Govt turns focus to lucrative oil industry

Govt turns focus to lucrative oil industry

Proposed changes to the oil and gas industry's exploration permit scheme are part of the government's Energy Strategy announced this morning, which emphasises fossil fuels on the back of a report that states New Zealand could earn up to $12.7 billion in royalties if current oil exploration rates were to double.

Proposed changes to the oil and gas industry's exploration permit scheme are part of the government's Energy Strategy announced this morning, which emphasises fossil fuels on the back of a report that states New Zealand could earn up to $12.7 billion in royalties if current oil exploration rates were to double.

Acting Minister of Energy and Resources Hekia Parata said fossil fuels will continue to play an important role in the global economy.

"Around half of the energy we currently consume is from petroleum,’’ she said.

“We can’t just turn off the tap in our journey to a lower carbon economy. We also can’t ignore the major economic opportunity that continuing global oil demand could provide New Zealand. Petroleum was our fourth biggest export earner in 2010.’’

The strategy proposes changes to the way permits are issued for oil and gas exploration. Currently companies can apply to explore any area in New Zealand, but the government wants to open up a limited range of specific areas for tender.

“The proposed approach would allow us to focus on areas of greatest potential, and will be more transparent for the public, who would know which areas are available for permitting and which are not. Communities and iwi would have an opportunity to comment on the proposed areas to be opened up,” Parata said.

In addition to the energy strategies, the minister today released an independent report assessing New Zealand’s oil and gas potential.

Independent financial advisers Woodward Partners said New Zealand is set to earn more than $3 billion in royalties from oil and gas fields already in production.

It also assessed the value of future royalties, from known petroleum reserves as well as potential production, and said these could form a very significant source of government revenue for years.

If recent patterns of exploration and development continue, future income could generate $8.5 billion – and if those rates doubled, New Zealand could earn $12.7 billion, the report showed.

Coupled with company tax, the government receives about 42 percent of a petroleum company’s accounting profit. 

Parata said people wanted jobs and growth, as well as ensuring the protection of the environment.

“We have seen the difference the oil and gas industry has made in Taranaki, employing over 5,000 people (in 2009) and contributing $2 billion to our country’s GDP.’’

She said a number of measures were being taken to ensure the industry was operating within a sound framework, including the establishment of a High Hazards Unit of eight inspectors specifically dedicated to the petroleum and mining industry and a review of liability insurance requirements.

New Zealand was "blessed" with an abundance of energy resources, and sustainable energy would also play a part in the plan, she said.

”Renewables made up 79 percent of our total electricity generation in the March 2011 quarter. New Zealand has a target of 90 percent of electricity generation to be from renewable sources by 2025, and we are well on our way to achieving that.’’

New Zealand’s renewable energy levels are the second highest in the OECD, behind Iceland.

“Our government’s goal is to make the most of all the assets we have – hydro, wind, geothermal, oil, gas and minerals.

“We want to use those resources responsibly to secure our energy future and to lift our standard of living."