Editorial: Gulf disaster must not happen here

19:35, Jun 02 2010

But for recent events in the Gulf of Mexico, the Government would be making more of a fuss of Brazilian oil giant Petrobras' decision to explore for oil and gas off the East Coast of the North Island.

The world's fourth-biggest energy company, a world leader in offshore drilling, this week won the right to explore about half of the Raukumara Basin, which extends north and east of East Cape. The company will spend up to US$118 million (NZ$174m) over the next five years gathering seismic data and drilling an exploratory well.

The project will create jobs and draw international attention to New Zealand as a potential source of petroleum.

But the big gains will come if Petrobras makes a commercial find. Already the petroleum sector generates about $3 billion a year in export revenue. Energy Minister Gerry Brownlee has estimated that figure could rise to $30b by 2025 if preliminary estimates of New Zealand's petroleum resources prove to be correct.

However, celebrations this week have been muted by the ongoing disaster in the Gulf of Mexico. Six weeks after an explosion on BP's Deepwater Horizon rig killed 11 workers, the well 1.6 kilometres beneath the sea is continuing to spew between 1.9b and 3b litres of oil a day into the gulf, polluting the fragile Louisiana coastline, threatening fisheries and destroying the livelihoods of fishermen and tourist operators.

For that reason it is essential that the promised overhaul of New Zealand's health, safety and environmental arrangements for offshore petroleum operations is completed well before any deepwater drilling begins.


The oil industry has shown it has the technology to extract oil from the depths of the ocean. But the tragedy in the Gulf of Mexico has shown it does not have the technology to deal with every mishap.

BP has spent almost $1.5b unsuccessfully trying to deal with the leak and it may take until August for it to finally gain control of the oil when two relief wells are completed. It faces astronomical losses – a fact reflected in its share value, which has declined by a third in six weeks and fell by 12b (NZ$26b) on Tuesday alone.

The company has promised to foot the bill for the disaster. It has little choice. To do otherwise would be to invite a backlash from the world's most powerful government and a consumer boycott in the United States. But the lesson of the Exxon Valdez disaster off Alaska in 1989 is that, once the world spotlight shifts to another issue, all the incentives on a corporate malefactor are to minimise its costs. It took some Alaskan communities destroyed by the spill more than 20 years to gain damages from Exxon.

If that is the case in the world's biggest economy, what would be the case in New Zealand?

The Government must ensure drillers operating in our waters conform to world best practice standards and that appropriate backup measures are in place in the event of accidents.

The potential gains from oil discoveries are huge. The potential losses are just as big.

The Dominion Post