“There is a theoretical case for intervention in the context of economic security. However, in practice, we consider such cases to be extremely rare and unlikely to justify broad-based government action,” they said.
Officials said that the terminal should be considered “alongside other alternatives” to ensure a balanced approach to energy transition and resilience.
They said that a “key challenge” to the work they were doing was the “short timeframes for decisions”.
“This will limit the information available to Ministers, particularly on the relative merits of alternative options to LNG,” they said.
Watts told the Herald Treasury’s advice on the facility was compared against advice from other agencies, including MBIE, which was more positive.
“We carefully weighed up the risks of intervening and ultimately selected LNG as the option with the least impact on the market and investment incentives.
“Treasury also revised its initial view on LNG imports after working through these early concerns with MBIE,” Watts said.
Watts said that the existing market was “failing to deliver the reliable back-up supply we urgently need to manage dry year risk, and a sector-led study on LNG determined that the sector would not deliver LNG imports on its own”.
“The recently released 2026 GIC Gas Supply and Demand study underscores the case for government intervention and the need for LNG more than ever.
“The study suggests prices in a domestic gas-only market, without LNG importation, could reach $31/GJ and cause significant economic destruction,” he said.
He said 11 options were considered to manage dry year risk, negating Treasury’s concerns others were not looked at.
“LNG was considered the best option, taking into account cost, time to deliver, flexibility and the spillover benefits to other parts of the economy,” he said.
Watts said that the “booming” renewables market put New Zealand on track to achieve 95% renewable generation.
However, the “final piece of the puzzle” to get to lower prices was fixing the risk to supply security in a dry year, when the hydro lakes were low.
“The reality is we need to address the dry year problem and domestic gas shortage urgently. No renewable solution can provide an extra 1.5 TWh of generation that can run regardless of the weather in the next two years,” he said.
He defended the tight timeframe, citing the severity of the fuel crisis.
“Without an LNG import facility, New Zealand would not have enough reliable fuel supply to manage dry year risk given our rapidly declining gas supply and put at risk our ability to keep the lights on.
“The economic consequences of another dry period – like winter 2024 – without a solution would be severe,” he said.
Even with the shock to the global LNG market caused by the war in the Middle East, futures pricing for electricity in 2027 and beyond is lower than prior to the Government’s announcement of the LNG terminal.
Labour’s energy and resources spokeswoman Megan Woods said the question should be asked; “why did Ministers give themselves such a short runway to decide on this scale?”.
“They have been talking about this for months, yet when the time came, they rushed headlong into a choice without properly assessing the alternatives.
“This is reckless and leaves Kiwis potentially exposed to higher household power bills and the loss of jobs,” she said.
Labour’s energy and resources spokeswoman Megan Woods. Photo / Mark Mitchell
“Treasury was right to call for a proper assessment of other options, and that should have included more affordable renewable options,” she said.
“This LNG plan bolts New Zealand’s energy system onto the wild global gas price spikes we are currently seeing. This leaves us even more vulnerable to international price shocks and instability.
“Instead of backing cheaper renewables and made‑in‑New‑Zealand energy that can give us real independence, the Government is exposing New Zealand households and businesses to very high and volatile energy bills for years to come,” she said.