A knock for the regions, but exploration end won't curb NZ oil demand

Thursday, 12 April 2018

Prime Minister Jacinda Ardern says the end to oil exploration is for future generations.

OPINION: No jobs lost, no economics rights stripped, exploration to continue for years and a temporary reprieve in the region most dependent on oil exploration.

In those terms, Thursday's announcement about oil and gas exploration seems moderate.

For all of Ardern's claims that climate change is her generation's nuclear free moment, the industry will in all likelihood continue to operate for decades.

Green Party co-leader James Shaw tried to help push that line by saying that while he welcomed the move, drilling would continue for longer than he or his party felt comfortable with.

Prime Minister Jacinda Ardern discusses the impact of an end to offshore oil exploration, while Regional Economic Development Minister, Shane Jones, the self-described 'first citizen of the provinces' makes his discomfort clear.

* Ardern says Government 'actively considering' call to end oil exploration

* Prime Minister Jacinda Ardern promised intervention, but is delivering uncertainty

* Greenpeace says Ardern has 'the benefit of the doubt' over end to oil**

Meanwhile, Regional Economic Development Minister Shane Jones' body language was so uncomfortable it looked as if he was trying to give the impression he was a hostage. The message was undermined because it all looked so deliberate.

An Oil rig sits in front of Mt Taranaki between Stratford and Midhurst. While there are permits around New Zealand, the bulk of the industry is in Taranaki.

In reality, Ardern could scarcely have gone further on oil exploration without opening her Government to the clear risk of legal challenge and further hurting business confidence.

Forget the oil exploration industry, the moment the Government begins stripping existing commercial rights, investment confidence plunges. It would immediately become a diplomatic issue, as affected companies lawyer up.

How significant is the move to call an end to offering new permits, in global terms?

Few countries have gone further. In late 2017, France banned new exploration and called an end to production by 2040. That move was symbolic - only 1 per cent of France's oil and gas consumption is produced domestically.

New Zealand's stance is softer, but in many ways is more significant, as locally produced gas is used directly by hundreds of thousands of Kiwi homes and businesses.

Although New Zealand produces a fraction of 1 per cent of the world's oil, the industry is significant in relative terms domestically.

But it will do little, if anything, to New Zealand's use of oil and gas.

Household power bills will probably rise, because the dynamics of the gas industry have changed, if only slightly.

Oil will continue to be imported, just as it has. Petrol will not become more expensive as a result of this decision, because in global terms, New Zealand's production is inconsequential.

In terms of the impact on motorists, the recent signal of higher excise tax on petrol to cover the cost of new transport projects will do far more to cut emissions.

Green Party co-leader James Shaw hails halt to oil exploration as the beginning of a new and exciting era.

Ardern and others have said that to tackle climate change, global action is needed.

This will feel good for environmental activists, but unless there are more significant moves to dampen demand, all this will do will be to grant more geopolitical power to countries in the Middle East and of the likes of Venezuela, holder of the world's largest oil reserves.

As well as having less respect for human rights, these countries are also less likely to heed warnings about climate change.

Regional Economic Development Minister Shane Jones says time will tell whether he gets 'hammered' by the regions.

The prime minister and her colleagues repeatedly insisted that no jobs would be affected by Thursday's announcement.

If she means that none of the 4500 people directly employed in oil and gas exploration will learn today that they are losing their jobs, she is probably right.

But the claim is tenuous beyond this. Many of the companies involved in the sector are international, operating across many countries.

Some will continue to operate in New Zealand for years to come. Others will decide to shut up shop and redeploy the capital elsewhere.

Many of the engineers, especially those who are decades away from retirement, will look to retrain in other fields.

Ardern said she hoped to see more of the investment in clean technology in New Zealand.

As much money as Jones and his colleagues have at their disposal to sprinkle around the provinces, chances are it won't go to Taranaki, where the bulk of the oil and gas industry is based.

New Plymouth has become one of the engineering hubs for New Zealand because of its proximity to the oil and gas fields, not the other way around.

This explains Jones' discomfort at being part of the press conference announcing the move.

Thursday's announcement will have a significant impact on Taranaki. While the new Government has announced close to $20 million in funding from the provincial growth fund for Taranaki, almost all of the money is tourism related.

As much as Jones tries to talk of a plan to transition the Taranaki economy away from fossil fuels, he may well face accusations that it will be a transition to making coffee for visitors.

But there will be little or no impact on motorists or fliers. Until the Government takes steps to tax users of fossil fuels, the impact on the climate will be limited.