New Zealand Removes Royalty Requirement on Cushion Gas to Spur Underground Storage

The government will eliminate the need for developers to pay royalties on cushion gas—gas kept in storage to maintain reservoir pressure—thereby easing a key regulatory hurdle for underground gas storage projects. Resources Minister Shane Jones explained that cushion gas is operational, not intended for sale, and that the change will allow investment in storage capacity that can bridge seasonal electricity demand gaps, especially during winter peaks and dry years. An independent expert will determine the proportion of a facility’s original gas that qualifies as cushion gas; any gas above that threshold will still attract royalties. The move follows Methanex’s decision to idle operations next year, which frees up gas for other users but does not eliminate the need for long‑term energy security. Future reviews of the petroleum regulatory framework will assess the measure’s effectiveness in encouraging storage investment and strengthening New Zealand’s energy resilience.