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Bridges: Block Offer 2014

Hon Simon Bridges
Minister of Energy and Resources
2 April 2014 Speech
Block Offer 2014: Address to the Advantage NZ 2014 Geotechnical Petroleum Forum

Good morning ladies and gentlemen.

It’s great to see so many people, including the many international guests, here today. I hope those of you from overseas have an opportunity to see some of the sights that our country is renowned for before you return home.

I want to take a minute or two at the outset this morning to tell you about a couple of the key points I made at the National Energy Research Institute conference here in Wellington a fortnight ago.

The first is that energy is an integral part of our lives. It is the foundation on which we build economic growth, prosperity and progress in our societies.

But across the globe, we are all facing the same basic energy challenge.

We want our citizens and countries to continue to develop and prosper.

But we need to reduce carbon emissions from our energy use and respond to climate change.

As we transition to a low carbon economy, fossil fuels will remain an important part of the mix.

Oil and gas will continue to play a key role in ensuring our energy supply is reliable and affordable.

That brings me to my second point. The National Government’s energy policy understands this reality.

In the US, President Obama speaks of an “all of the above” policy on energy.

That is also what we have here in New Zealand.

The mixed and balanced energy approach of the National Government means it’s not exclusively renewable or non-renewable. It’s both.

I am motivated by the opportunities that renewable and non-renewable present for New Zealand socially, economically and environmentally.

The International Energy Agency tells us that coal, oil and natural gas will continue to contribute more than half the world’s energy needs until at least 2035. As I have said, fossil fuels will inevitably play a significant part in our day-to-day lives for some time.

For a country like ours where petroleum exploration remains small, this presents a big opportunity. Let me give you the context.

Currently, oil is our 4th largest export, with a value of around $1.8 billion in 2012. It is our only industry that doubled the number of people it employs in the past decade.

There are now well over 7000 people employed in the sector and typically these jobs are highly paid.

The Government receives around 42 per cent of the profits, which equates to about $700 million each year. This money is invested back into our communities in projects like our schools, roads and hospitals.

All of this comes from one petroleum basin – Taranaki. We have 17 others that are under-explored.

So we have barely scratched the surface of our potential.

We are increasingly being seen by those overseas as a very promising region for petroleum development.

And yet we know New Zealand has to compete with other countries for investment capital.

That is why the Government is working hard to attract major international companies to invest in petroleum and minerals exploration and development in New Zealand.

Our Petroleum Action Plan is an important part of the Government’s energy strategy. The plan is to increase exploration activity in the sector and to build a competitive and productive economy.

The introduction of the annual Block Offer permitting system has put in place an efficient, predictable and transparent process for exploration permitting. It offers incumbents and new entrants an opportunity to build portfolios featuring multiple basins with varying levels of risk.

And it’s working.

New Zealand is competing on the international stage and we are attracting world-class companies to invest in New Zealand. We saw this late last year with the entry of Statoil and Woodside.

New Zealand’s approach to data management is largely modelled on the Norwegian system.

We similarly value transparency and access to data as a means to drive investment.

My recent trip to Norway confirmed that investment in data is a long game. It pays off over decades. And we are seeing that now.

The value of Government funding for data acquisition has been seen in Block Offers since 2012, including this year.

2014 New Zealand Block Offer

So, now onto what many of you are waiting for.

I’m pleased to announce this morning the areas that are available for bidding in the 2014 New Zealand Block Offer.

There are three onshore release areas and five offshore release areas.

Iwi, hapū and local authorities have been consulted on all of the areas that I’m releasing today.

Let’s start with the onshore areas that will be available.

Onshore Taranaki Basin

The first onshore area is Taranaki.

The area was first drilled here in 1865, and it is New Zealand’s only producing basin to date.

Three permits were granted for the onshore Taranaki Basin as part of Block Offer 2013, reflecting strong interest in the area.

The 2014 release areas are prospective for oil and gas and feature numerous geological structures that are likely to be prospective for petroleum.

Producing fields near the release area include:
• Kapuni – a gas condensate field;
• Tariki-Ahuroa – which is also a gas condensate field; and
• McKee – an oil and gas field;

The area has good coverage in existing data and represents a relatively mature opportunity for companies.

Onshore East Coast Basin

Turning to the other side of the North Island, onshore East Coast is again on offer in 2014.

