Speech to New Zealand Petroleum Summit 2013

Good morning everyone, it’s great to be here and to have the opportunity to speak to you all.

From the discovery of the Kapuni gas field in 1959, and then the much larger Maui field in 1969, the oil and gas industry has played a significant role in New Zealand’s economic development – as an energy source for industry and households, an input into the chemicals industry and as a valuable export in its own right.

In fact, crude oil is our fourth largest export after dairy, meat and wood.  It contributes more than $2.5 billion to our GDP each year.

On average, the Government collects around $300 million in company tax and $400 million in royalties each year from the industry; and over time, the Government has collected over $4 billion in royalties.

A few weeks ago, Economic Development Minister Steven Joyce and I launched the Petroleum and Minerals Sector Report 2013.

While there are plenty of statistics available about the petroleum sector, this is the first report of its kind to consider employment alongside export, financial and innovation performance.

The report is another arrow in the quiver informing and demonstrating to New Zealanders the benefits that our country gets from the development of our resources.

I want to take a few moments to recap on some of the stand-out findings of the report:

• Firstly, it confirms what most of us in this room already knew, that the petroleum and minerals sectors are the most productive in our economy generating $333 per hour worked, compared with an average of $48 per hour across the rest of the economy. 
• The report also confirms that there are significant flows of investment into the economy, with a total of $8.3 billion spent on oil and gas exploration and development in the last six years.
  Much of this investment was spent on goods and services provided by New Zealand businesses.
• Then there is the fact that petroleum exports have tripled over the last 10 years, driven by a surge in the production of crude since 2008.
• And finally, the report finds that the oil and gas industry has experienced sustained growth with a doubling of employment and the number of operators over the last decade.

For me, and I’m sure for all those who read it, the report proves the importance of  the industry to New Zealand’s economy, especially over the last decade.

While it’s important to recognise this, it’s equally important that we keep looking forward and that we continue to invest in unlocking new opportunities.

The numbers almost speak for themselves in terms of the potential yet to be tapped. 

New Zealand has the fourth largest EEZ and greater Extended Continental Shelf in the world, covering more than six million square kilometres.

From this total area, only 1.2 million square kilometres has been mapped, and all production in New Zealand to date has come from an area of less than 10,000 square kilometres.

Indeed, it’s important to remember that all the current and historic oil and gas production has come from just one of New Zealand’s 18 basins – Taranaki.

If any one of those other 17 basins were to have anything like the success of Taranaki, I think this could properly be called a game-changer, creating higher paying and more jobs for New Zealanders.  

I’m really encouraged by recent and upcoming levels of exploratory activity in the sector.

The 2013/14 season recently got underway with OMV spudding the Manaia-2 welln appraisal well in the Maari production unit in offshore Taranaki – kicking off what will be one of the busiest and most sustained periods of offshore oil and gas exploration New Zealand’s ever seen.

Operators drilling onshore and offshore this season include OMV, AWE, Anadarko and Shell Todd Oil Services.

Operators planning to carry out seismic surveys this season include Todd Exploration, New Zealand Oil and Gas, Anadarko, OMV, and Shell.

And multi-client seismic companies are also looking to conduct proprietary surveys which will inform future exploration initiatives for years to come.

All of this activity will be an important step towards unlocking our potential, both on and offshore.

And this is off the back of strong interest in the 2012 and 2013 permitting rounds. 

It’s clear to me that commitment is meeting company rhetoric, and oil and gas explorers are getting serious about New Zealand.

So with this in mind, I want to now turn to the proposed 2014 Block Offer which I believe will continue to build on the industry’s momentum.

Earlier this year at the Advantage New Zealand Petroleum Conference, I announced the Government was inviting nominations from industry on areas that could be included in the 2014 offer.

21 nominations from 11 companies were received across a range of onshore and offshore areas.

The proposed areas for inclusion in Block Offer 2014 have been selected on the basis of their prospectivity and anticipated commercial interest. 

The Government is proposing to offer a range of mature and frontier acreage to appeal to a diverse range of operators and investors.

This morning I’m pleased to announce that official consultation will start tomorrow with iwi and local authorities in the areas being proposed for the offer. 

Let me take you through the blocks, starting with the offshore areas first – of which there are five.

The Northland and Reinga Basins. This area totals 85,000 square kilometres of prospective acreage off the north-west coast of the North Island.  Despite having been subject to limited exploration to date, I’m told GNS say this release area is New Zealand’s most prospective.

The New Caledonia Basin. This area totals 49,000 square kilometres of prospective acreage for consultation off the north-west coast of the North Island.

The Offshore Taranaki Basin.  This area totals 55,000 square kilometres of area for consultation.

The Pegasus-East Coast Basins. This area totals 75,000 square kilometres of lightly explored but prospective acreage. While some data has been collected over the area, a significant amount of exploration work is still required to understand the full potential of the basins.

The Great South-Canterbury Basins.  This area totals 154,000 square kilometres of prospective acreage.  This area is prospective for oil and gas and there is strong commercial interest.

I want to now look at the onshore areas for consultation, of which there are three.

The East Coast Basin.  The area being consulted on will total 3,100 square kilometres.

Onshore Taranaki, where a total of 2,400 square kilometres will be consulted on. Included in this area are a number of existing permits that will face between 50 to100 per cent relinquishment by the time the Block Offer 2014 tender opens.

The Government is including these existing permits in the consultation areas because it will be unknown how much, or where, the relinquishments will take place until the opening of the tender in April next year.

And, finally, 9,900 square kilometres in the West Coast Basin on the South Island will be consulted on.

A new feature for 2014 will be the introduction onshore of the graticular model, currently used for offshore areas. 

Next year will be the first time this has been used for onshore areas.  It’s designed to allow for smaller, more targeted blocks in areas of greatest commercial interest.

Ladies and gentlemen, in total, the proposed available acreage is nearly 434,000 square kilometres – more than double the total area offered for Block Offer 2013. 

Of course, this area will obviously decrease as we move from tender to exploration and then finally, in some cases, to production.

Consultation on the blocks will end on 12 November and I expect to release the 2014 Block Offer for competitive bidding in April next year.

But I want to stress that this Government does not want development at any cost.

The Government is committed to ensuring that New Zealand has a world-class regulatory environment for the safe and environmentally responsible exploration, production and transportation of our oil and gas resources.

The recent changes to the Crown Minerals Act regime strengthen regulatory agencies’ coordination on health, safety and environmental matters – and ensure regulatory efforts are proactive and focus on operations that have the highest technical and geological complexity. 

Environment Minister Amy Adams has introduced a new law to enable the comprehensive environmental management of activities in New Zealand’s Exclusive Economic Zone for the first time.

And the creation of a stand-alone Environmental Protection Authority in 2011 is enabling stronger and better coordinated central government leadership on environmental regulation.

In closing, I want to reiterate that the oil and gas sector offers our country one of our most significant opportunities for growth. 

We cannot let this pass us by.

Above all though, it must be managed responsibly and safely.

From an oil and gas perspective, New Zealand truly is a land of opportunity.

The demand for – and exploration of – oil and gas has never been greater.  And New Zealand has never been a better place in which to operate.