New Zealand's energy landscape is facing a critical juncture with the revelation that natural gas reserves have plummeted to their lowest levels in two decades. Recent data from the Ministry of Business, Innovation and Employment (MBIE) indicates a sharp 23 percent decline in proven plus probable (2P) reserves, dropping from 948 petajoules (PJ) at the start of 2025 to just 731 PJ as of January 1, 2026. This downturn, which includes both production consumption and downward revisions to estimates, has ignited debates over the nation's energy security, electricity pricing, and long-term sustainability. While some earlier assessments pointed to an approximately 12 percent shortfall compared to prior expectations, the full picture reveals an even more precarious situation, prompting urgent calls for action from international bodies like the Organisation for Economic Co-operation and Development (OECD).
The decline stems from a combination of ongoing extraction—about 108 PJ used in 2025—and revisions totaling 109 PJ, largely due to underperformance at key fields like Pohokura, where reserves estimates were slashed by 129 PJ. Despite some positive developments, such as upward adjustments at the Mangahewa field, the overall trend underscores a depleting resource base that threatens to disrupt industrial processes, power generation, and household affordability.
🛢️ Breaking Down the Latest Reserves Data
The MBIE's annual Petroleum Reserves Overview provides a detailed snapshot of New Zealand's underground gas assets. Proven plus probable reserves, often abbreviated as 2P reserves, represent gas that operators deem commercially recoverable with reasonable certainty. At 731 PJ, this equates to roughly seven to eight years of supply at current consumption rates, a stark contrast to the more comfortable buffers of previous years.
Key fields tell the story: The Turangi field now dominates with 380 PJ, comprising over half (51 percent) of total 2P reserves, up from 42 percent last year as other sources wane. Pohokura, once a powerhouse, saw its reserves revised downward significantly due to a poorly performing well, accelerating its projected depletion to 2033—ten years earlier than anticipated. Meanwhile, Maui is set to cease production by the end of 2026 after contributing just 8 PJ more.
- Turangi: 380 PJ (51% of total)
- Mangahewa: Extended production to 2035, with recent drilling successes
- Pohokura: Major revision down, ends 2033
- Maui: Final 8 PJ, shutdown 2026
- Kupe and Kapuni: Steady declines in deliverability
Contingent resources (2C), gas known to exist but not yet economically viable, stand at 1,950 PJ, down 3 percent. Deliverability—the daily flow rate—averaged 285 terajoules per day (TJ/day) in 2025, a 13 percent drop from 2024, signaling tightening supply dynamics.
Historical Context: A Decade of Depletion
New Zealand's natural gas production has been on a downward trajectory since peaking around 2001. Primarily sourced from the Taranaki Basin, fields like Maui, Pohokura, and Kapuni have powered the economy for decades, supporting electricity generation (about 20 percent of supply), industrial heat, and exports via methanol production. Annual output has halved from 415 million cubic meters per month in 2017 to 215 million in 2025.
Past MBIE reports chronicled similar woes: Reserves fell 27 percent to 948 PJ in early 2025 and 20 percent the year prior. This pattern reflects natural field maturation, fewer new discoveries, and policy shifts like the 2018 ban on new offshore exploration (recently reversed). Without fresh investment, the supply-demand gap widens, with forecasts showing 2026 production at 85 PJ—15 percent below prior projections.
| Year | 2P Reserves (PJ) | Change (%) |
|---|---|---|
| 2024 | ~1,300 (est.) | - |
| 2025 | 948 | -27% |
| 2026 | 731 | -23% |
This table illustrates the accelerating decline, highlighting the urgency for diversified energy strategies.
Impacts on Electricity Generation and Prices
Gas plays a pivotal role in New Zealand's electricity mix, firing peaker plants during dry winters when hydro (over 50 percent of supply) falters. With renewables growing—wind and solar surging—the intermittency challenge intensifies, making reliable firming capacity essential. Low gas reserves risk blackouts, factory curtailments, and soaring wholesale prices, as seen in recent spikes.
