Oil & gas ban will cost New Zealand, but how much?

The Government ban on most new oil and gas exploration permits was applauded by some and slammed by others. There have been warnings, and also assurances.

Investment, exports and jobs are at stake. And if New Zealand has to import gas when local production runs out it will increase global emissions – China produces methane from coal, much dirtier than direct extraction of gas.

A report commissioned by the Oil & gas industry claims the ban could cost the country $28 billion, but the Energy Minister disputes this.

Last June (RNZ):  Govt warned of ‘chilling effect’ over halting oil, gas permits

The government was warned by officials that if not handled well, its plan for future oil and gas exploration could have a “chilling effect” on investment.

The Energy and Resources Minister has released all of the Cabinet briefing papers and communications from officials, ministers and some industry players.

The papers said if the supply of natural gas was restricted, that could push up consumer prices, pose a “significant risk” to security of energy supply and have a detrimental impact on some regional economies.

Energy Minister Megan Woods said that was “free and frank advice” but she described it as “standing still” advice.

The government had since “accelerated” work towards the transition towards renewable energy, she said, and she did not expect the halt to most future exploration permits would have an “immediate impact”.

But she acknowledged the change in policy would have a direct effect on the energy industry.

“We’ve got ourselves a window of time to put in place proper transition planning so we’re not leaving individuals without a future and without hope.”

The documents warned that if all future gas exploration was halted, consequences could include a possible increase in global greenhouse emissions.

Methanex is the largest global supplier of methanol, and has two processing facilities in New Zealand.

Officials said Methanex needed a consistent supply of affordable gas, and new discoveries would be needed to keep it operating past 2021. The amount of methanol produced in New Zealand was “significant” globally and currently supplies the Asia Pacific market.

If Methanex closed down, or cut back on production, China would pick up the slack, said the briefing papers.

The problem with that is, though, two thirds of China’s methanol is produced from coal, producing three to four times more greenhouse gas emissions.

Yesterday:  Government’s oil and gas ban could cost country $28b, new economic analysis finds

The Government’s oil and gas ban could cost the country $28 billion dollars, according to new economic analysis.

The report, by the NZ Institute of Economic Research, found the ban would be felt most keenly in Taranaki, with a 42 per cent drop in exports and another big drop in living standards there.

But it warns the impacts will be felt across the country – with a cost of $15,000 per household when averaged across the country.

The Petroleum Exploration and Production Association, or PEPANZ, paid for the report and its chief executive, Cameron Madgwick, says it makes for sobering reading.

“It reveals some very very large costs to New Zealand and in particular Taranaki,” Mr Madgwick told 1 NEWS.
“The Government should really now take the time to assess this new information that wasn’t available to it at the time it made its decision and reconsider it.”

NZIER’s report predicts that losing the oil and gas industry will cost $28 billion over the next three decades – the equivalent of building 20 new Dunedin hospitals or buying 43,000 KiwiBuild homes in Auckland.

Energy Minister Megan Woods disputed the report’s predictions.

“This could be the case if the Government buried its head in the sand and did nothing – we have made a bold decision and the right decision for New Zealand,” Ms Woods said.

“But we’re not just sitting back and magically hoping the future plays out in Taranaki. We’re working on the ground with that community.

“We’ve put $20 million through the Provincial Growth Fund into various projects.”

It will take more than $20 million to replace the investment and jobs if the Oil & Gas industry shuts down.

Ms Woods rejected PEPANZ’s call for it to reconsider the ban in light of the new report.

“PEPANZ, of course, is the oil and gas industry’s lobby group. I’m not surprised that that’s the view they’re taking, but no, that’s not something we’re considering.”

National Party media release: Assessment of ban – we’ll be poorer not cleaner

New Zealanders will end up poorer as a result of the Government’s ban on new oil and gas exploration, but they’ll have nothing to show for it in terms of slowing climate change, National’s Energy & Resources spokesperson Jonathan Young says.

“NZIER has done the analysis that the Government ought to have done before recklessly banning new oil and gas exploration. The ban may read as a step toward a low-carbon economy but this report says its biggest achievement will be to wipe $28 billion off GDP.

“As expected, the Taranaki region fares the worst. The ban will reduce the region’s economy by almost 50 per cent. That’s $21,000 a year in real purchasing power per household wiped out in Taranaki between now and 2050. Nothing the Government has announced goes anywhere near making up for that loss.

“The report makes clear the Government rushed in, without an audit on the economic costs to New Zealand. Now the industry has funded the work itself from NZIER – work that Minister Megan Woods should have ensured was done.

