NZ News
War on Iran a ‘bazooka’ through government’s LNG plan – gentailer CEO
The Energy Minister is expressing confidence in the government’s plans to build a liquefied natural gas (LNG) terminal, even as the Prime Minister says it will not go ahead if the business case does not stack up.
Two of the country’s gentailers have expressed their own doubts on the future of the terminal, while Labour has asked the auditor-general to look at the decision-making process.
The government intends to build a billion-dollar LNG import facility in Taranaki as a back-up to address dry-year risk.
Confirmation the government would proceed with the terminal was announced in February, shortly before the United States and Israel attacked Iran.
The ensuing energy crisis has led to LNG prices rises of 143 percent in Asia since 28 February, leading to criticism from Labour the government was signing New Zealand up to more volatile price spikes in the future.
A decision on procurement is due to be made by the middle of the year, with the aim of having the facility operational and receiving gas in 2028.
The prime minister indicated its future would rely on the business case.
“If it doesn’t stack up, we won’t be doing it. Until we see the commercials on it, we’ll make the decision then,” Christopher Luxon said on Tuesday.
Energy bosses express mixed views
Appearing at the energy sector conference Downstream in Wellington on Tuesday morning, gentailer chief executives were asked what the crisis meant for the LNG terminal.
“It depends which day you read the news, doesn’t it? I think LNG stands for ‘likely no gas’ to be honest,” Genesis chief executive Malcolm Johns said.
“The reality is that only 30 percent of New Zealand’s energy comes from electricity, 70 percent comes from other forms. Fifty percent of our overall footprint is imported, so we have a highly exposed energy system to the rest of the world. Whether you add LNG to that or not is not going to make one iota of difference to New Zealand’s exposure to the imported fuel regime to the world.”
Meridian chief executive Mike Roan agreed.
Meridian chief executive Mike Roan. Photo: Meridian Energy
“It feels like the Americans might have put a bazooka, literally, through that proposal,” he said.
“I think it’s the challenge that we have as an industry, which is, how do we take charge of the resources that are at our fingertips and actually build out a resilient, secure, and affordable electricity system for not only today, but for the generations that follow? Because that’s what people were able to do before us.”
Others on the panel were more optimistic.
David Prentice, chief executive of the Gas Industry Company, said “first and foremost” the LNG terminal was about providing insurance for a dry year.
“We all have insurance in our homes and our cars, and we grumble and moan about it, but at the end of the day, I would bet that most people would still have insurance.”
Transpower executive general manager of operations Chantelle Bramley said LNG would bring new energy into a constrained system, and would buy New Zealand time to “build out” renewables.
“It gives us optionality. And in times of uncertainty, creating more options is actually a really good thing.
“We’re a tiny country at the bottom of the South Pacific. We are not an interconnected power system. There are things that will happen in our domestic market that at some point we’ll also want to be looking at that international fuel mix. The war in Iran won’t be going on forever, so I think that that optionality is also really important.”
Firefighters attempt to extinguish a fire following a projectile impact on a refinery in Israel’s northern city of Haifa on 3 March, 2026. Photo: JACK GUEZ / AFP
Energy minister wants ‘a good deal’
Energy Minister Simon Watts said there were “two conversations” at play, involving the procurement of the import terminal and then the procurement of the LNG itself.
Watts said the government was proceeding with the procurement process “as planned”, but like any procurement process the government wanted to get “a good deal”.
Officials had advised him the procurement process was on track.
“First and foremost, we’re doing a procurement process to build a strategic LNG importation terminal. The second conversation is around procurement of that gas.
“Obviously, the procurement of the gas will be for winter ’28, which is obviously not on Tuesday, and that long-term contracting process will follow once the terminal is built. So we’ve got to separate out. There’s two conversations here. We’re talking about the procurement to build the ability to import.”
Watts said the underlying problem of a lack of gas to make electricity in a dry year remained, and a PwC report two weeks ago had outlined that not having gas in the economy would be “catastrophic” for regional jobs and GDP growth.
The PwC report said introducing LNG would help “stabilise total gas supply and prices,” as well as reduce structural scarcity pressures and restore confidence in the market to support an “orderly” gas transition.
“We need the capability to import, and then we need to do long-term contracting to get that gas when we need it, acknowledging we don’t know exactly when we are going to have a dry year, but having that insurance policy gives us more options,” Watts said.
‘A dangerous idea’ – Labour
Cabinet has delegated the authority for the contract to be signed off by the ministers of finance, energy and infrastructure.
Labour energy spokesperson Megan Woods said she was concerned it was not the “usual” way for a billion-dollar project to be decided on.
