Extraction of existing oil reserves
16 December 2004
Government should encourage extraction of existing oil reserves
The Petroleum Exploration Association today said the Government's ill advised plan to force the oil industry to increase oil storage to create a 90 day oil security buffer completely ignores the fact that there are existing underground reserves in New Zealand and opportunities for further discoveries. New Zealand's self sufficiency in indigenous oil has deteriorated from around 50% a few years ago to 20% currently.
"The Minister of Energy has announced that an additional 500,000 tonnes of storage capacity is required for New Zealand to be fully compliant with an international arrangement on oil security in times of emergencies, yet expects industry to provide this capacity, at its expense" Dr Mike Patrick, Executive Officer of PEANZ said today. "Is this realistic?"
"With the right incentives, potential new developments, such as Maari, the Tui-Amokura-Pateke fields, and Kupe, could more readily and swiftly be brought into production, creating substantial quantities of crude and condensate to make up the supposed shortfall identified by Government. There are also opportunities for enhancements to existing production."
"Really, the only barriers to getting the oil out of the ground are financial ones, in the form of royalties that are imposed by Government on oil producers."
"Government recently relaxed some of the royalty regime with the aim of encouraging more exploration and production of gas, but this is tagged to a definition of any new "discovery" made after June 2004 - unfortunately Government has been poorly advised with regards to this definition, such that several developments which would assist this country in terms of oil and gas supply security will not qualify, and hence may not be developed." Dr Patrick said.
"If Government were to realise that this attempt to define "discovery" is too restrictive, and were to redefine it and introduce royalty relief for oil so that it truly created an incentive for exploration, then not only would they see an immediate increase in exploration for oil and gas, and ensuing production but also this happening at a fraction of the cost of installing additional storage," Dr Patrick said.
"How about a policy that will most likely find new oil, not just the gas reserves the Government is currently seeking, a policy that will create useful jobs, reduce the use of overseas funds and save the consumer the costs of establishing the oil security buffer," he asked?