NZ Advances LNG Project to Strengthen Energy Security

Energy Minister Simeon Brown announced that two providers have been selected to progress to the next stage of the process, with a Request for Proposal (RFP) now being prepared.

New Zealand is moving closer to securing a liquefied natural gas (LNG) import facility, a project the Government says could reduce pressure on electricity bills and provide a reliable backup energy source during dry years.

Energy Minister Simeon Brown announced that two providers have been selected to progress to the next stage of the process, with a Request for Proposal (RFP) now being prepared. The Government expects to sign a contract with a preferred provider later this year, while the facility is scheduled to begin operating in 2028. The announcement forms part of the Government's broader strategy to strengthen New Zealand's energy system as domestic gas supplies decline and concerns grow about electricity shortages during periods of low renewable generation.

Brown said renewable energy projects are expanding rapidly, with new wind farms, geothermal developments and battery storage projects entering the market. Even with that growth, he said there is currently no renewable technology capable of providing the large-scale backup needed for extended periods when hydro lake levels fall and renewable generation drops.

Lower power costs and greater certainty for businesses

The Government believes the LNG facility could deliver significant economic benefits by reducing the risks associated with dry years, when low rainfall limits hydroelectric generation and places pressure on electricity supplies.

According to the Government, wholesale electricity prices for 2028 and 2029 have already fallen by around $20 per megawatt-hour since the LNG proposal was announced in February. Officials estimate those changes could generate savings of up to $800 million annually, with benefits eventually flowing through to households and businesses.

Energy-intensive industries have been particularly vulnerable during periods of tight supply. Manufacturers, food processors and other major energy users often face higher operating costs when electricity prices surge. In severe situations, businesses can be forced to scale back production or temporarily halt operations.

The Government argues that a reliable LNG supply would provide an additional layer of security, helping industries continue operating during periods when renewable generation is constrained. Officials also believe a stronger backup system would reduce the risk of blackouts and support greater confidence for future investment.

Funding model under development

While the Government has committed to progressing the project, decisions on how the facility will be funded are still being worked through. Brown has directed the Ministry of Business, Innovation and Employment (MBIE) and the National Infrastructure Funding and Financing Company (NIFFCO) to develop funding options and engage with electricity generators and retailers on a fair approach. He stressed that the facility will not be paid for through a levy added to household power bills.

The Minister said responsibility for maintaining a secure electricity supply rests with the energy sector itself, a principle that will guide funding decisions as discussions continue. Recent global events have also reinforced the importance of diversified energy sources. The Government says access to imported LNG would provide flexibility during supply shortages and reduce New Zealand's exposure to domestic fuel constraints.

The proposed LNG import facility is one part of the Government's Securing Affordable Energy plan. It sits alongside a new Winter Energy Reliability Obligation, currently under consultation, which would require electricity companies to take greater responsibility for preparing for dry-year risks and ensuring adequate backup energy is available before shortages emerge. Together, the measures are intended to strengthen New Zealand's energy security, support economic growth and provide households with greater protection from future electricity price shocks.