Gas risk is now a boardroom issue

For many New Zealand businesses, gas has long been treated as a stable input that is familiar and built into core operations. That assumption is now harder to rely on.

Gas supply is tightening, and price volatility has increased. For commercial and industrial users, this has become a strategic issue for boards because it affects business continuity, capital planning and allocation, asset life decisions and long-term performance.

Gas plays a major role in many industrial processes and in the wider energy system. For businesses that depend on gas for heat, processing or production, the key governance question is no longer whether this creates risk. It is whether the organisation has a clear and workable plan for how that risk will be managed over time. For some, particularly multinationals operating across jurisdictions, this may include structured transition or exit pathways.

Directors do not need to be energy specialists to see the issue. When a critical input becomes less predictable and more constrained, boards should expect management to have a clear view of:

• • Current exposure and concentration risk
  • Contract horizons and supply dependencies
  • Realistic alternatives and system constraints
  • Capital replacement timelines
  • Decision trigger points and potential lock-in risks

Not having that line of sight is now a governance gap.

Vince Hawksworth, Director of PowerCo, says the conversations at board level are shifting. “This isn’t about every business having a perfect technical answer today. From a governance perspective, the biggest risk is that boards leave these decisions too late. Organisations that start early give themselves time to manage cost, sequencing and disruption, rather than being forced into narrow choices under pressure.”

That question of timing matters because for large energy users, gas is rarely a simple change. High-temperature boilers, kilns, furnaces and process heat systems are often expensive and built into operations. Many of these assets are mid-life, which makes early replacement a difficult financial decision. But leaving the issue until contracts tighten or supply becomes more constrained can leave boards with fewer, more costly and more disruptive options – or no options at all.

One of PowerCo’s customers, a large metals company where gas is central to several parts of the production process, illustrates the challenge. The business has secured gas supply that gives it some runway, but moving away from gas will still require major investment and careful sequencing to avoid disrupting operations. Lead times for equipment and infrastructure are measured in years, not months, and in many cases the constraint is as much the surrounding system as the technology itself.

Hawksworth says boards are beginning to see this as part of their strategic oversight, not just a technical problem to be solved.

“Good governance in this area is about understanding when decisions need to be made, how that affects capital allocation and what risks sit on the path. With transitions that take years rather than months, that timing question becomes critical.”

In practice, this is less about choosing a technology and more about building decision readiness. Boards should be able to see where the business is most exposed, what options are realistic and what would be required to move from one position to another.

It is also important to recognise that not every business has a fully workable technical alternative today. In some sectors, replacement technologies are still developing or remain hard to justify on cost. But that does not remove the governance responsibility. In those cases, boards should still be able to point to an active and regularly reviewed view of how the risk is being managed.

For organisations that do have viable pathways, the risk is different. Delay reduces choice and increases the chance that decisions will be made under pressure, with higher cost and more disruption to operations. Starting early is less about committing to spend immediately and more about keeping options open.

There is also a tendency to look to future supply extensions and assume they will solve the problem. The Government’s announcement on progressing LNG and other initiatives to extend gas availability are necessary and welcome, and boards should be aware of that work. But these possibilities should be treated as risk mitigation, not as a strategy. They do not remove the need for businesses to plan how their energy needs will be met over the life of their assets.

For directors, the practical implication is straightforward. Gas should now be a standing board-level topic for any business with material exposure, as part of ongoing oversight of strategy, capital allocation, and risk.

That does not mean every board needs to sign off a conversion project tomorrow. But boards should expect management to be building a clear decision framework, informed by realistic timelines and system constraints. In the current environment, having no plan is no longer a neutral position. It is a risk in its own right.

PowerCo is a member of the Energy Transition Framework, a diverse group of participants from across the energy system, working on key priorities to support New Zealand’s transition. The Framework has completed a report specifically on the gas system and actions that need to be taken. Directors looking for more information about the role of gas in the transition can find more details in that report, through the Energy Transition Framework and EECA.