New Zealand's gas squeeze: what it means for business energy costs

New Zealand is running short of its own natural gas, and businesses pay twice: through dearer, shorter gas contracts, and through power prices that spike when a dry year leaves too little gas to back up the hydro lakes. Here is the picture as at September 2026.

How fast is New Zealand's gas supply running down?

Fast: proven and probable (2P) reserves fell 23% in a year, to a record-low 731 PJ at 1 January 2026 (MBIE, 14 May 2026).

About half of that 217 PJ fall was gas produced in 2025 and half was downward revisions. The Government says 12 of the 17 producing fields are expected to stop within 10 years.

New Zealand has no facility to import gas, so any shortfall has to be made up with other fuels (MBIE). Piped natural gas is North Island only, serving about 13,000 commercial and 400 industrial customers (Commerce Commission).

What changes in Taranaki over the next six months?

The Māui field is expected to stop producing by the end of 2026 (Gas Industry Co), and Methanex will idle its plants early in 2027.

Methanex, which Newsroom calls the country's largest gas user (about 40% of supply), announced the indefinite idling on 1 September 2026 and is selling substantially all its gas entitlements.

That matters beyond Taranaki. Methanex has been the system's shock absorber, idling from August to October 2024 and for eight weeks in May 2025 so its gas could go to power stations (MBIE). Gas Industry Co says its exit will limit how far demand response can cover dry-year fuel shortages. Ballance's Kapuni ammonia-urea plant has only a short-term gas contract to the end of 2026.

Taranaki is also where the fixes are going. Both shortlisted LNG import proposals are at Port Taranaki (MBIE). And the Government's Gas Security Fund will invest $21.5 million in the Kaheru offshore exploration prospect (Energy Resources Aotearoa, 24 September 2026). More on the region: our Taranaki hub.

Why does less gas push up business power prices?

Because gas is the backup fuel for a hydro-based grid. When the lakes run low, gas-fired stations fill the gap; when gas is scarce, the price of that last megawatt-hour climbs.

• Between July and early August 2024, hydro storage hit a six-year low and spot prices rose from about $300/MWh to over $800/MWh (Electricity Authority). Auckland's monthly average spot price reached $488/MWh in August 2024, the highest in market history (PwC for Gas Industry Co).
• The Electricity Authority says the average monthly wholesale price at Ōtāhuhu sat around $100/MWh from 1997 to 2018, then averaged $160/MWh from 2019 to early 2026. It calls the gas decline one of the most significant influences on the market over the past decade.
• The Government's February 2026 LNG fact sheet put the dry-year risk premium in forward prices at $30–50/MWh. Business prices are driven by forward prices, so that risk sits in your fixed rate even in a wet year.

Right now the picture is calm. In the week of 13–19 September 2026 the spot price averaged $39/MWh, with hydro storage about 136% of the historical average (Electricity Authority). The Authority expects "long periods of very low prices" and "short periods of very high prices". The gas squeeze lives in those short, expensive periods, and in what suppliers charge to shield you from them. For the other forces on a power bill, see why business power bills are rising.

What is the Government doing about gas supply?

It is betting on imported LNG as dry-year insurance, while pushing the largest electricity players to hold backup and businesses to use less gas.

One caution: LNG ties local prices to a volatile global market. After war in the Middle East effectively closed the Strait of Hormuz in early 2026, Asian spot LNG averaged US$17.5/MBtu in the June quarter, up close to 45% on a year earlier (IEA). PwC's March 2026 modelling for Gas Industry Co, which assumes hedged LNG prices, finds delivered gas cheaper with LNG: $19–22/GJ over the decade, against about $31/GJ by 2035 without it (real terms). Industrial gas averaged about $10/GJ over the past decade (PwC).

What does this mean for businesses that use gas?

Expect gas to cost more and be harder to contract, whatever happens with LNG.

• Contract prices: twelve medium-to-large users the Commerce Commission interviewed in 2025 reported contracted price rises of 50–200% in a year, often after getting one tender or none.
• Shorter terms: users are offered short-term supply, or long-term contracts "with a large price premium" (Gas Industry Co, June 2026). The Government says many new contracts last "just a few months".
• Pipeline charges: new Commerce Commission limits start on 1 October 2026. Most households face rises of about 1–3% before inflation; small businesses, similar percentages.
• LPG: the largest LPG supplier added temporary adjustments of 4.1% in May and 3.8% in June 2026, amid the Middle East conflict (Gas Industry Co). That matters most in the South Island, which has no natural gas network.

More for your sector: hospitality and food production.

What should a gas-using business do now?

Get your numbers, dates and options straight before your next renewal.

1. Know your annual gas use. Add up a year of bills. The loan scheme threshold is 1,000 GJ (about 278,000 kWh); an average household with gas cooking and heating uses about 25 GJ a year.
2. Start renewals early. Large users told the Commerce Commission that take-or-pay clauses can make it harder to cut gas use later, and fixed charges bite hardest when production dips.
3. Check your curtailment band. In a gas emergency, supply is cut in bands. Gas Industry Co has commissioned modelling of how an emergency would play out without Methanex and Ballance to stabilise the system, to tell businesses in higher bands whether they risk being curtailed earlier.
4. Plan switching around equipment life. Large users told the Commerce Commission that process hot water and steam often cost more to run on electricity. Ask your lines company about capacity early: grid upgrades were a key barrier.
5. Use the support. The Gas Transition Loan Guarantee Scheme opened on 31 July 2026 for businesses on piped natural gas using at least 1,000 GJ a year. The Crown guarantees 80% of each new bank loan (loans of up to $50 million) for projects cutting gas use by at least 15% without cutting output. EECA offers independent advice and regional workshops.
6. Review your electricity contract too. Dry-year risk is priced into power, and moving load off gas makes that contract bigger. See what we compare for business gas and LPG, try the savings calculator, or check your address or ICP.

What should businesses watch before winter 2027?

• 1 October 2026: new gas pipeline price limits start.
• By October 2026: the Government aims to have interim gas-market disclosure rules in place, under a transparency law passed on 29 May 2026.
• After the election: the delayed decision on the LNG terminal contract.
• End of 2026: Māui expected to stop producing.
• First quarter of 2027: Methanex idles its plants.
• Autumn 2027: hydro storage heading into winter, which decides whether the squeeze reaches your power price.