropped 22% year-on-year. MBIE said that was mainly driven by a decrease in use at Methanex. It temporarily shut its plants in August and sold the gas to Contact Energy and Genesis Energy, to shore up electricity supplies.
MBIE said natural gas reserves at January 1 were 27% down on the year before.
“While some of this drop was due to natural gas extracted for use over the course of 2024, around 66 percent of the drop is due to gas field operators revising their estimates of field reserves.
“This may occur, for example, when gas field operators perform more detailed surveys on reservoirs, or when development projects provide operators with a better idea of how much gas they are able to extract from a given reservoir. Production profile data also indicates that production will continue to decrease year-on-year, with annual production likely dropping below 100 PJ in the next two years.
“This contrasts with previous production profiles, which had predicted an increase in production around 2025 as development projects were expected to mature. Since around 2020, this expected increase has been revised downward multiple times as new developments have failed to meet production expectations.”
Fertiliser manufacturer Ballance Agri-Nutrients, which uses gas to produce urea, said earlier it might have to temporarily close its Taranaki plant as it struggled to find a supplier.
Major Gas Users Group spokesperson Len Houwers told RNZ that Ballance was not the only company having such problems.
He said there had been a significant lack of investment since 2018. Many in-field gas developments had not been as successful as expected.
A survey of business gas consumers by the BusinessNZ Energy Council and Optima found that gas prices have risen by over 100% on average over the past five years, with half of the respondents having increased prices or cut staff as a result.
Paul Fuge, general manager of Powerswitch, said gas was “really expensive”. He said he had been told that one major retailer would put up its gas prices by 15% next month.
The Commerce Commission is also consulting on changes to gas network charges to take effect from next year.
Both households and businesses were affected, he said.
“We’ve got this kind of death spiral where you get people leaving the network, which leaves fewer people there to split those costs, so more people leave … leaving the people who can’t exit which is low income and renters, having higher and higher costs.
“We get into real equity issues as well. Electrification is good for the environment and the economy long term but it does create equity issues where wealthier households who can afford to get off the gas network and electrify and get modern efficient appliances, EVs… face increasingly lower costs while those remaining face increasing costs. That’s a real concern.”
Fuge said there needed to be a national energy strategy and a plan for gas.
“How do we manage this transition in an equitable way? It does feel quite chaotic at the moment.”
When gas prices were elevated, it could cause higher electricity prices too because of its role in electricity generation.
“The marginal generator can set the price structures at high demand times or in times of crisis and the highest cost forms of generation by far are coal and gas. The risk of gas shortages has kept the forward price of electricity very high.
“We do seem to lurch from energy crisis to energy crisis with alarming frequency. It does appear that market is not delivering the new energy sources we need.
“It’s so essential to the economy and wellbeing of New Zealand, to just leave it completely up to the market… we believe there’s increasingly need a for a national strategy and a firmer hand here in more consequential reform in the energy markets.”
Some of the interventions announced recently to push for a more level playing field for new retailers were happening too late, he said.
“It’s taken a crisis to drive some reforms. It’s still a good thing, but it’s not that sort of dial turning, consequential change we believe is needed now.”
