Domestic price of natural gas

IBISWorld forecasts the domestic price of natural gas to rise by 0.1% in 2025-26, to 186.7 index points. Supply conditions are likely to improve on historically low 2024-25 figures. However, supply conditions will remain tight, minimising price-based relief. Prices for natural gas in global markets are also expected to face upwards pressure, with these trends flowing through to the domestic market.

New Zealand's natural gas is primarily sourced from the Taranaki region on the West Coast. Gas supply has declined over the past decade as major gas fields, like Pohokura, Kupe and Maui, have matured. Gross gas production in New Zealand has fallen from 231.9 petajoules (PJ) in 2014-15 to 119.5 PJ in 2024-25. Declining gas supply has placed upward pressure on gas prices over the past five years. The impacts of declining gas reserves were evident in 2024-25, as domestic natural gas prices soared to record highs. A 13.2% decline in hydroelectricity generation output forced an uptick in electricity production from fossil fuels, with coal-based electricity generation doubling on 2023-24 figures. While gas electricity production dropped by 1.9%, this was largely a flow-on effect from low gas supply, which declined by 21.0% in 2024-25. Natural gas remained in high demand, causing prices to skyrocket.

New Zealand does not import or export natural gas. As a result, domestic natural gas prices are partially insulated from fluctuations in global gas prices. However, prices are still influenced by supply and demand conditions for substitute energy products in global markets, like oil and coal. Global oil, coal and LNG prices have all grown sharply over the past five years, driven by heightened geopolitical tensions in the Middle East and the Russia-Ukraine war. These trends have also flowed through to domestic natural gas prices in New Zealand.

In April 2018, the Central Government (Te Kawanatanga o Aotearoa) introduced a ban on issuing new offshore oil and gas exploration permits, which has constrained exploration activity and gas supply over the period, placing further upwards pressure on prices. While the ban on new gas and petroleum exploration permits was reversed on July 1st 2025, increases in natural gas supply will be lagging, with government spokespeople estimating that new gas fields won't become operational until the mid-2030s. Therefore, this ban reversal is unlikely to have any significant downside impacts on natural gas prices in 2025-26.

While declining gas production has caused gas prices to rise, total gas consumption has also fallen. Gas consumption from electricity generation has declined between 2020-21 and 2024-25, largely a follow-on impact of decreasing supply and the high cost of procurement of natural gas for electricity generation. Household consumption has also fallen over the past five years, as consumers have increasingly switched from gas to energy-efficient electric appliances. Despite this, residential customers have increased as a share of total consumption over the period. Residential customers also typically pay significantly higher prices than industrial or wholesale gas users, contributing to growth in the domestic price of natural gas. Residential, commercial, industrial and wholesale prices have all increased over the past five years, mirroring trends in the overall index. Overall, IBISWorld expects the domestic price of natural gas to increase at a compound annual rate of 12.2% over the five years through 2025-26.