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.