Government’s Billion-Dollar LNG Plan Was Built on Modelling That Never Considered a Price Spike

The government’s decision to proceed with a multi-billion-dollar liquefied natural gas import terminal was supported by economic modelling that never tested what would happen if international LNG prices surged — a scenario that has now become reality following Iran’s closure of the Strait of Hormuz.

Documents released under the Official Information Act reveal the modelling prepared by consultants Concept Consulting considered only two international price points for LNG: $20 and $25 per gigajoule. No higher pricing scenarios were examined, and the modelling explicitly noted it had not considered the potential impact of international fuel price volatility.

The government approved proceeding with the Taranaki-based facility in February 2026, committing electricity ratepayers to funding a project valued at approximately $2.7 billion through a levy. The plan was presented as critical to New Zealand’s energy security during periods of low hydro generation and declining domestic gas supply.

Critics say the gap in the modelling is significant. Jessica Palairet of Lawyers for Climate Action described the oversight as quite remarkable, noting the analysis had overlooked the risk of international LNG price volatility at a time when global energy markets are increasingly unstable.

Goldman Sachs has projected that LNG prices could increase by a further 50 to 100 percent if the Middle East conflict continues to escalate. The Strait of Hormuz, a critical passage for global LNG shipments, was closed by Iran earlier this year, sending fossil fuel prices sharply higher across the world, including in New Zealand.

The modelling also assumed that supply of LNG to New Zealand would be unlimited and uninterrupted — an assumption the current situation is directly testing. Critics argue these combined assumptions left the government without a clear picture of the risks attached to locking in long-term dependence on imported gas at a time of exceptional global market volatility.

The Ministry of Business, Innovation and Employment has defended the modelling, saying the current price volatility is short-term in nature and that futures prices for 2028 and 2029 remain consistent with the assumptions that went to Cabinet. But the response has done little to satisfy those who say the full picture was never properly stress-tested before a commitment of this scale was made.

That concern has now reached the Ombudsman. Lawyers for Climate Action and the New Zealand Climate Foundation filed a complaint in March after MBIE withheld key sections of the Concept Consulting report, including what appear to be the executive summary, conclusions, and recommendations. Those sections were redacted under the free and frank opinions provision of the Official Information Act.

The organisations received the partially-redacted documents in April. They argue that the redacted sections — the consultants’ own interpretation of the modelling they produced — are precisely the most important parts of the entire analysis, and that there is a strong public interest case for their release given the scale of the investment being made on behalf of New Zealand electricity consumers.

MBIE’s position is that the redactions are lawful under existing OIA grounds, and that the free and frank opinions protection exists to allow officials and contractors to provide candid advice without fear of it being exposed before a decision is finalised.

The LNG terminal decision sits within a broader political debate in which opposition parties and environmental groups have argued that New Zealand should be accelerating its transition toward renewable electricity and domestic alternatives, rather than committing to new fossil fuel import infrastructure. That argument has sharpened since the Strait of Hormuz crisis made the supply-and-price assumptions embedded in the modelling look fragile.

The government has maintained that the terminal is necessary to provide backup generation capacity during dry hydro years and that the economics remain sound. But with LNG prices now well above the range tested by the modellers, the case for the terminal is being asked to rest on assumptions the analysis never actually examined.

The story of the LNG terminal — a major commitment made under political pressure, modelling that sidestepped the key risk, and a subsequent battle to release the conclusions that consultants drew from their own work — raises broader questions about how large infrastructure decisions are made and scrutinised. With the Budget due on 28 May and an election in November, the government’s energy strategy is set to remain a live issue throughout the year.

The Ombudsman complaint is ongoing. Whatever conclusions the investigation reaches will shed light on whether key advice to ministers was lawfully protected, or whether significant public interest information is being withheld at a moment when New Zealanders are already paying sharply higher energy costs because of conditions the modellers chose not to model.

What do you think of the government’s approach to the LNG terminal decision? Should the full modelling conclusions be made public? Leave a comment below.