Labour pummels oil offer

JAMES WEIR
Last updated 05:00 03/04/2014

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In the country's biggest-ever block offer, the Government is opening up 405,000 square kilometres for oil and gas exploration around New Zealand, but Labour says it is a "fire sale" of permits.

Running from off the Northland coast to south of the South Island, the block offer for this year is almost double the size of last year's offer, and covers an area bigger than Japan and one and a half times bigger than New Zealand's total land area.

"But we don't expect to see all that area, or even most of it, go to permits," Energy Minister Simon Bridges said in Wellington yesterday.

Last year just 13.5 per cent of the total area offered was actually awarded for exploration permits and the areas likely to be explored would be a "pinprick".

Bridges said there was "good momentum" in the sector, with "strong continued interest in New Zealand" from overseas companies from Norway, and both the United States and Canada.

"We have had unprecedented exploration recently," he said.

"We have only scratched the surface and we can have more taxes and pay for more schools and get higher-paying jobs."

But Labour leader David Cunliffe said the Government was holding a "fire sale" on exploration permits.

"Labour is not opposed in principle to offshore oil exploration but we are not satisfied with the environmental standards in place.

New Zealand needed world best practice standards.

"And we also need full liability and clean-up cover and to make better use of the revenues from that oil and till we have that fixed we should not have a fire sale on exploration permits," Cunliffe said.

However, Edison Research analyst Tim Heeley said the new offshore blocks in the Far North were likely to attract interest from big world oil players.

It was likely that US oil giant Anadarko would look at the wider Pegasus Basin acreage off the lower North Island, expanding from an area where it is now doing offshore seismic testing.

Anadarko, which was seen as one of the best explorers in the world, was not likely to give up on New Zealand even after spending $300m on two apparently dry wells over the summer.

And on the East Coast of the North Island, Tag Oil was expected to be interested in a new onshore area from east of Palmerston North up towards Hawke's Bay.

Tag is the only company actively exploring the East Coast. "Of course" it would look at all available land in the basin, according to Tag executive Drew Cadenhead, though in the past it had rejected some East Coast areas as "non-prospective".

Tag has just been given construction consent to drill a well near Gisborne, with a drilling consent expected soon.

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The first stage of the well would employ up to 30 people and pump up the local economy through motel bookings, restaurants and suppliers, he said.

"Dannevirke definitely noticed a positive change in the economy as soon as we got started on our Ngapaeruru-1 well (last year) . . . we expect Gisborne will see the same."

The newly opened area onshore on the South Island's West Coast, known for its coalfields, may also attract commercial attention, though that would not be easy in mountainous country, an analyst said.

A handful of protesters stood outside an oil industry conference at Te Papa in Wellington yesterday.

Fi Gibson, from Oil Free Wellington, said they wanted to show their opposition to opening up more land and oceans to oil and gas exploration.

"It was a symbolic action."

Bridges took a backdoor entrance to Te Papa and avoided the protest group.

"He has learned to avoid us, which we take as a sign of success," Gibson said. "He and any oil companies that come here are going to face resistance every step of the way."

The latest report on global climate change showed 9000 scientists agreed that using more fossil fuels was a "one-way ticket to frying out future", Gibson said.

Heeley said the large total area being put up could indicate to opponents that exploration had not worked, so the Government was releasing as much as possible as "one last-ditch effort to find a commercial" discovery.

On the other hand, New Zealand could be seen as a frontier area where there had not been much exploration and "tremendous potential".

It would take the deep pockets of the global oil giants to look in offshore frontier zones, which had the potential for the really big fields, Heeley said.

"The elephant hunting is going to go in these (frontier areas) by Anadarko and Shell and the like."

- BusinessDay

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