Monday, February 18, 2019

New Zealand Oil & Gas starts drilling south of New Plymouth


New Zealand Oil & Gas (NZOG) and its partners have started drilling the Kohatukai-1 exploration well south-east of New Plymouth.

Drilling started yesterday with the objective of testing the Matapo and Mangahewa sands that deliver gas in the Pohokura, Turangi and Mangahewa fields north-east of the city. The well will be drilled to a depth of more than 3,600 metres and is expected to take two months.

NZOG has a 25 per cent stake in the permit, as does its parent company Ofer Global Group. Operator AWE owns 12.5 per cent, with the balance held by its parent company, Mitsui E&P Australia.

This news comes after a Ministry of Business, Innovation and Employment (MBIE) report released yesterday saying the government's proposed ban on new offshore oil and gas exploration may cost the country $7.9 billion in revenue forgone between now and 2050.


The estimate accompanies the long-awaited release of Crown Minerals Act amendments required to put the ban in place. Energy Minister Megan Woods, who released the Crown Minerals (Petroleum) Amendment Bill this evening after share market trading closed, is disputing the figure. She says it is practically impossible to make a credible estimate about oil and gas discoveries that have not been and can never be made.

She is also questioning MBIE's decision to assume that there would either be no oil and gas finds or no commercial development of finds made in the 100,000 square kilometres of offshore territory still covered by permits already granted, but still awaiting exploration efforts.

The MBIE modelling, which was quality-checked by the Treasury, gives a huge range of possible outcomes, saying foregone revenue could be as little as $1.2 billion or as much as $23.5 billion. Lost oil company profits are separately estimated to fall within a range of $199 million and $7.3 billion, with a calculated mid-point of $2.1 billion.

Oil industry critics of the April 12 decision to end offshore oil and gas exploration have been predicting for months that official advice would fail to back the government's controversial decision, which was a major win for the Green Party and the clearest possible signal that the government wants the New Zealand economy to accelerate its transition to a low-carbon emissions economy.

However, the MBIE regulatory impact statement says only that the policy "may" contribute to the government's climate change action goals.

Also embarrassing is the fact that the amendments are now so late that the 2018 Block Offer for onshore exploration permits cannot begin until January 2019. The process normally concludes before Christmas each year.

Woods is trying to make a virtue of that by ensuring a four-week period for public submissions on the Crown Minerals (Petroleum) Amendment Bill, which it had been widely assumed would be rammed through Parliament under urgency and without the normal select committee hearings process.

Oil and gas industry leaders last week called on MPs to hold hearings on the amendments in Taranaki, the country's main oil and gas-producing province, to hear first-hand the economic and job impacts of the decision.

Those impacts have not been modelled, MBIE said in the RIS.

It warns that security of natural gas and electricity supplies could be reduced by the decision and could raise the price of both for consumers, although future governments can use their discretion to "consider these factors". Onshore exploration in Taranaki is allowed but that was to be reviewed after 2020.

MBIE warns also the decision could raise global greenhouse gas emissions if production of oil and gas goes to "countries that have higher emissions footprints" and investments that might have occurred in New Zealand may not proceed.

However, there had been insufficient time to consult either the oil and gas industry or the public prior to the April decision, so "it is not possible to be confident that all potential impacts have been identified," the MBIE analysis says.

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