Households already face elevated bills; businesses in manufacturing and processing report supply contracts expiring by 2027, exposing them to spot market volatility. Energy Minister Simeon Brown warns of job losses and economic drag if unaddressed, noting New Zealand's unique vulnerability among OECD peers without diversified gas imports.
For context, average gas deliverability dropped 13 percent last year, with Maui's 38 percent plunge leading the way. As hydro variability persists amid climate change, the gas shortfall amplifies risks to the national grid.
Government's Response: LNG Imports and Exploration Push
The coalition government views the reserves data as validation for bold moves. Plans for a liquefied natural gas (LNG) import terminal in Taranaki aim to secure 200-300 PJ annually, saving $265 million yearly in electricity costs per some estimates. Procurement is underway, with operations targeted soon to bridge the gap.
Reversing the offshore ban seeks to lure investment for new finds, though experts doubt quick results given Taranaki's maturity and high-risk prospects elsewhere. Prime Minister Christopher Luxon emphasizes action to 'keep the lights on,' dismissing critics amid rising bills from gas shortages.
Government's official statement outlines these priorities, stressing diversification beyond domestic fields.
OECD's Stark Warning: Ditch Gas Dependence
Contrasting sharply, the OECD's 2026 Economic Survey urges New Zealand to sever the power sector's gas reliance for affordability and security. Labeling LNG sponsorship a risk for fossil lock-in, it advocates batteries for peaking, pumped hydro, biomass, geothermal upgrades, and demand response.
The report forecasts GDP growth at 1.4 percent in 2026 and 2.3 percent in 2027 but flags energy costs as a drag. It critiques gentailer dominance and calls for market reforms, including potential breakups, to sever gas-electricity price links. Luxon rebuffed this as 'load of rubbish,' defending LNG as transitional.
Industry Perspectives and Challenges
Energy Resources Aotearoa urges petroleum investment, arguing lower reserves demand accelerated exploration. Manufacturers face hobbled operations, with 80 percent of contracts expiring soon amid rising prices. Some pivot to electrification, but infrastructure lags.
Transpower warns of blackout risks through 2034, even with max fossil use. Climate groups like Rewiring Aotearoa echo OECD, pushing renewables over imports vulnerable to global shocks, as in recent Middle East tensions.
Renewable Alternatives and Transition Pathways
New Zealand boasts world-leading hydro but needs firming for wind/solar growth. Options include:
- Pumped hydro storage for seasonal needs
- Battery augmentation for daily peaks
- Supercritical geothermal for baseload
- Biomass co-firing with hydro
- Demand-side management via smart grids
Overbuilding renewables with storage could achieve 100 percent clean power by 2035, per some models, reducing import risks and emissions. Yet, upfront costs and consenting delays hinder progress.
Economic and Regional Implications
Taranaki, home to 90 percent of production, braces for job shifts as fields deplete. Nationally, higher energy costs curb competitiveness, with OECD noting fragile recovery. Positive: LNG could stabilize prices short-term; long-term renewables foster green exports like hydrogen.
MBIE Petroleum Reserves Overview PDF details field economics.
Future Outlook: Balancing Security and Sustainability
By 2030, gas demand may halve if electrification accelerates, but shortfalls loom without backups. Policy debates pit LNG/exploration against green firming. Success hinges on investment, reforms, and consensus—ensuring lights stay on while cutting emissions 50 percent by 2030.
Stakeholders urge hybrid approaches: Transitional LNG with rapid renewable scaling. Monitoring MBIE updates and OECD follow-ups will shape the path ahead.
Actionable Insights for Businesses and Households
Businesses: Audit energy use, explore electrification incentives, secure fixed-price contracts. Households: Insulate homes, adopt efficient appliances, consider solar batteries. Policymakers: Fast-track consents, fund R&D in firming tech.
This crisis, while challenging, catalyzes innovation toward a resilient, low-carbon future.
