New Zealand is stepping on the gas to overcome major energy issues

• Failed previous government oil and gas restrictions lead to major energy issues
• Soaring prices add to supply shortage woes
• Current government chasing range of options to support oil and gas exploration
• LNG imports on the table as Māui field declines

A surge in electricity and gas prices has led the New Zealand government to make the hunt for hydrocarbons an increasingly important component of the nation’s future.

Interest in New Zealand’s oil and gas exploration opportunities is only just starting to return after the industry was hamstrung by the policies introduced under former Prime Minister Jacinda Ardern.

Ms Ardern’s decision to block the awarding of new petroleum exploration permits and invest in renewables has led to major energy shortage issues and forecasts for ongoing power restrictions and blackouts.

It was soon found that wind and hydro power wasn’t enough when the wind doesn’t blow and low rainfall impacts dam levels.

Among the options a desperate NZ government has turned to is a NZ$200 million Gas Security Fund (GSF).

The fund recently announced it will invest in two projects to help secure the nation’s ongoing energy needs.

The government is providing NZ$14.5 million to contract major oil field contractor Schlumberger (SLB) to create the first basin-scale offshore pseudo 3D dataset using state-of-the-art seismic technology – with free access for industry for two years to incentivise companies to explore in New Zealand.

It is also providing $21.5 million for a time-limited equity arrangement for EnZed Energy’s Kaheru offshore exploration project in Taranaki. The project has an estimated total cost of NZ$71 million, with EnZed Energy seeking to raise the remaining NZ$49.5m from other investors.

Industry lobby group Energy Resources Aotearoa believes the Gas Security Fund investment and an updated petroleum exploration data pack will help companies assess New Zealand’s gas potential and advance a promising offshore prospect in Taranaki.

Chief executive, John Carnegie, said the announcements support successive steps in exploration: improving access to existing geological information, making it easier to use, and helping EnZed Energy raise the capital to drill the Kaheru prospect off Taranaki.

“New Zealand is competing with other countries for exploration capital. Companies need evidence of where the opportunities might be before they commit money to finding out what’s there.

“New Zealand’s gas fields are declining and discoveries won’t happen unless we drill. Kaheru gives us a chance to find a significant new source of domestic gas. EnZed Energy is prepared to pursue it, and this investment helps bring the drilling campaign closer,” Mr Carnegie said

The investments form part of a broader push by the government to improve the information available to explorers while helping bring new projects closer to drilling and production.

The Fund previously announced up to NZ$23.5 million in loans for Todd Energy’s McKee Gas Cap and McKee-Tariki projects. Both use existing Taranaki fields and infrastructure and, if successful, are expected to have gas flowing by the end of 2027.

“With offshore exploration taking years to turn into production, we need that work under way while projects in existing fields help address the immediate supply problem,” Mr Carnegie said.

“Investors need to trust that New Zealand’s policy settings will last over the life of these projects.”

Enzed Energy, the first explorer to be awarded a new petroleum exploration permit since the repeal of Ms Arden’s offshore exploration ban, has lodged a second application targeting the promising Toutouwai prospect in the offshore Taranaki Basin

New Zealand Petroleum and Minerals body recently opened a three-month competitive process over a proposed 2400 sq. km permit area centred on the Toutouwai prospect. The application was lodged by a wholly owned subsidiary of Enzed Energy.

“This is another positive development for New Zealand’s energy sector. Enzed Energy’s decision to pursue a second prospect demonstrates growing confidence in New Zealand’s resource potential and in the government’s work to restoring certainty for explorers and investors,” Resources Minister, Shane Jones, said.

“It is encouraging to see companies looking beyond a single opportunity and considering further investment in our sector. That is exactly what we need if we are to unlock new resources, strengthen energy security, and support economic growth.”

With major businesses packing up because of the lack of gas supplies, the NZ government is also looking overseas for help.

Decades after it was first mooted, plans to build an NZ LNG import terminal is back on the agenda.

After being a major proponent of the idea, the government recently delayed its final contract decision on the proposed terminal until after the election.

With an estimated cost of around NZ$1 billion, the facility would be located in the Taranaki region if it goes ahead and would act as a backup fuel source to mitigate “dry-year risk” to help offset declining domestic gas production.

Where the gas would come from has yet to be unveiled, but the looming Papua LNG project and Australia’s Taroom Trough fields would be logical options.

In the meantime, local and international juniors are moving quickly to take advantage of surging energy prices.

One of those is Monumental Energy which is aggressively bringing historic fields back to life and seeking new exploration opportunities.

“Gas prices in New Zealand spiked as high as $20.55 NZ per million cubic feet (MCF (US$11.50) due in part to the significant lack of new gas to market,” CEO, Maximilian Sali, CEO, said this week.

“Monumental Energy is working diligently and quickly to apply for new gas barring acreage and bring new investment to these areas that the company deems extremely beneficial to the country of New Zealand and shareholders.”

Elsewhere, the nation is looking to drag the last possible output from its largest gas project, Māui.

The Māui gas field off the Taranaki coast is expected to cease production by the end of 2026, though late-life performance could potentially extend operations into early 2027 before a mandatory platform recertification is required in May 2027. 

As the Australian oil and gas industry raises concerns over political interference, the issues facing NZ are an example of potential consequences.

New Zealand’s 2018 ban on new offshore oil and gas exploration severely damaged industry confidence, accelerated the exit of multinational energy companies and pushed domestic natural gas production to its lowest levels since the 1980s.

As BusinessNZ forecast back in 2018, banning new petroleum and gas exploration will have significant implications for New Zealand business.

BusinessNZ chief executive, Kirk Hope, said at the time the bans “would have had a potentially devastating effect on investment into New Zealand.”

How prophetic.

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