With New Zealand's single biggest gas consumer Methanex announcing a decision to close from next year and sell off its gas contracts, what impact will it have on households and small businesses?
Methanex was at times using close to half of the country's total natural gas supply.
The Canadian multinational's departure releases a huge amount of gas supply into a market that has struggled in recent years.
Electricity generator-retailer Genesis Energy has announced it has picked up major gas contracts that run from March next year through to December 2029.
Ben Gerritsen is general manager of customer and regulation at Clarus – the company that runs the gas transmission network in the North Island. He told Nine to Noon on Tuesday it was a "big shift" and "big deal" for the local Taranaki economy, which Methanex was a part of for more than four decades – but not a surprise.
"Thinking about Methanex's decision in the context of the overall gas market, it's not surprising and it is part of a transition in the New Zealand gas industry that started a few years ago when supply constraints started to emerge and gas has kind of been redirected, if you like, to its highest value use.
"Methanex's business model globally is to operate in countries with plentiful gas and export that in the form of methanol. So with the decline in gas production in New Zealand, it's not surprising."
But will it translate into cheaper prices for other users, be they industrial or household? Gerritsen said he had to be "careful" predicting future prices, but expected an easing in the near-term for both.
Energy Minister says NZ needs a better contingency plan than renewable energy. (Source: 1News)
And it might even help some companies stay afloat, rather than shut up shop due to high costs.
"Ultimately that is in the hands of the gas retailers in terms of competition between the likes of Genesis Energy, Contact, Nova, others. But certainly having availability of more gas, that's been the key constraint in recent years.
"So when you've heard industrial consumers being concerned that they can't get a contract on terms that they used to, I think this extra supply in the short term will help that challenge. "
But the challenge remained in the long-term, he said, because New Zealand's known gas fields were "in a pattern of decline" with some expected to close soon.
Big energy companies, such as Genesis, had limited capacity to store gas, Gerritsen said – and may use what it has to produce electricity when needed.
"I think what Genesis may well look to do is, the sort of flexibility that Methanex has provided in recent years where it will essentially turn off during winter and redirect the gas to electricity generation - we may see Genesis look to other industrial customers to operate in a similar mode.
"So the industrial consumer will get the gas on relatively favourable price terms. It can use it during summer, it can use it during wet years. But when the electricity generator is needed, the gas can be redirected to generate electricity."
The Energy Minister spoke to Q+A's Jack Tame. (Source: 1News)
Households should not expect a price drop, particularly in the North Island where there are fixed costs involved in the pipeline supply network.
"The costs of the pipeline network and delivering gas throughout the North Island are essentially fixed. They're the infrastructure costs. of transporting the gas."
Further into the future, Methanex's absence could drive up prices, Gerritsen said, as local sources become scarce.
"Methanex has played a critical role as a big consumer in underwriting exploration and production of gas in New Zealand. So no doubt not having them around makes what is a challenging proposition even more challenging, I would say."
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