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13/4/2018 — Oil and Gas
Ardern’s ban on new offshore permits
By Simon Hartley

The Government has quit offering new offshore oil and gas exploration permits and restricted permitting to just onshore Taranaki targets - a definitive move to transitioning away from fossil fuel extraction.

Welcomed by environmentalists, the move is attracting energy sector criticism for lack of consultation and questions over supplying New Zealand's long term energy requirements.

Prime Minister Jacinda Ardern said yesterday that just one oil and gas exploration permit had been granted in each of the past two years.

“This decision does not affect current (oil and gas) reserves or the potential finds from current exploration permits. As the industry itself admits, there is good potential for more to be found,” Ms Ardern said.

Given five major offshore oil and gas companies have relinquished their New Zealand permits in the past two years and exited New Zealand, the decision appears unlikely to have any short term effects.

However, chief executive Cameron Madgwick of the Petroleum Exploration and Production Association of New Zealand (PEPANZ) said the decision was likely to affect New Zealand's energy security and international reputation.

“Our known gas supplies will run out in 11 years. Apart from importing fuels with higher emissions, where else will we get energy from and how much will it cost consumers and businesses,” Madgwick said.

By not exploring and producing petroleum in New Zealand, that meant other countries would produce it instead and New Zealand would have to import it at higher cost, he said.

“This will do nothing to reduce global greenhouse gas emissions and could make them worse,” he said.

On the issue of security of supply, Madgwick noted that this week coal had to be used for electricity generation after there was an interruption to the Taranaki gas supply.

He said there was also substantial economic benefits at stake, with the Government receiving about $500 million annually in taxes and royalties and employing more than 11,000 people at peak periods.

“All of which will decline without new activity,” he said.

Madgwick, and New Zealand Oil & Gas chief executive Andrew Jefferies both highlighted the decision sent worrying message to domestic and international investors, on New Zealand being a place to invest and create jobs.

However, Ms Ardern said the Government was protecting existing exploration and mining rights.

“No current jobs will be affected by this as we are honouring all agreements with current permit holders,” she said.

On the question of supply, the PM said there were 31 oil and gas exploration permits currently active, including 22 offshore.

“These permits cover an area of 100,000 square kilometres, nearly the size of the North Island, and run as far out as 2030 and could go an additional 40 years under a mining permit,” Ms Ardern said.

Existing onshore and offshore exploration permits; and those that may go on to seek a mining permit, will all be honoured by the Government.

The stance was well signalled when in February Minister of Energy and Resources Megan Woods extended an offshore oil and gas exploration permit off Oamaru, stating the alternative would have been a judicial review of the permitting process.

Madgwick said there had been no direct consultation with the sector and asked the Government to “talk with the industry urgently.”

National's spokesman for energy and resources Jonathan Young described the decision as “economic vandalism” which would ensure the demise of 8,000 high paying jobs and remove $2.5 billion from the economy.

“This decision is devoid of any rationale. It certainly has nothing to do with climate change. These changes will simply shift production elsewhere in the world, and not reduce emissions,” Young said.

Forest & Bird chief executive Kevin Hague described the decision as a “victory for New Zealand's seas,” in protecting ocean wildlife from seismic testing and oil spills.

Climate Justice Taranaki member Urs Signer welcomed the Government's decision to cease offshore permitting, but criticised the continued onshore permitting around Taranaki, describing it as “continuing to sacrifice Taranaki for political trade off.”

He said a potential 23% of onshore Taranaki land could be available to companies wanting to drill, further contributing to what he claimed was a climate crisis and destroying the local environment.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

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An offshore drilling rig being piggy-backed into Admiralty Bay for OMV New Zealand.
Prime Minister Jacinda Ardern. Photo: Fairfax Media.