Exploiting New Zealand’s Oil and Gas

The oil and gas industry will be squirming over recent headlines shouting that the North Island’s East Coast is set to become the “Texas of the south”. Tag Oil, a Canadian exploration company with interests in Taranaki and the East Coast, has been talking up its New Zealand prospects to its North American investors, citing the potential for “thousands” of wells on the East Coast, a region that is “literally leaking oil and gas”.

It’s proving difficult enough for the resources sector to allay public fears about the perceived environmental risks of large-scale oil and gas exploration without having those fears inflamed by excitable chatter from within its own ranks. Not for the first time, Tag’s partner on the East Coast, American oil company Apache, has distanced itself from Tag’s utterances, warning that it would be a mistake to get “too hyped” about prospects in the region. Apache prefers to take a softly, softly approach with East Coast community groups, many of which are anxious about the potential impact on water quality of aggressive drilling methods such as hydraulic fracturing, the risk of oil spills and the long-term liability for hazards such as defective well casings and drilling waste.

But what the latest flurry of headlines illustrates is that New Zealand is increasingly on the radar for big international oil and gas companies, which sense a potential bonanza in our under-explored and fuel-rich territory. They are being actively encouraged by the Government’s enthusiastic support for the exploration industry, and its aim to make New Zealand a net exporter of oil by 2030.

Despite its avowed commitment to long-term reductions in carbon emissions, the Government has positioned the oil and gas sector as a pivotal part of its economic growth agenda. Its 2011 Energy Strategy demands that New Zealand exploit its mineral and petroleum resources, and says the goal is to make this country a “highly attractive” global destination for ­petroleum exploration and production companies. Government consultants have advised the value of petroleum royalty flows to the Crown could be $12.7 billion if exploration activity increased by half over the next 10 years.

New Zealand’s appeal to big exploration companies no doubt lies also in the fact that it is a cheap place to exploit oil and gas – the Crown’s petroleum royalty rate is the fourth lowest in the world – and because it is politically stable. According to the annual Fraser Institute Global Petroleum Survey, New Zealand is now the most attractive jurisdiction in Oceania for oil companies.

The influential Institution of Professional Engineers (Ipenz) has lined up alongside the resources sector in promoting the idea that, with a little improvement to the regulatory framework, New Zealand can have its cake and eat it – that is, it can remain “clean and green” while massively increasing its extraction of fossil fuels. Ipenz claims New Zealand is “vastly under-utilising” its mineral and energy resources, and suggests this could be the cause of the wealth gap with Australia.

The Government is planning to make things even easier for resources companies to find and extract minerals, with a review of the Crown Minerals Act on the agenda this year. But the current infatuation with the oil and gas sector runs the risk that the necessary investment in and support for new forms of renewable energy will be diminished.

The Government’s energy strategy has been widely criticised as backwards-looking and potentially damaging to New Zealand’s already-strained clean, green brand. Of particular concern is that although the Government is rolling out the red carpet to international exploration companies, the enormous potential gains to be made from greater energy efficiency are going begging.

Globally, the International Energy Agency estimates US$8 trillion in annual savings are available from improved energy efficiency. Green growth lobby group Pure Advantage says the savings that could be generated in this country from more ­efficient fuel use would amount to hundreds of millions of dollars a year – money that could be reinvested in education, health and infrastructure.

Although smart grids, efficient public transport systems and home-insulation programmes might not match the headline-grabbing allure of the likes of Tag Oil’s ambitious exploration plans, the economic and environmental gains to be had from such schemes are likely significant – and a good deal more sustainable.

Source: New Zealand Listener