More than 40 wells have been drilled onshore since 1955 reflecting the prospectivity of the area.

We are seeing international interest in this area, particularly in tight oil and gas, and two permits were awarded for the onshore East Coast Basin in Block Offer 2013.

Onshore West Coast Basin

This year I’m pleased to add the West Coast of the South Island to the acreage on offer.

The West Coast has attracted exploration interest since the early 20th century, and has known prospectivity for both oil and gas.

Onshore Graticular

Last year we introduced a graticular methodology for offshore release areas, to give bidders the flexibility to define their desired permit area within predetermined limits.

You may have noted on the maps onscreen that for Block Offer 2014 we have extended this approach to onshore release areas.

Bids for onshore Taranaki may be for areas up to 250 square kilometres.

Other onshore bid areas may be up to one thousand square kilometres

Now to the five offshore areas that are available in this year’s block offer.

Offshore Taranaki Basin

The first is offshore Taranaki.

Off the west coast of the North Island, the basin stretches from the coast of Auckland to the northern tip of the South Island.

Producing wells adjacent to the area on offer in 2014 include:
• Māui – a gas condensate and oil field;
• Kupe – a gas condensate field
• Pohokura – also a gas condensate field; and
• the Tui oil field;

This includes acreage from a relinquished offshore Taranaki Petroleum Exploration Permit that became available late last year. We know the basin is highly prospective for oil and gas but remains under-explored and has real potential for future discoveries.

Two permits were awarded in the offshore Taranaki Basin in Block Offer 2013.

Offshore Reinga-Northland Basin

The Reinga-Northland Basin off the west coast of Northland is on offer again in 2014.

While an exploration permit was awarded to Statoil for part of the Reinga-Northland Basin last year, it remains virtually unexplored.

However, we have strong evidence that it is prospective for oil and gas, and it has many similarities with the Taranaki Basin.

This is one of the more exciting areas on offer.

Offshore New Caledonia Basin

A new basin has been added to the available areas for 2014.

The New Caledonia Basin release area, located off the west coast of the North Island, covers a total of 49,000 square kilometres.

Like the Reinga-Northland Basin, the New Caledonia basin remains virtually unexplored and again has many geological similarities with the Taranaki Basin.

Despite being truly frontier acreage, the area is already attracting strong interest from Majors and Super Majors, so it looks promising.

Offshore Pegasus Basin

I’m pleased to announce that the Pegasus Basin will be on offer this year.

The area, which is located off the south-east of the North Island, covers an area of approximately 75,000 square kilometres.

The first exploration permit for this basin was awarded in late 2012 to Anadarko.

Offshore Great South & Canterbury Basins

The last of the offshore areas on offer in 2014 are the Great South and Canterbury Basins.

This large area off the lower east coast of the South Island is prospective for oil and gas.

Discoveries in this region date back to the mid-1970s and through to the 1980s.

It has a long demonstrated active petroleum system that has been the subject of renewed interest since 2007, and two permits were awarded for the Great South-Canterbury Basins last year.

To sum up, the Government is offering 405,000 square kilometres of acreage in the 2014 New Zealand Block Offer.

The three onshore and five offshore release areas on offer make up a tender that ranges from smaller appraisal blocks in well-explored areas containing previously drilled wells, through to large blocks with running room in frontier regions where little to no exploration has taken place.

Industry has six months to prepare their most compelling work programmes.

New Zealand has built a strong, world-class regulatory framework to provide economic opportunities but also provide the necessary environmental protections. The Government expects companies to clearly demonstrate how exploration activity will be completed within our regulatory framework.

All bids are due by 25 September; and I expect to be able to announce the successful bidders in December this year.

Industry nominations

I’m sure that the interest in Block Offer 2014 will be high. I look forward to seeing the results of your bids.

This morning I’m also pleased to announce that today we are opening industry nominations for Block Offer 2015.

All of the areas that I’ve released today were informed through nominations and contributions in the form of prospectivity assessments from the industry.

The identification of areas of interest for each Block Offer is vital.

So this is your opportunity to guide the Government by nominating the areas you want to see in the next block offer.

Conclusion

There are big energy and resources opportunities in New Zealand.

We’ve barely scratched the surface of our potential.

Help us to continue building the momentum in this most promising region for petroleum development by participating in the now open 2014 New Zealand Block Offer.

ENDS

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