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3/25/2018 Member News
Oil and gas chiefs meet as Government mulls future of the sector

Oil and gas chiefs meet as Government mulls furture of the sector

By: Grant Bradley -NZ Herald March 25, 2018

 

Under-pressure oil and gas industry chiefs meet this week amid uncertainty about the Government's plans for the sector and the threat of protests.

The industry is gathering in Wellington this week for the Petroleum Conference and one sector leader says while he accepted the Government needed time to make a decision on how it will manage the sector, there was concern about the next steps.

Petroleum Exploration and Production Association of New Zealand chief executive Cameron Madgwick said oil and gas provides half of the country's energy.

"At the same time, we recognise the challenges of climate change and want to be involved in tackling this. Prime Minister Jacinda Ardern last week accepted a petition signed by 45,000 people who want to take action on climate change by ending oil exploration.

The Government was actively considering how it would manage block offers in future, including looking at environmental and economic impacts.

She has said the block offer decision would not disrupt the jobs of workers at the 27 producing petroleum fields in Taranaki and not impact on the permits that have already been issued but it was a starting point in a much bigger plan to address climate change.

Greenpeace organised the petition with high-profile backing and says the world can't afford to burn even existing fossil fuel reserves let alone seek out new oil and gas if countries wanted to avoid catastrophic warming.

One leading sector analyst says those at the conference would be very keen for any guidance from Energy and Resources Minister Megan Woods on what the Government was thinking.

John Kidd of Woodward Partners said the uncertainty hovering over the industry was unprecedented.

''The rules of engagement are critical to being able to operate in this business,'' said Kidd who is presenting a paper at the conference.

Because of the long-life assets that the sector manages, it needed to have clarity about the fundamental position of the resource owner - the Crown - for years and decades ahead.

''Right now there is no understanding of that. There's quite a lot that has been put out there in terms of slogans but very little detail and that needs to change.''

One bright spot for the sector was Austrian company OMV's decision to buy the upstream assets of Shell for $800 million and while Kidd said he couldn't speculate on whether the stance by the prime minister would have caused the Austrian company to pause, ''they will be the party who will be the keenest to understand what the detail looks like''.

He said there was doubt about a block offer this year as there had been none of the usual consultation involving iwi, local government and other groups.

Kidd said 270,000 residential consumers and the industrial and commercial sector, including the dairy industry relied on gas for to fire boilers which had a 40-year life span.

There was about 11 years of proven gas reserves from existing fields and while there had been no new discoveries for a several years, field owners had been able to squeeze more gas from them with new techniques.

Oil and gas fields cost hundreds of millions of dollars to develop and keep running.

''These are huge investments that are typically required not just to grow but to maintain what you have. They're in the depletion business and they need to keep reinvesting capital to be able to bring more product to market.''

Madgwick said there could be greater clarity within the next month.

''Of course this industry is keen to understand the direction of travel here but at the moment all we can work with is a request from the Government for more time to decide. If there's not an answer there's not an answer - you can't force that time to be quicker.''

The association was braced for protest after being targeted before by groups highlighting environmental concerns.

''There will undoubtedly be protest action and while we absolutely respect the right to protest, we just ask the activists to obey the law and respect other people's rights as well.

People have the right to go about their daily business and attend events like this."

Among the delegates attending are senior Government officials, regulators, industry leaders, international experts and service providers.

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