Hekia Parata on The Nation
Interviewed by DUNCAN GARNER
Duncan This week the government released its energy strategy signalling major increase in oil and gas production. Thirty blocks will be opened up for tender around New Zealand with an estimated 12.7 billion dollars to the New Zealand government – that’s of course in royalties. That’s raised the ire of environmentalists despite the fact the government's also committing to 90% renewable energy by 2025. So can we increase energy production and maintain our clean green image. Acting Energy and Resources Minister Hekia Parata is with me now. Kia ora tena koe welcome to the shoe.
That 12.7 billion dollars that was spoken about in the energy strategy this week of increased royalties over the next ten years, how realistic is that?
Hekia Parata – Acing
Energy and Resources Minister
Well it depends on a number of factors. That’s an analysis that was carried out for the Ministry of Economic Development. It built on one that had been done in 1998, and a number of scenarios are set out in the analysis. The 12.7 billion dollar one is based on the rate of exploration increasing. It also makes a number of forecasts about what the price of oil might be. But in terms of what we're already producing the indications are that future earnings off that are three billion with the opportunity to quadruple.
Duncan So when are we going to see some of these oil rigs coming into New Zealand. How realistic is it when I go back to that first question? Are we going to see increased exploration as a result of some of your changes this week, because we've seen Petrobras come to the Raukumara Basin, but when are we going to see increased activity as a result of this, because as you said some of these statistics and figures go back to1998?
Hekia No no, the original ones were done, this updated Woodward Report was done last year. One of the other things that I announced earlier this week as part of the energy strategy, was that we would be changing the permitting process. So we've gazetted that we have stopped the priority and time process, which basically has meant that anyone can apply for any area at any time.
Duncan And are they knocking on your door Minister? I mean are these oil companies taking on Petrobras, are they knocking on your door as a result of what we've seen this week even?
Hekia Well as a matter of fact, in the Fraser Institute Survey, which is an international survey of counties involved in the oil and gas sector, New Zealand has rated for the first time at five out of 152 countries, that indicates two international companies and investors, that this is a highly desirable location, and we're very keen to encourage.
Duncan But are they knocking on your door? I mean it's all very well to quote those surveys, and I've read a lot of them myself, but are they knocking on your door?
Hekia I've seen a lot of these companies.
Duncan And are they expressing interest because if you look at Exel Mobil they’ve actually exited from the great south basin haven’t they?
Hekia They are expressing interest and one of the particular reasons that they are is that we have invested in the science. We are able to provide indications of what that potential is, based on the seismic mapping that the government has funded. They're very interested in what we have to offer here in New Zealand, and yes there is interest being expressed.
Duncan But some of the people that we have spoken to in the preparation of this interview say that the strategy's a bit woolly and one of the experts said there's only vague ideas where the resources might be and no certainty. You can't give these petroleum companies any certainty.
Hekia I don’t know who your other people are that you're talking to, but what we do know is that we have done the seismic mapping. We've had feedback from these international companies of their interest based on the evidence of what the potential of our resource is. We are rated exceptionally high as a frontier basin exploration opportunities. Our regime, we're putting in place all of the elements to ensure it is a world class regime, both in terms of the regulations, but also in terms of managing the actual work programme around environmental responsibility, around workplace safety. So all of these contribute to New Zealand being very solidly based as a destination for this exploration.
Duncan Looking at one of the reports that the MED, the Stuart McDire Report, there's been 200 wells have effectively been drilled in those frontier basins, and they have found some encouraging signs over the last 20 years, but nothing has been commercialised as yet in that frontier region. What gives you any confidence that these figures stick, because what we've seen, the history of what we've seen is yes there's been some exploration, but no commercial hit.
Hekia First of all what we have to appreciate is that this industry works over very long time lines. Exploration does work in the three phases of 2D seismic mapping, followed by 3D seismic mapping, followed by exploration. There remains a very good level of interest and we are very keen to attract that interest, and yes in Taranaki where we do have our producing basins where Pohukura and Maui and Tui make up 75% of our production at the moment, has demonstrated that by commitment to an area over time you get the maturation of the industry, and that has given very positive indications for other exploration.
Duncan Okay, of every dollar of oil that comes out of the ground in New Zealand, how much is the New Zealand government getting?
Hekia Well in the 2000 year our exports of petroleum were our fourth biggest earner.
Duncan What's the figure Minister, what's the figure? A pretty simple question. For every dollar of oil that we pull out of the ground what are we getting as a country?
Hekia Well that’s what I'm telling you is that it was our fourth biggest earner, but we also use it for our own domestic requirements here in New Zealand, so it's a mix of those things. We get a royalty stream, we get levies, we get company tax, we get individual personal tax.
Duncan No, I understand that, I understand it's the fourth largest earner, but for every dollar – cos I know you’ve got a royalty regime. You're looking at the Royalty Regime Review, and that’s been around for a couple of years now. But for every dollar, I'm asking you how much does the New Zealand government get?
Hekia I can't give you that specific figure Duncan because it depends on which variables are used at any one time. What I can tell you is that it employs 5000 New Zealanders who pay tax. It is our fourth biggest export earner in 2010.
Duncan Is it about 43 cents in the dollar? Does that sound about right?
