New Zealand seeks to lift exploration ban to reverse gas slump

The New Zealand government is proposing to lift a ban on oil and gas exploration in 2018 as it seeks to stem a decline in domestic natural gas supplies, boost energy security and signal to international investors that it is open for business.

This week the coalition government declared It will introduce a bill in Parliament to lift the ban on oil exploration beyond the offshore Taranaki region as part of proposed amendments to the Crown Minerals Bill in the second half of 2024.

The industry welcomed the government’s announcement as a step in the right direction to ensure reliable domestic energy for all New Zealanders, but research firms noted that a return to the country would depend on legislative changes and the nature and extent of perceived risk.

Resources Minister Shane Jones said the ban was lifted to address energy security challenges posed by rapidly depleting natural gas reserves.

“Our job as a government is to provide the right policy framework for the sector to work and that is what we are trying to achieve with these amendments,” Jones added.

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“Some of our current parameters are a barrier to attracting investment in exploration and production because they are too expensive and burdensome for industry. Some obligations lack the necessary flexibility, and compliance obligations are uncertain and unclear,” he said.

The oil and minerals sectors contributed US$1.17 billion (NZ$1.9 billion) to GDP in 2020-2021 and US$145 million (NZ$236 million) in Crown revenue in 2022-2023. By 2023, these industries employed about 6,000 people, mostly in regional communities.

Legal amendments, which including According to Energy Resources Aotearoa, the allocation of exploration permits and decommissioning requirements will help restore investor confidence in New Zealand’s oil industry.

“New Zealand is facing energy shortages that threaten the competitiveness of our electricity system and our exporters. We now urgently need to attract more investment in exploration and production to keep the lights on, our homes warm and our businesses running,” said John Carnegie. Energy Resources Aotearoa.

“Gas is critical to a multi-fuel energy system that allows for consistency of supply as we increasingly rely on climate-dependent energy,” Carnegie added.

Deregulation and other regulatory changes in the oil sector will help restore investor confidence, which will encourage investment in low-carbon technologies such as carbon capture and green gases, the executive said.

Companies already operating in the country, such as OMV, Beach Petroleum, Matahio, Todd, Westside and Greymouth Petroleum, will be the first to act when the ban is lifted, Carnegie said. New Zealand Herald.

“But it all comes down to conditions – the nature and substance of the changes,” he said, adding, “Have conditions changed significantly enough to justify a significant investment?”

A steady decline in New Zealand’s domestic natural gas production has changed in recent years, raising concerns about energy security.

New Zealand currently has six major natural gas fields: three offshore, Pohokura, MYU and Kube, and three onshore, Mangahewa, T?rangi and Kapuni. The landscape also has 12 smaller courses.

Production at Pohokura could drop to zero by 2032, while the M?ui field produced 75% less gas from 2000 to 2023 and Kapuni 57% less gas over the same period, the Electricity Authority reported from New Zealand earlier this month.

“While not all gas fields are in such obvious decline, natural gas production is likely to decline over time without further drilling or investment,” the Electricity Authority said.

Natural gas currently powers New Zealand’s electricity system, meaning gas will continue to play an important role in securing New Zealand’s supply as New Zealand moves towards emissions neutrality during nighttime peaks and hydroelectric storage is limited, the authority says.

“New Zealand’s electricity system is likely to face challenges as it transitions to more renewable energy and moves away from thermal fuels such as gas,” he adds.

By Tsvetana Paraskova for Oilprice.com

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