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    NZ Industry Slams Halt in Offshore Block Offers


The New Zealand government’s decision to halt offshore block offers has been criticised by the upstream industry.

by: Shardul Sharma

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NZ Industry Slams Halt in Offshore Block Offers

The Petroleum Exploration and Production Association of New Zealand (PEPANZ) said April 12 that government’s decision to halt offshore block offers is likely to affect New Zealand’s energy security and international reputation.

“The decision is a lose-lose for New Zealand’s economy and environment, likely to threaten jobs and mean higher prices for consumers,” said PEPANZ CEO Cameron Madgwick. "This will do nothing to reduce global greenhouse gas emissions and could make them worse. Because petroleum is produced to meet growing global demand, not exploring and producing in New Zealand simply means other countries will produce it instead and we will have to import it at higher cost.” 

New Zealand’s government April 12 put an end to any new oil and gas exploration offshore. New Zealand’s minister for energy and resources, Megan Woods, said this year’s block offer will be limited to onshore acreage in Taranaki. She told NZ Radio: "The prime minister has taken the opportunity to announce the more long-term direction that this government is taking, that there's no offshore in this 2018 round and there won't be any further offshore permits." The government since October 2017 is led by the Labour Party but includes the populist centrist party New Zealand First, and the Green Party.

PEPANZ's Madgwick said: “We are disappointed there has been no direct consultation with the industry and it is also a surprise given the Labour Party’s 2017 energy manifesto talked of continuing offshore exploration. We ask the Government to talk with the industry urgently. In the meantime, we will be carefully considering the ramifications of this decision and our options going forward."

Natural gas and oil provides over half of New Zealand’s energy. While other sources of energy are being developed, there is no realistic way they can cover this demand in the immediate future, Madgwick said. “We are already seeing the potential impact this week with coal being used for electricity generation to ensure security of supply following the interrupted gas supply from Taranaki.”

Shell divested its upstream business in New Zealand last month, selling it to Austria's OMV for $578mn. An existing producer in NZ, OMV acquired from Shell interests in the offshore fields Pohokura (48%) and Maui (83.75%), which are the country's largest gas-producing fields, as well as related infrastructure for production, storage and transportation. 

The decision to stop offering new offshore blocks, noted minister Woods, would not affect the 22 active offshore licences, which cover roughly 100,000km2 of ocean, of which the last extends to 2030.