Terrence Loomis, FFARN

Opinion: Time for Energy Minister Woods to End Oil Exploration

Shortly after the last election, Prime Minister Jacinda Ardern stated that fossil fuels were not New Zealand's future and future exploration block offers would be reviewed.

At least four countries have already banned oil and gas exploration, and Ireland is about to do so.

The challenge for Energy and Natural Resources Minister Megan Woods is turning around the juggernaut of government administration and support for the oil and gas industry put in place by the National government. Already Dr Woods has been presented with several operational policy decisions that could have signalled Government’s intention to move urgently on climate change. So far, the Minister has kicked for touch (e.g. seismic surveying) and chosen not to confront the industry. It’s becoming increasingly urgent that she do so.

A case in point is New Zealand Oil and Gas (NZOG)’s recent application to New Zealand Petroleum & Minerals (NZP&M) for another extension to its Clipper permit.

NZOG first sought an extension in 2016. At the time, they were selling assets and struggling to find farm-in partners to share the drilling costs of a well. Some industry analysts speculated NZOG might even be wound up. The company told NZP&M they needed an extension in order to carry out an economic feasibility study and analyse geosurvey data more carefully.

What NZOG actually did was jack up a sweetheart $100,000 grant in ‘partnership’ with New Zealand Trade and Enterprise (NZTE) to pay consultants Martin Jenkins to produce what was subsequently spun as a regional ‘economic impact assessment.’ The Barque prospect in the Clipper block supposedly contained trillions of cubic feet of gas and would generate hundreds of jobs for South Canterbury. The figures were virtually plucked out of thin air. Trade association PEPANZ touted the Barque as a game-changer for the region and country.

The report was released before NZOG’s October 2017 AGM to company shareholders, and most importantly to potential take-over bidders and drilling farm-in partners.

In reality it was little more than a sales prospectus partly funded by the New Zealand taxpayer to garner local business support and attract big-money investors. Even Monaco-based OG Oil & Gas, which took majority ownership of NZOG in January, acknowledged drilling the Barque would be a risky and costly deep-sea exercise ($NZ85-$115m) which they were reluctant to commit to.

So once again NZOG was left struggling to find a farm-in partner to share the costs of an exploratory well. With a deadline of April 10th looming to commit to drilling an exploratory well or surrender the permit, the company approached NZP&M before Christmas for another extension on dubious grounds. Not surprisingly, the extension was fast-tracked and signed off by the National Manager Petroleum by the end of January.

If fossil fuels are not New Zealand's future and addressing climate change is our nuclear-free moment, why is the Government continuing to allow exploration and supporting the oil and gas industry to the tune of $87.6m a year?

It’s time to walk the talk. Minister Woods should immediately declare an end to permit extensions and new exploration permits (the Block Offer process) while she reviews further steps to end taxpayer support for the oil and gas industry.

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Dr Terrence Loomis is an independent researcher specialising in the political economy of the oil and gas industry. His 2017 publication, Petroleum Development and Environmental Conflict in Aotearoa New Zealand (Lexington Books) was written while he was a Visiting Research Scholar at Victoria University’s Institute of Governance and Policy Studies. He is also coordinator of the Fossil Fuel Aotearoa Research Network.

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