Hekia No I can't give you that exact figure and I wouldn’t want to mislead the public.
Duncan Because on your MED website which is obviously the government department that you oversee in this role, they say that it's about 42% of the petroleum companies are counting profit goes to the New Zealand government. Does that sound about right to you?
Hekia Well it depends on again which variables were using, so the royalties bring in a certain amount, levies bring in a certain amount, company tax brings in a certain amount, individual tax based on those employed in the sector bring in a certain amount, and we are very positive about what this contribution can make to our economic growth agenda. We think that the strategy we put in place will deliver a better energy future for New Zealanders, and in the end it will also lead to better jobs and higher incomes for New Zealanders, it contributes to better roads, better hospitals, better schools.
Duncan Well last year in your 2010 Energy Strategy Report it did focus a bit on coal. I noticed this year a lot of the references to coal has been taken out. Does the government still want to get coal out of the ground or not?
Hekia Yes we do. We decided in terms of how we would construct the strategy was that we would stay at a strategic level and so we haven’t identified in the strategy specific programmes or specific plans, but we remain committed in this area.
Duncan Why have you backed away from that?
Hekia We're not backing away from it.
Duncan Well why isn't it mentioned?
Hekia We're not backing away from it. What
we're doing is focusing on giving the general direction and
approach. We know that for instance our minerals estate
brought in 450 million dollars in the
2009-2010 year. We remain committed to seeing better jobs and higher incomes coming off all the energy options and resources that we have in this country.
Duncan And what about Pike River? Do you still want to get I think there's about eight billion dollars' worth of coke and coal in there, good top grade coal as you're obviously well aware of. Do you want to get that coal out, or is it too sensitive now?
Hekia Well that matter is still in the hands of the Receivers.
Duncan But does the government want to get that coal out, is it the government's intention behind the scenes for that mine to get back up and running?
Hekia That matter is still in the hands of the Receivers, so we'll wait to hear advice on that.
Duncan And what about the government's intentions though? Would the government like – I know it's in the hands of the Receivers but would the government like that mine to be operational again?
Hekia Well look, we're very keen as I've said and we've described in our energy strategy that we want to take advantage of all the options we have available, and New Zealand's blessed with an abundance of resources that do give us those options. So we have a very strong commitment to renewables. We're still committed to 90% of our electricity generation coming off the back of renewables, and in the March quarter this year we're at 79%. We're investing in clean technologies. We're expecting a report from our Greengrove Advisory Committee by the end of the year, and we see significant opportunities in clean technology, in working with businesses. We're focused on energy efficiency, both in homes as well as in businesses, and we've passed the hundred thousandth milestone of our Warm Up Heat Smart New Zealand programme. And we're interested in our diverse resources and exploring the oil, gas and minerals.
Duncan Can I just jump in there Minister. in the preparation of this interview I obviously spoke to a number of energy consultants and Stratera and the likes, and there's been a bit of concern that this energy strategy didn’t in any way identify conservation land that could be opened up. This is going back to last year of course when the government looked at opening up Schedule 4. Are you looking at opening up more conservation land to mining companies or not? They want to know, they want to know the answer to this.
Hekia Well I speak regularly with Stratera and my door is open to them. The answer is this. There are many categories of land in the Crown estate. Schedule 4 which contains those with the highest conservation values are absolutely not available for mining….
Duncan So that’s off the agenda now is it? The Schedule 4 stuff remains off the agenda?
Hekia That was made very clear after the consultation that the government had listened, had heard, and Schedule 4 lands will not be available and in fact we've just added …
Duncan And other conservation estate Minister – other areas of the conservation estate, other areas of the conservation estate?
Hekia Again let's talk about the Crown estate, because there are different categories of land within the entire Crown estate. So for Schedule 4 lands which have the highest conservation values, they are off the agenda. We will pass legislation as part of the review of the Crown Minerals Act, which I also announced this week, that makes that very clear. In other areas of the Crown estate we require, as we do with any permit, that first of all a permit be processed, that a consent be given, and that land access arrangements are entered into …
Duncan Speaking of permits, do you envisage any more big sort of mines taking place around coal? Because I think Bathurst Resources has uncovered quite a find in Dennison on the West Coast. Interest that correct, and are they going to be able to go ahead and get that coal out of the ground?
Hekia Well my understanding is that they’ve certainly been permitted, it was a notified consent, but they're still working through the process of gaining access, because we have very rigorous and transparent processes here in New Zealand, so that New Zealanders in general can be assured …
Duncan And there are environmental concerns about that, there are hug environmental concerns about that. Can you rule out open cast mining to those environmentalists?
Hekia Well first of all…
Duncan Can you rule out open cast mining please Minister?
Hekia Ah, no. I'm not ruling out open cast mining. What I'm saying is that I am confident that the processes we have in place that allow for all of us to have our views expressed, and we're all environmentalists because we all love this country, and we want it to retain all these high pristine values. At the same time we want economic growth and we want better jobs and higher incomes, and our government is focused on how we strike the balance between those two. And we rely on local and regional government to conduct the Resource Management Consent processes, and the Department of Conservation, the access land access processes, all of which are in the public domain.
Duncan Alright Minister, thank you for making time for us this morning on The Nation.