Government officials have branded a drop in the country's energy production levels as serious and are scrambling for solutions.

Public facilities such as schools and hospitals face increased prices and shorter-term contracts as new figures released from the gas industry showed a 12.5 per cent material plummet in production based on forecasts for this year.

In the first three months of 2024, that figure now sits at nearly 28 per cent.

"I don't want to catastrophise it but it's very serious," Resource minister Shane Jones told Newstalk ZB this morning. “After a long period of underinvestment and stigmatisation of the gas sector, we're now going to rely very heavily on Indonesian coal to keep the lights on.".

Energy Minister Simeon Brown told the Mike Hosking Breakfast that NZ had to rely on Indonesian coal because the country does not have enough gas to support its manufacturing base and because gas has a critical role in the country's electricity supply.

"We either have to reduce demand or burn more coal and news out today from Genesis shows they're burning a lot more coal in order to meet that need. And that's twice as carbon intensive as burning gas."

Brown said the Government's priority is to keep the lights on. He said he wanted to provide New Zealanders with energy security, so if coal was the answer in the short term, then he would accept it was required.

"But as a result of the previous Government banning oil gas exploration, making it harder around decommissioning rules for the companies doing the drilling, we've haven't had the drilling we need to keep the gas flowing from those production fields," the minister said.

"It's disincentivised that investment, and ultimately the chickens are coming home to roost. This isn't good for our economy."

Under former Prime Minister Jacinda Ardern, the Government froze all oil exploration permits and essentially shut down operations in districts such as Taranaki. She told the media at the time that the transition to a zero-carbon economy "must start somewhere" and promised no jobs would be lost.

But Brown said gas was a necessary transition fuel and was critical to the country's supply when the sun and wind cannot be relied upon for renewable energy sources.

"So ultimately, the Government has made it very clear that we're going to be repealing that. My colleague Shane Jones and I are working around the clock to prepare the decommissioning rules," he said.

"We need to encourage investment back to have the security of supply for New Zealanders."

Newstalk ZB Plus brought the criticism of Labour pulling the plug on gas exploration to the party, now in opposition. Labour's climate and energy spokesperson, Megan Woods said the Government’s top priority should still be to reduce gas use and therefore reduce emissions.

This would be so New Zealand would meet its climate targets and our obligations under the Paris Agreement.

"The stakes are too high not to prioritise this work," she told ZB Plus.

"The Coalition Government has undone a lot of good work done in the last six years to bring emissions down and transition our industry away from fossil fuels. [For example], they canned the Government Investment in Decarbonising Industry work that saw big emitters able to transition to low-carbon energy."

Woods said a key challenge facing New Zealand's energy sector is bringing the gas and electricity markets together, which she said her former government’s work programme was focused on. This included accelerating work on biogases, renewable storage technologies including battery technologies, and reducing demand for gas.

"Blaming Labour’s ending of offshore oil and gas exploration shows that ministers haven’t got their heads around these complex challenges and opportunities."

Brown said the Government will be making decisions quickly as it prepares to set up a gas security response group, which will monitor the situation and report back to Parliament. He also outlined his intention to work with upstream suppliers to get better coordination, so the Government can ensure the security of energy supply.

At the same time, Brown said, Genesis made it clear it will be looking to import more coal to keep the lights on.

"The market will respond, but ultimately we want to do everything we can to incentivise that upstream investment so New Zealand's security of supply remains strong."

Jones praised Genesis, calling it the country's "saviour" despite it being "penalised, sadly, in the minds of the public, [because] they're going to have to import coal".

He said although the Government was setting up a committee to deal with energy resilience, the country also needed to ensure the right generators were there.

"The generators are the social license in New Zealand and if they don't help maintain our solvency and productivity with affordable energy, then they can't expect to enjoy all of the good news that they savour," he said.

"And coal, sadly, is going to be a key feature as we work out how we can re-legitimise the gas industry. And I'm doing that through changing the rules with further decommissioning and passing legislation to reopen the gas sector for new exploration."