Government set to give oil industry breathing space over permits, Greens urge rethink
Tuesday, 25 September 2018
The Green Party is urging Energy Minister Megan Woods to rethink plans to give oil companies facing deadlines more time to consider whether they will drill.
Woods has opened the door to giving oil companies additional time to decide whether they 'drill or drop' while the Government's changes the Crown Minerals Act, potentially breathing life into the sector.
Just hours before announcing a law change to give effect to the new offshore oil exploration ban on Monday, Woods met with oil industry figures to discuss their request for more leniency on the conditions of existing exploration permits.
Woods said she agreed that on a case-by-case basis, she will consider giving the oil companies more time to fulfil their commitments on the permits, describing it as 'a little bit of a pause'.
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Although she did not put a time limit on the pauses or say under what conditions they might be granted, Woods said the pause was designed to give the industry time while the Government considered more wide-ranging changes to the Crown Minerals Act.
After being lauded by environmental groups for its stance on oil exploration, the comments were described as a 'terrible' decision by Greenpeace executive director and former Green Party co-leader Russel Norman.
Green Party energy spokesman Gareth Hughes is also urging the Government to reconsider.
'I struggle to see the point in banning offshore exploration for oil and gas if existing companies with huge blocks can hold off from exploring until way later down the track.'
While the conditions on permits vary, holders tend to make commitments to drill exploratory wells by a certain date, or face relinquishing the permits to the Crown, so-called drill or drop clauses.
Oil companies have lobbied for more flexibility around the clauses in the past, however, generally because the Government has offered large areas for exploration each year, the industry expected new space to become available.
The decision to stop offering new offshore permits, announced in April was behind Woods' being decision to give greater flexibility, she said.
'Obviously they [the oil companies] have to figure out how to manage their permits differently given that there aren't more being offered,' Woods said.
This would be a terrible decision for the climate if it happened. Every existing permit that expires is positive for the climate: Government set to give oil industry breathing space over permits, potentially boosting exploration https://t.co/PhEfdfYZXK
— Russel Norman (@RusselNorman) September 24, 2018
'Previously people would be quite content to just let stuff drop off because they would pick up stuff in the next block offer round,' Woods said.
The dynamics of the industry changed as the result of a deal between the leaders of Labour, NZ First and the Greens, announced as Government policy despite not being considered by Cabinet.
Woods and Prime Minister Jacinda Ardern have pointed to the vast amount of space available for exploration under existing permits, claiming in total is amounts to more than 100,000 square kilometres.
Although officials have said this move to stop offering new offshore space could benefit the holders of existing permits, and especially companies with existing oil and gas production, it warned the move could have a chilling effect on investment as companies look to deploy investment budgets elsewhere.
The move, requested by industry lobby group Pepanz, is likely to give breathing space on a massive South Island permit, and could extend the life on other permits coming close to expiry.
In early 2019, New Zealand Oil & Gas (NZOG) faces a decision on whether to drill in the Barque prospect, off the east coast of the South Island, around 60 kilometres from Oamaru.
However it conceded the prospect had only a one in five chance of success if drilling was to proceed.
Cameron Madgwick, chief executive of Pepanz, welcomed the move, but said the earlier move by the Government had 'seriously damaged' investor confidence.
'This is a welcome signal from the Minister that could give operators a little more breathing space, given we are operating in a new environment,' Madgwick said.
'Without flexibility there is a real risk to our energy security, given we have just 10 years of natural gas supply left and the chance of new discoveries has taken a real hit.'
NZOG has not responded to requests for comment.