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Funding boost to encourage oil and gas exploration

Hon Gerry Brownlee
Minister of Energy and Resources

8 May 2009 Media Statement

Funding boost to encourage oil and gas exploration

Energy and Resources Minister Gerry Brownlee has announced a renewed seismic survey programme to encourage New Zealand oil and gas exploration.

As part of Budget 2009 a total of $20 million over three years will be allocated to the seismic data acquisition programme run by Crown Minerals, which is responsible for the administration and promotion of New Zealand’s oil and gas.

“This work will increase data acquisition and processing of marine seismic surveys of the earth’s subsurface geology,” Mr Brownlee said.

“Petroleum exploration and investment companies can then use the data to assess the oil and gas potential of frontier basins,” he said.

The $20 million funding meets National’s pre-election policy promise for seismic exploration. A further $3.45 million has been reallocated for seismic survey work since National came into office.

Previous surveys have resulted in $1.4 billion of expenditure by exploration companies, particularly in the Great South Basin.

“The international oil exploration industry is showing increasing interest in New Zealand following initiatives to make new data freely available to companies wishing to explore here,” Mr Brownlee said.

“This has translated into increased exploration expenditure and activities across frontier basins that have historically struggled to attract investment in exploration.

“At this time of uncertainty in international financial markets, as well as the fall in oil prices, it is important for the government to maintain interest in New Zealand,” Mr Brownlee said.

“With this in mind the government sees the 20 million of budget funding as a good step to generating more exploration,” he said.

A number of the major oil companies have already indicated interest in the New Zealand region, and in coming months Crown Minerals will continue to promote bidding rounds in Australia, North America, Europe and Asia.

Question and answers:

1. Oil and gas exploration services are very expensive. Is $20 million enough over 3 years?
This amount will be enough to give an initial indication of the prospectivity of some areas and give industry useful data to work with.

2. The previous government abandoned funding of data acquisition, why has the current government resurrected the initiative?
This government has resurrected the initiative because it’s confident
about the benefits it will generate.

3. What are the chances of finding oil or gas using these surveys?
The surveys will not directly find oil or gas, but the chance of uncovering areas that exhibit the components of a “petroleum system” is high.

4. Why can’t the petroleum industry explore these areas without Crown data being acquired first?
Exploration companies need some initial information to begin working on an area. Further, providing this data to many companies creates healthy competition.

5. Is this a good investment for the taxpayer given current financial conditions?
The potentially high rates of return make this a good investment despite the economic climate.

6. How much did the recent Reinga basin seismic survey cost?
The Crown paid about $3.5 million for 1,500-kilometres of Reinga data.

7. Foreign vessels are used to acquire seismic in the past. Can this seismic acquisition be carried out by a New Zealand vessel?
Some New Zealand vessels can acquire seismic but they are unable to acquire data of sufficient quality.

8. What New Zealand industry sectors stand to gain from the seismic surveys ?
Seismic acquisition companies will spend money in New Zealand while they are acquiring here. Many of the maritime crews will be New Zealanders and if a support vessel is required, this will also be of New Zealand origin. Crown Minerals is likely to spend some of the allocation on local geological assessment of the data.

9. How much of any industry spend will be spent in New Zealand?
Geological, engineering and maritime industries benefit; fuel bunkering and provisioning rigs and seismic boats will also be a substantial cost. It is estimated that 20 - 25 percent of the industry spend will flow to the New Zealand economy, either directly or indirectly.

10. How will the surveying benefit the scientific understanding of the surveyed areas?
The new data will have a big impact on the scientific understanding of the area. The science is the first step towards understanding the hydrocarbon potential of an area.

11. What progress has been made in the promotion of the Reinga, Northland and Raukumara basins?
Data has been collected over Reinga and Crown Minerals has contracted GNS Science to write a report and interpret the new data. The Northland and Raukumara blocks offers have been opened and Crown Minerals staff are targeting explorers in North America, Europe and Asia.

12. What economic impact will the recent offshore developments of Maari, Tui, Kupe and Pohokura have?
For the 11-month production period ended 30 June 2008, the Tui JV paid the Crown $210 million in royalties, and at least a further $250 million more in related corporate tax. It is estimated that over the life of the field more than $1.5 billion in forward nominal royalties will flow to the Crown, plus corporate tax on any accounting profits. Royalties from Pohokura are likely to average $200 million per year. Kupe and Maari are expected to provide over $1.5 billion each over the life of the fields.


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