“Dr Woods says the Government wants a shift to electricity or hydrogen but the transition to hydrogen as a fuel source could cost up to ten times more than natural gas, making some industries uneconomic and driving up power prices for families already having to stretch each dollar further.

“We all agree on the need to reduce emissions but drawing a roadmap to 2050 after you’ve made a wrong turn down a no exit road won’t get us there. National would repeal the ban and ensure all options are on the table to combat climate change and safeguard our economy.”

Greenpeace (NZ Herald):

Greenpeace climate and energy campaigner Amanda Larsson said an oil industry-commissioned report claiming to show the Government’s oil and gas exploration ban will cost billions is nothing but “fake news and flatulence”.

It will remain a contentious policy, but it looks like the Government is determined to continue with the ban.

NZ plummets in energy investment ranking, Government happy

New Zealand has dropped from 14th to 46th in a ranking of attractiveness to energy investors. This isn’t surprising after the Government put significant limitations on oil and gas exploration.

‘Green’ or alternative energy prospects don’t seem to rate – I’m still unclear how we will meet al our energy needs if we transition away from fossil fuels completely as some want.

NZH:  Survey of top energy executives shows NZ has become a lot less attractive for investors

An annual survey of the world’s leading oil executives, which ranks the ease of investment into oil and gas producing countries, shows New Zealand has dramatically dropped down the list in terms of its attractiveness to investors.

The Fraser Institute, which has run the survey every year for 12 years, asks executives to rank provinces, states and countries according to the extent to which barriers to investment in oil and gas exploration and production are present.

New Zealand’s attractiveness to investors has dropped from the 14th highest country/region to 46 in the space of a year.

“This drop is based on poorer scores with respect to political stability, environmental regulations and protected areas and taxation in general,” the report said.

The Opposition is critical.

National’s Energy spokesman Jonathan Young put the blame for the drop squarely in the lap of the Government.

In April, Prime Minister Jacinda Ardern banned future offshore oil and gas exploration in New Zealand with the exception of Taranaki.

The ban took the industry by surprise because it was not part of any confidence and supply or coalition agreement and had not been explicitly promised by Labour during the election campaign.

According to some industry players surveyed in the Fraser Institute report, this was a key reason for the drop in New Zealand’s attractiveness.

“New Zealand’s move to ban new offshore exploration is a deterrent for investors,” one said.

“Jurisdictions that are openly hostile towards resource development, like New Zealand, cause investors to take their investment dollars elsewhere,” said another.

Young was not surprised by this and said the ban had “scared off” potential investors and would cost the economy tens of millions of dollars.

It’s not surprising – it looks like to an extent at least it was the intent of the ban, or it must have been at least a predictable consequence.

Energy Minister Megan Woods is unrepentant:

“We’re incredibly proud of the fact that New Zealand is leading the world on a managed, long term transition to a clean energy future.”

Hardly. The Government has limited fossil fuel exploration possibilities, but I have seen little of the other side of the equation – alternatives.

“International investors will consider a range of information when making decisions about where to invest, including the likelihood of a discovery and the likely value of any potential discovery.”

Climate Change Minister James Shaw was not surprised by the survey.

He said because oil and gas exploration was being phased out in New Zealand, there was not actually much more investment in the sector that was needed.

“So it’s unsurprising that investors in that industry would be saying that over the long term it’s not a place they wanted to end up.”

Shaw needs to come up with a credible path to sufficient alternative energy to replace fossil fuels, otherwise we will either have an energy shortfall, or will have to rely more on more expensive imports of fuel.

I’d love to see polluting fuels phased out, but I would also love to see a realistic and viable plan for what will replace them. At the moment I see little more than pie in the sky idealism.

Energy of dreams – ban them, and alternatives will come. Maybe.

 

There were two other bills drawn

For some reason only two of the four bills drawn from the Members’ ballot today got people excited. The other two were:

Ian McKelvie’s Sentencing (Livestock Rustling) Amendment Bill

This bill is designed to deter people from engaging in livestock rustling, by identifying it as an aggravating factor at sentencing.

McKelvie is National MP currently holding the Rangitikei electorate, which he won by 10,060 votes from Labour’s Deborah Russell in 2014. Russell looks set to take over David Cunliffe’s New Lynn electorate this year .

Jonathan Young’s Local Government (Freedom of Access) Amendment Bill

This bill clarifies the law to ensure that persons who obstruct council enforcement officers or local authority agents from performing their duties, or fail to give true and sufficiently particular details when required by the Bill, are liable to be arrested without a warrant, and widens the scope in which an enforcement officer may remove and seize property.

Young is the National MP for New Plymouth who has beaten Andrew Little twice, by 4,270 votes in 2011 and by 9,778 votes in 2014.