New report estimates oil and gas ban will cost Taranaki $30bn

Tuesday, 19 February 2019

Job losses are inevitable from oil and gas exploration permit ban, a report says.

The coalition Government's ban on oil and gas exploration could cost the Taranaki economy $30 billion by 2050, a new industry-commissioned study claims.

Job losses, lower incomes for skilled workers and a cut in living standards are predicted in the New Zealand Institute for Economic Research (NZIER) report, released on Tuesday.

A giant jack up rig arrived off the Taranaki coast to improve the country's natural gas supply from the Pohokura offshore well.

It found the region will be hardest hit by the exploration ban, which was passed last year.

The report, commissioned by the industry representative group, Petroleum Exploration and Production Association of New Zealand (PEPANZ), claims all indicators of economic growth and wellbeing in Taranaki will decline.

Petroleum Exploration and Production Association of New Zealand (PEPANZ) ceo Cameron Madgwick says Taranaki will bear the brunt of the exploration ban.

The findings have been praised by New Plymouth MP Jonathan Young, National's Energy & Resources spokesperson, but energy and resources minister Dr Megan Woods said the numbers in the report were 'nothing new' and the government was protecting 100,000 square kilometres of current exploration permits.

PEPANZ chief executive Cameron Madgwick said Taranaki will bear the brunt of the exploration ban's impact, with major job losses and lower incomes felt in the region over the next 30 years.

* Government's oil and gas exploration halt was a 'kick in the guts for Taranaki': Mayor

* The slow demise or temporary slump of New Zealand's oil and gas industry**

'Employment in the region could fall by between 3.2 per cent and 6.6 per cent, many skilled workers will leave and there will be less investment into the region,' he said.

Madgwick said the Taranaki economy could shrink by as much as $40b, which would be a 'major blow to the region'.

The report estimated the fall in Taranaki's GDP would equate to a drop in household incomes of about $21,000 a year.

'This is the first proper analysis of the wider impacts this decision will have and it is very sobering,' Madgwick said.

'It shows a major reduction to the standard of living in Taranaki for no apparent environmental gain.

'This is new information, which was not available to the Government when the legislation was rushed through Parliament last year, strongly reinforces the need for an independent review and rethink of this policy.'

The Government's decision stopped new exploration permits being granted offshore, and onshore outside of Taranaki.

It was recently passed into law as the Crown Minerals (Petroleum) Amendment Act 2018.

Nationally GDP will drop between $15bn and $38bn - the equivalent of buying more than 40,000 Kiwi Build houses in Auckland - while household spending will drop between $4800 to $14,200, the report said.

Investment will also reduce between $4b and $7b and export revenue drop between $3b and $10b.

'In Taranaki the ban will reduce real GDP to between $16b and $40b, and cause substantial reduction impacts on regional consumption, investment and export revenue are also strongly negative,' the report said.

Living standards in the province will drop as household incomes fall by $20,774 annually for the next three decades, while job losses in Taranaki within the oil and gas sector will fall between 3.2 per cent and 6.6 per cent.

Employment will grow slightly in the rest of New Zealand, but growth will come at the cost of steep job losses in Taranaki, forcing people to move outside the region for work, it said.

The oil and gas industry was estimated to contribute $2.5bn to the New Zealand economy, or 1.29 per cent of national GDP.

About 11m barrels of oil, from 12.5m barrels produced, were exported in 2016 while natural gas provided between 10 per cent and 15 per cent of New Zealand's electricity generation with the remainder being used for industrial processes, such as feedstock for the fertiliser industry, the report said.

The effect on New Zealand's emissions is minimal, it added, and the country's contribution to the global reduction of emissions was undetectable.

'The decision to ban the granting of new oil and gas exploration permits drives a series of strongly negative economic impacts and New Zealand will spend more on imports to keep other petroleum-dependent industries going.'

Jonathan Young MP said New Zealanders will end up poorer as a result of the exploration ban 'but they'll have nothing to show for it in terms of slowing climate change'.

'The report makes clear the Government rushed in, without an audit on the economic costs to New Zealand. Now the industry has funded the work itself from NZIER – work that Minister Megan Woods should have ensured was done,' Young added.

'Dr Woods says the Government wants ā shift to electricity or hydrogen but the transition to hydrogen as a fuel source could cost up to ten times more than natural gas, making some industries uneconomic and driving up power prices for families already having to stretch each dollar further.'

In a statement, Dr Woods said the government was planning for the future.

'Of course there will be long term implications if we do nothing, but that's exactly why we're starting the planning now. This is a long term, managed transition happening over the next 30 years.

'Just recently we've seen OMV's investment of a further $500 million in Taranaki in the coming years. We've seen Todd investing in a $100 million new gas peaker in Taranaki, as well as Methenex securing a long term supply contract through to at least 2020 and having the certainty to advertise for new highly paid roles.

Greenpeace dismissed the PEPANZ report as 'fake news and flatulence'.

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