New Zealand's multibillion-dollar energy industry will become uneconomic if fracking is banned from drilling operations, an industry report says.
Banning the controversial practice could potentially endanger the future of the lucrative sector, says the report, prepared by New Zealand-owned Todd Energy.
Fracking is a method used to pump fluid into wells under great pressure to fracture the oil and gas bearing rocks so they can flow better. The Todd report says the fluid used is up to 99 per cent water, with the remainder made up of chemical additives, most of which have common applications around the home.
Posted on the company's website, the report lifts the stakes just three weeks ahead of the scheduled publication of the parliamentary commissioner for the environment's inquiry into fracking - "hydraulic fracturing".
Todd's conclusions highlight the importance of the industry to New Zealand's energy supply and coffers and raises the possibility of major oil and gas players walking away from uneconomic prospects.
The result of a three-month research project, the Todd report has been written as its submission to the PCE inquiry. Close to 180 pages long, it is the most comprehensive industry report into fracking published in New Zealand.
It says opposition to fracking in New Zealand is being based not on evidence, but on misinformation and emotion.
The 2010 movie Gasland, which received significant public attention, has also been comprehensively discredited, the report says.
Yesterday Todd Energy chief executive Paul Moore said the success of his company's petroleum operation depended on it being able to continue to frack.
"We need to do it - but we also need to assure the public that we're doing it well. We believe the way to do this is to be totally transparent. That way we are confident the public can be educated that fracking is safe and environmentally sound," he said.
Mr Moore said it was not Todd Energy's intention to stir up anything by making its submission public before publication of the results of the PCE inquiry.
"All we want to do is honestly say to everyone that we are wanting to do the right thing, that we are fully committed to New Zealand and our environment."
Pointing out that the petroleum sector annually contributes $2.2 billion to New Zealand's GDP and employs 6000 people, the Todd report claims fracking has been directly responsible for the success of almost every currently-producing oil and gas field in Taranaki.
It argues the technique has been used safely and successfully in New Zealand for more than 20 years and has become the standard treatment for maximising production from deep gas wells.
It says fracking is an essential technology for the development of these wells, including those being drilled at Todd's Mangahewa gasfield inland from Waitara.
The Todd report says the company has so far performed a total of 12 fracks in five wells, and there have been no incidents of fresh groundwater contamination.
Todd Energy is a major player in the New Zealand energy scene with interests in the Mangahewa gasfield, the McKee oilfield north-east of Waitara, the Kapuni gasfield, and the Maui, Pohokura and Maari oil and gas fields.
It plans to invest $760 million in further development of its Mangahewa field over the next few years, the work including drilling at least 20 more wells, adding millions to New Zealand's GDP and creating more than 1000 jobs.
Royalty payments will be about $45 million each year.
Natural gas provides more than 19 per cent of New Zealand's primary energy supply and 18 per cent of electricity supply. About 247,000 New Zealand households and 10,000 businesses use gas.
"The petroleum sector is a valuable contributor to the New Zealand economy and way of life," the report says.
"As production from the large Maui and Kapuni fields winds down, hydraulic fracturing has become an increasingly important tool in ensuring long-term security of natural gas supply and maintaining the benefits it provides to New Zealand."
THE GOOD OIL
Contributes $2.2 billion to GDP every year
Provides more than 6000 jobs for Kiwis
Each worker produces about $525,000 in labour productivity, which is five times the national average
Estimates show the Government received $1b from the oil and gas sector in the 2009-10 year
Since the 1950s, more than 350 wells have been drilled both onshore and offshore
Most of New Zealand's oil and gas industry is in the Taranaki basin
Industry body Petroleum Exploration & Production Association believes the country is underexplored, saying "a substantial find" is likely in the offshore Great South Basin to the south of the South Island
This story has been edited to fix a subbing change and clarify the explanation of fracking in the third paragraph.