Oil industry claims before ban, interest in exploring in NZ was the highest in years

Monday, 25 June 2018

While there had been little interest in the Government's offer of oil exploration permits since the oil price plunged in 2014, officials were reporting a significant increase in interest in the second half of 2017.

Oil industry bidding for new exploration permits was set to be the strongest in years in 2018, industry body Pepanz claims, with government officials seeing a sharp upswing in interest.

Documents released under the Official Information Act show the petroleum and minerals team at the Ministry of Business, Innovation and Employment (MBIE) was receiving more interest from oil explorers at the end of 2017 than it had seen since at least 2012.

On April 12, Prime Minister Jacinda Ardern announced that the Government would no longer offer new offshore exploration permits, with several years of new permits to be offered in onshore Taranaki.

While falling interest in new exploration was not given as a reason for the ban on new permits, Ardern has previously pointed to the lack of permits being offered.

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

* Government warned oil decision could have 'chilling effect' on investment in Taranaki**

Cameron Madgwick, chief executive of oil and gas industry group Pepanz said the government had worked hard to make New Zealand an attractive destination for oil companies and with interest returning the industry could have invested 'billions'.

'Those block offers and their popularity have diminished over time. It's become less economic, particularly for offshore,' Prime Minister Jacinda Ardern said in an interview with Newshub on October 21.

But the MBIE document from July 2017 pointed to an expected upswing in interest as the oil price firmed, especially offshore.

Oil companies, which had slashed exploration budgets since 2014 as prices tumbled, were expected to increase investment, the report said.

Officials reported that there was 'high' interest in both the Taranaki basin and Pegasus-East Coast (which stretches up the east coast from south of Cook Strait up to near the East Cape) basin, as well as moderate interest in the Canterbury-Great South basin.

MBIE officials recorded 23 'nominations' from companies expressing interest in certain areas, more than had been seen in any of the previous five years. The nominations do not necessarily lead to a company bidding for exploration space.

A number of companies were showing interest in entering New Zealand.

US seismic surveying company Schlumberger had conducted what MBIE said was the largest survey in New Zealand in 2016/17 off the East Coast of the North Island.

When Anadarko gave up its permits in the basin at the end of 2016, MBIE received 'a number of requests from interested parties' for the areas to be reoffered in future block offers.

Energy Minister Megan Woods acknowledged that the commodity price cycle was improving, but said the decision to end new offshore oil exploration 'was about future proofing our economy'.

MBIE also raised Hawke Bay and its proximity to the Port of Napier, shallow water and existing infrastructure as 'an alternative to exploring offshore Taranaki'.

French oil and Gas giant Total had named the Great Southern Basin as among its 'top 10 basins for capturing acreage globally'.

Cameron Madgwick, chief executive of oil and gas industry body Pepanz, said interest in coming to New Zealand appeared to have been higher than in the 'heyday' of the block offer process. As a result of the ban New Zealand may have missed out on 'billions' of investment.

'Investment looked like it was coming back to New Zealand and with that the opportunities for jobs in New Zealand and the opportunities for potentially more discoveries and we'll now miss that opportunity,' Madgwick said.

'The government had been doing a lot of work trying to get that interest up, even in the down part of the cycle and this [Official Information Act request] shows that that work was bearing fruit, but unfortunately that opportunities now been lost and the potentially billions of investment that comes with it.'

A spokesman for Energy Minister Megan Woods acknowledged that 'the commodity price cycle is on an upswing' and a large amount of New Zealand waters were currently under existing exploration permits.

'The Government's decision was about future proofing our economy. Continuing to rely on fossil fuel production in a changing world will set us up for sudden economic shocks that will hurt communities, businesses and individuals as the world moves away from those fuels,' the spokesman said.

'This Government's decision was about lifting our sights beyond the three year political cycle and getting ahead of the curve. Our plan is for a long term managed transition to a low carbon economy.'

New Plymouth MP Jonathan Young, National's energy spokesman, said there were positive signs that after a downturn, it appeared interest in exploring in New Zealand was strong.

'I had spoken with OMV, Tamarind and Todd towards the end of last year and all three had strong exploration programmes in the planning,' Young said.

'My conversations with overseas explorers prior to the 12 April decision, have been very positive with good levels of confidence in the data they had been able to access so far.'