Source: BusinessDesk – Ian Llewellyn Tue, 12 Aug 2025
Industrial and commercial gas users are warning of plant closures, job losses, and steep price increases for goods as rising gas prices and shrinking supply force businesses to cut production or reconsider their future entirely. A survey from the BusinessNZ Energy Council (BEC) and energy consultancy Optima said that of the 66 large industrial and commercial gas users who responded, nearly half (31 firms) reported they had already reduced operations, raised prices, or cut staff because of costs or uncertainty around supply and contracts. Another 30% expect to take similar steps within the next 12 months. The pressure is being compounded because four out of five businesses surveyed have gas supply contracts expiring by 2027, and there is uncertainty about whether they can secure new supply, and, if they do, whether it will be on terms that make operations viable.
Price increases
With prices having more than doubled for most users in the past five years, confidence in securing affordable replacement contracts is low. On a scale of one to 10, the average confidence score among respondents was just 3.05. “If we do nothing, a major deindustrialisation crisis could escalate in the next two years,” BEC executive director Tina Schirr said. “This would have devastating consequences for suppliers, customers, and the wider economy.” The survey results echoed reports of a sharp and sustained rise in gas prices since 2019. More than a third of businesses reported increases of between 20% and 50%, a quarter said prices had jumped between 50% and 100% and 6.6% reported prices rising more than 300%. A quarter of the companies surveyed are now paying more than $25 per gigajoule (GJ) for gas, compared with $10 to $15/GJ that was common only a few years ago. Half of the respondents said they could tolerate, at most, another 20% price rise before becoming unviable.
A growing trend
Several cited recent closures in the manufacturing sector, including the Penrose recycled paper mill and the Kinleith paper mill, as examples of what could become a broader trend. In both cases, high gas prices and supply uncertainty were cited as contributing factors. For producers in the food sector, multiple businesses warned of severe shortages and dramatic price hikes if closures occur. One large grower said gas was essential for heating and CO₂ capture in glasshouses, which boosts crop yields by 20%. Without it, prices for some products would treble. Many of the businesses said a loss of supply would have ripple effects across the economy. One manufacturer warned that shutting its plant would lead to the loss of 70 direct jobs and force the closure of other businesses reliant on its production. Another said closure would eliminate 25% of national output in its sector, triggering shortages, higher prices, and increased reliance on imports from countries with weaker environmental standards. While some respondents are exploring electrification, biomass, or LPG, 42% said moving away from gas was not commercially viable within the next five years, and 20% were unsure. Even with a 15-year phase-out, one in four said they could not make the shift without significant support. The main barriers cited were: High conversion costs, cited by 82% of those unable to transition. Lack of proven alternative technologies for certain industrial processes. Electricity grid capacity constraints and costly site upgrades. Uncertainty over the commercial viability of alternative fuels such as biomass or biogas. Some businesses said that electrifying process heat would require large-scale infrastructure investment, often with payback periods exceeding a decade. Others said that without grid upgrades, the required electricity could not be delivered to their sites.
Calls made
BEC and Optima called for a short-term push to free up existing gas supply and develop new production, and a long-term national energy strategy. “Natural gas is used in everything from coffee roasting and beer brewing to infant formula and meat processing,” Optima’s managing director, Martin Gummer, said. “Without secure supply, whole industries will contract or disappear.” The industry wants bipartisan political agreement to give investors confidence in new gasfield development. It is also urging co-funding or subsidies for industrial fuel switching, better regulatory processes, and greater co-ordination between government agencies to remove transition roadblocks. Resource Minister Shane Jones has said he is exploring whether rationing could ensure essential users have access to gas. This follows large gas user Ballance saying it was considering a four-month temporary closure after it failed to renew its long-term gas deal with Greymouth Petroleum for seven petajoules (PJ). Ballance had been outbid by Contact Energy, who recently secured 7PJ a year for seven years with a right of renewal for three more years. This gas would be mainly for its residential and commercial customers, with talks under way with the Government to fill its contract for schools, hospitals and others, with the contract expiring at the end of September.