Domestic price of natural gas

IBISWorld forecasts the domestic price of natural gas to fall by 2.8% in 2023-24, to 97.2 index points. Despite supply conditions improving marginally, they are likely to remain tight over the year, causing gas prices to remain. However, declining energy commodity prices in global markets, including liquefied natural gas (LNG), oil and coal, are anticipated to place downward pressure on domestic gas prices over the year.

New Zealand's natural gas is primarily sourced from the Taranaki region on the West Coast. Gas supply has declined over the past five years as major gas fields, such as Pohokura, Kupe and Maui, have matured. Gross gas production in New Zealand has fallen from 181.87 petajoules (PJ) in 2018-19, to 148.04 PJ in 2022-23 (latest available data). Declining gas supply has placed upward pressure on gas prices over the past five years. Further, 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. 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, such as oil and coal. Global oil, coal and LNG prices have all grown strongly over the past five years, with supply constraints due to the Russia-Ukraine conflict anticipated to cause global energy prices to rise.

Declining gas production has caused gas prices to rise over the past five years. However, total gas consumption has fallen, partially offsetting growth in prices. Gas consumption from electricity generation has declined as renewable energy sources have increased as a share of the energy mix. The COVID-19 pandemic has also had a mixed impact on gas consumption, with industrial gas consumption falling over the first half of 2020 as lockdowns constrained industrial activity. Household consumption has also fallen over the past five years, with some consumers switching 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. Residential, commercial, industrial and wholesale prices have all increased over the past five years. Overall, IBISWorld expects the domestic price of natural gas to increase at a compound annual rate of 7.1% over the five years through 2023-24.