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Bridges: Speech to 2014 New Zealand Petroleum Summit

Simon Bridges

1 OCTOBER, 2014

Speech to 2014 New Zealand Petroleum Summit

Good morning ladies and gentlemen — it is a pleasure to be here.

Our abundance of energy and minerals resources provides us with unique opportunities to build the New Zealand economy.

Over the past three years the Government has made significant changes to how the sector is regulated.

We’ve done the groundwork necessary to attract investment and build our collective understanding of New Zealand’s potential.

We’ve raised the profile of New Zealand, but at the same time emphasised that we want to attract responsible operators.

And we’ve been clear that the Government is committed to developing our resources in a safe and environmentally responsible way.

Today, I’d like to take stock of what we’ve achieved, before looking at the priorities for this term of Government.

The past three years

Looking back over the past three years, it’s clear we’ve come a very long way in a relatively short time. The Government has strengthened the Crown’s management of oil and gas exploration and production.

• We have moved to exclusive use of annual block offers to allocate exploration permits.

• We have introduced new legislation governing activities in the Exclusive Economic Zone.

• We introduced provisions to the Crown Minerals Act to ensure the industry can operate without disruption from unlawful protest.

• And we have put in place a world-class health and safety regime, and established the independent health and safety regulator, WorkSafe New Zealand.

These changes provide certainty and stability for businesses operating here, and ensure we develop our resources productively, responsibly and safely.

It has helped sent a message to the sector that we are not only open for business, but that we are a country where you should want to do business.

Our regime is certain, stable, responsible and safe.

The results

The results speak for themselves.

Over the past two years, we have seen significant levels of activity with a total of $2.98 billion spent on exploration and development-related activities.

While most of the exploration activity has not yet yielded discoveries, one of the real success stories has been in appraisal.

Recent appraisal wells drilled in the Maari, Maui and Tui fields have yielded positive results. These positive results will deliver reserves upgrades and incremental production from 2015.

The Mangahewa Development project is almost complete adding significant information to the field for Todd Energy to work with.

This marks serious investment in a mature province, showing that Taranaki still has a lot to offer when it comes to recoverable reserves.

Among the more significant achievements of the last year, we saw a 31 per cent increase in gas reserves, compared with 2012. This increase is largely the product of the recent upswing in drilling activity.

In terms of 3D seismic acquisition we came close to a record high with 6,825 km2. More is on its way.

Taking New Zealand to the international market

Over the past three years we have positioned New Zealand as an investment destination.

New Zealand offers a certain, stable regime, which compares favourably to regions that suffer from political uncertainty.

We also have a range of basins that can cater to different parts of the market, whether they seek to enter mature areas or be the first to enter a frontier basin.

And with the Block Offer’s graticular model, we offer companies the flexibility to select and bid for purpose-built Blocks within a wider release area.

Rather than defining the opportunity for them, we allow them to determine their preferred opportunity informed by their own analysis of the available data, expertise and exploration strategy.

The New Zealand Block Offer and Related Prospecting Permits

The results are demonstrable in the outcomes of our first two annual Block Offers and associated prospecting permit activity.

Block Offer 2012 saw 10 petroleum exploration permits granted to seven companies or consortiums, including one new entrant, East West Petroleum, who partnered with TAG for three permits in the Taranaki basin.

Block Offer 2013 saw another 10 petroleum exploration permits granted, including three new entrants to New Zealand: Statoil, Woodside and Mont D’Or.

Block Offer 2014 closes on October 9th so we will see the results of the third Block Offer by the end of this year, but interest to date has been strong with 112 industry requests for petroleum data packs.

So it’s clear that the move to an annual permitting round has heightened New Zealand’s profile, created certainty and stability for business, and sent a strong signal of the Government’s commitment to promoting exploration activity.

Building better data

One key to tipping the balance of investment decisions in our favour clearly lies in better data.

Historically the Government’s focus has been to purchase data, and target it to the market. This represents a significant, but costly investment.

Among the more bigger changes brought in last year was changing data confidentiality provisions in the Crown Minerals Act that have enabled multi-client seismic acquisition companies to acquire data and then on-sell it to industry.

We have seen swift results.

Since the multi-client legislation came in, 25,993 km of new 2D equivalent data has been acquired in less than 18 months. In contrast between 2005 and 2010 the Crown invested over $30 million to acquire 14,516 km of new 2D seismic data. In other words, we have acquired around 80% more data in a third of the time.

Not only has more data been acquired, with the industry bringing tens of millions of dollars into the mix, this approach gears investment to global interest as multiclient companies take the New Zealand story on the road, allowing us to reflect that interest in future Block Offers. In essence it means we now have some of largest companies in the world promoting New Zealand on our behalf, with state of the art data.

Open access to data

The access we offer to information about New Zealand's geological prospectivity is unparalleled.

We promote information through Petroleum Data Packs which we deliver to the market – as part of a defined and targeted promotion strategy.

These data packs offer high quality, consistent data sourced from both government and industry. They offer insight into New Zealand at basin and national level. Aligned with Block Offer cycles, they are actively used to target new ventures, based on market intelligence.

We know from industry feedback that these tools are not only considered to be world-class, but that this model is being adopted and emulated by other jurisdictions.

A second, equally vital part of our strategy is our online library of government data and company data collected and released under the Crown Minerals Act.

This is a rich source of information that has proven valuable not only for new ventures, but for existing operators, researchers and service providers alike.

Funding in the last Budget

While acknowledging Government data acquisition is being dwarfed by private work, in this year’s Budget the Government has committed $8 million over four years to fund a range of new data acquisition projects, such as petroleum basin analysis, to provide better geological information for investors.

In addition, earlier this month the Government granted GNS Science a total of $6 million as part of the government’s latest science funding round, including $2 million over four years to support databases of prospective offshore, oil and gas deposits within the exclusive economic zone.

NZP&M are currently looking at opportunities to leverage this funding. Last year’s busy season came with some disappointments, but there is a lot to be learnt from analysis of well data. There is also the opportunity to support acquisition of targeted data sets - such as Pegasus and Reinga joint studies with GNS and NIWA.

I believe all of this work on data, whether the changes to data confidentiality provisions through to the open access and packaging of it, is leading us into a virtuous cycle where strong interest and acquisition is leading to more again so that we can better understand and then realise New Zealand’s potential.

Looking forward

More than ever before, New Zealand is primed for sector investment so we can collectively understand and then realise New Zealand’s potential.

More than ever before, given the changes we’ve made, we have a first class regime that is certain, stable, responsible and safe, matched by strong numbers of first class players investing billions.

So now let’s turn to the immediate future. Among the priorities for the Government this term will be reform of the Resource Management Act, funding data acquisition work as discussed, and finalising our review of the fees regime so that it is as efficient and equitable as possible.

More fundamentally though, we want to build on the first class regime and players we now have by providing certainty and stability.

That is what the next 3 years promises: certainty and stability in our settings so that we continue attracting investment so that in turn we can understand and then realise New Zealand’s potential.

This will be intertwined with our continued commitment to safety and environmental responsibility because that’s a bottom line for us all.

Ladies and gentlemen, New Zealand has a long, proud history of petroleum exploration and development, and the last 3 years have built strongly on those foundations. There is still, however, much potential to understand and tap and that requires ongoing confidence to invest and a continued commitment to excellence.

Together the Government and sector will provide this and will continue building the momentum for all New Zealanders to benefit from.

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