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13/4/2018 — Oil and Gas
NZOG and Straterra cite cases against Ardern ban

One of the strongest responses to Jacinda Ardern’s ban on new offshore exploration permits has come from Wellington-based New Zealand Oil & Gas Ltd (NZX: NZO) which has been one of the key operators in the country.

The company (NZOG) said while the announcement will not have any immediate impact on the company’s operations or financial position it pointed out that the decision was likely to see greater carbon emissions in NZ.

Looking to the future NZOG would look to expansion in other jurisdictions.

The company has “potentially transformational” offshore exploration projects in the Canterbury and Great South basins, also unaffected by the announcement for which it has the lure out to get major companies to become joint venture partners.

NZOG chief executive Andrew Jefferies said renewable energy can provide almost all of NZ’s electricity needs in a year of normal rainfall.

“But another two-thirds of our national energy use is industrial and transport related, for which complete renewable alternatives are not currently economically viable.

“Therefore the choice for NZ is whether we use our own resources for our own benefit, or New Zealanders rely on overseas energy sources benefitting those economies.”

NZOG said in environmental terms the ban may mean carbon emissions in New Zealand and globally will be higher for longer. This is because petroleum resources in NZ are likely to be gas and gas condensate.

Gas is a lower carbon alternative to coal for uses such as industrial heating, where no economically viable renewable alternative exists, the company said.

If new gas supplies are unavailable then coal will continue to be used domestically for purposes such as dairy drying plants. Globally, natural gas from NZ produces fewer emissions than alternatives such as Canadian tar sands or Venezuelan bitumen.

“Therefore, if natural gas from New Zealand is not permitted then the world will use more high-carbon fuel sources,” NZOG claimed.

A study produced last year by economic consultancy MartinJenkins found that a discovery in the Barque prospect, offshore from Oamaru in the Canterbury Basin, could increase regional GDP by up to $15 billion and earn the NZ Government $32 billion in royalties and taxes over the life of the field.

“In total, up to 5,740 full-time equivalent jobs per year could be created during construction, and around 2,000 enduring jobs in the region,” NZOG added

This study was co-funded by the permit joint venture and New Zealand Trade & Enterprise.

Another Wellington-based entity, the resources sector’s lobby Straterra said exports will suffer as a result of this decision.

“Not only does New Zealand export fossil fuels, which are not counted in terms of NZ’s emissions, New Zealand’s export dependent economy is relatively energy intensive,” said Straterra chief executive Chris Baker.

“High levels of energy are used to produce heat for industrial processes. The dairy and steel sectors for example are dependent on NZ’s competitive advantage in energy.”

Baker said if NZ does not take advantage of its energy reserves, investment and business will shift offshore, export receipts will suffer and workers, regions and Government would lose out in terms of employment and revenues.

“Most importantly, ending exploration in New Zealand is symbolic. Such action will do nothing to reduce global demand and nothing will be achieved in terms of emission reductions internationally,” Baker said.

As a back up to renewable sources, Baker said, fossil fuels also play an essential role in energy security for New Zealand.

“We might note, during last week’s storm lightning strikes halted gas processing and gale-force winds reduced wind farm output meaning coal fired generation had to come into play.”

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Straterra’s Chris Baker.