“There’s power to ministers to decide, rather than the usual kind of officials process that you’d have in a case like this,” Woods said.
“I’ve actually written to the auditor-general, and I’ve asked the auditor-general to look at that, because I think it is highly atypical that you’d be having political decisions around a billion-dollar project, when the government’s already shown that it doesn’t have the ability to think things through.”
Megan Woods. Photo: RNZ / Samuel Rillstone
Woods’ letter questioned whether the decision-making criteria at each stage was sufficiently clear, documented, and robust.
It asked the auditor-general to consider whether it was consistent with the Government Procurement Rules, as well as the Cabinet Manual and the auditor-general’s own guidance on procurement.
Of particular concern for Woods was whether the level of ministerial involvement in shortlisting and choosing suppliers was “appropriate for a procurement of this size and risk”, and whether that created a real or perceived risk to the independence and integrity of the process.
“The Cabinet material describes a process where the minister for energy approves the shortlist and a small group of ministers selects the preferred supplier. That appears to be a high degree of direct ministerial involvement in what is, at heart, a commercial evaluation and selection exercise for a very large contract,” her letter said.
Woods said LNG was “always” going to be a more volatile and insecure way for New Zealand to secure its energy system, and accused the government of brushing aside other ways in which it could be done.
“It was a dangerous idea when the government announced it. I think the last three or four weeks have just shown how precarious it is. New Zealand should not be banking its energy security on a volatile fuel like LNG.”
Source: RNZ
Latest News
Opportunities to mitigate multi-million-dollar RNZ budget blowout likely missed – experts
Multiple opportunities to identify and mitigate a multi-million-dollar budget blowout at RNZ appear have been missed, according to the former executive director at Audit New Zealand.
The public broadcaster on Monday revealed a near $12 million shock financial loss after a litany of financial blunders, which will now lead to sweeping job cuts.
The $11.8m loss is more than 25 times the $470,000 RNZ had expected to lose over the year to June.
CEO Paul Thompson took responsibility for the result, and said internal reports gave an inaccurate picture of the finances, meaning the scale of the loss only became clear in October.
RNZ’s former chief financial officer Hilary Parker resigned unexpectedly in early October.
The board said it would commission an independent review into what went wrong.
Independent contractor Stephen Walker, who left the Audit Office earlier this year, said the size of the loss was surprising, as was the length of time it took to identify it – months after the financial year ended.
Supplied / OAG
“Probably more of a concern is that they had seemingly been unaware that they were running up a significant deficit until they were in the preparation stage of their annual report in October.”
Walker said public entities typically produced monthly financial reports.
An interim audit also took place before the end of the financial year, he said, but if the organisation hadn’t identified significant losses at that stage, the auditor could also be in the dark.
“It seems that there’s a real weakness in forecasting and budgeting that’s occurred here and that the monthly accounts, when they’re produced, either haven’t identified these significant variances against budget or the magnitude of them really hasn’t come to light until right towards the end of the financial year,” Walker said.
“And really at that point, there’s no opportunity for the chief executive, the leadership team to take, and the board to take, any corrective action because the year has effectively been completed.”
Walker said the “significant miss” was difficult to account for given it was more than 10 percent of RNZ’s total funding.
He said based on RNZ’s annual report, financial complexity didn’t appear to be a factor.
“This $11.8m loss isn’t made up of one particular item … it seems to have been contributed to by a number of separate expense lines running over budget. So I don’t think it’s necessarily to do with complexity.”
Among the errors, RNZ wrongly counted $2m from land sales as income in its budget. Staff costs also came in $3.2m over budget, including $1.4m in redundancy payments.
Professor at Auckland University’s business school Norman Wong said based on media reports the issues identified were “significant and troubling”.
Supplied / University of Auckland
“But recognising the sale of land as income in their budget is a basic error that one would have expected to have been caught and corrected well before it got to this point.”
With funding reductions at RNZ over the past two years, Walker expected greater scrutiny of financial results.
“Virtually every public entity has had their annual budget reduced. And so you would expect … the leadership team on a monthly basis and board – I’m not sure how frequently the board will consider the information – but you would expect them to be interrogating the results on a regular basis throughout the year,” he said.
Walker said initiating an independent review was the correct course of action and that he’d want to understand what information the leadership team and the board were regularly receiving.
He said he’d “love to say” surprising financial results were rare, but conceded they occured on a semi-frequent basis during his time leading the Audit Office.
“The benefit of independent scrutiny by the Audit Office – and the auditors providing that support to the Auditor General – [is] that the reporting is fairly presented at the end of the year, whether it’s good, bad or ugly.”
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