Energy analyst John Kidd is accusing the Government of using Block Offer 2018 as an excuse to pass the Crown Minerals (Petroleum) Amendment Bill under urgency.
The Government late on Monday introduced the Crown Minerals (Petroleum) Amendment Bill to Parliament in view of banning new offshore oil and gas exploration.
Energy and Resources Minister Megan Woods said the Bill had a four-week select committee process to “enable the public and industry to have their say on the change”.
Had the Government tried to push on with the ban under the current law it would’ve risked being challenged in court, as the Crown Minerals Act’s purpose is to “promote prospecting for, exploration for, and mining of Crown owned minerals for the benefit of New Zealand”.
Yet Kidd of Woodward Partners says the uncertainty created by the proposed offshore ban makes bidding for onshore permits so unpalatable that Block Offer 2018 is pretty much redundant.
Holding it up as the reason to fast-track a major legislative review is therefore “disingenuous and serves only to mask the true objective of seeking to minimise public discussion and critique”.
Kidd says the Government would be better off canning Block Offer 2018 and taking time to get the legislation right, before pressing on again with Block Offer 2019.
After all, by the time Block Offer 2018 (which was previously planned to be launched in April 2018) is ready to go in early/mid 2019, it will nearly be time for the launch of Block Offer 2019.
Policy creep?
Kidd says: “Policy creep is also clearly an issue, with the detail of what the Government now proposes reaching significantly further than what has been communicated before now."
Woods in a Cabinet Paper released on Monday said Cabinet had agreed to “prohibit new petroleum exploration permits outside of onshore Taranaki”, holding block offers for onshore blocks for 2018, 2019 and 2020.
Thereafter: “I recommend that for the purposes of this legislative change, onshore Taranaki block offers can, but are not required to, run beyond 2020...
“If desirable, the Government could also announce its intention to review this position around 2020.”
One could argue this is an indication the Government is loosening its stance from the proposed changes to the Crown Minerals Act it announced in July, leaving the door open to new onshore exploration permits being offered in Taranaki into the future.
Yet Kidd maintains that given it didn’t previously specifically prohibit exploration beyond Taranaki, it’s now actually tightening its position.
He says it's also doing so by proposing to restrict access to conservation land in Taranaki.
Around half of New Zealand's oil and gas reserves are onshore in Taranaki.
Cost in question
Kidd goes on to say the cost of the Bill to the Crown could be much higher than the Ministry of Business, Innovation and Employment’s (MBIE) $1.2 billion to $23.5 billion estimate in the Regulatory Impact Statement it prepared for Woods.
While he says MBIE’s methodology is sound, its modelling only considers royalties, taxes and company profits forgone, and doesn’t look at the impact on gross domestic product or the economy more broadly.
MBIE recognises this, pointing out that Balance Agri-Nutrients is opting to spend $35 million to refurbish its Kapuni plant, instead of spending $1.1 billion to expand the plant - at least partially due to the proposed offshore exploration ban.
Kidd says a $100 million-plus Methanex project to recover and reuse CO2 from its production process is now also unlikely to proceed due to uncertainty around how long Methanex will stick around New Zealand for.
On the opposite end of the spectrum, Woods in her Cabinet paper rubbishes MBIE’s modelling, saying it overstates the likely success rates of commercially viable oil/gas finds.
She also says the “impact of the transition to a low carbon economy and uses of alternatives to oil and gas have also not been fully modelled”.
21 Comments
We could expect groans from the dying dragon.
Time we asked what money represents post fossil fuels - it's a nonsense to talk in terms of the tokens if the tokens are no longer underwritten/underwriteable. We need another measure, or the current one linked to something real. (Statoil investment in 'shares' is the classic example - what are the shares worth post oil?)
CO2 sequestration should be discussed, stranded assets due to incorrect bets shouldn't be. Let's move on.
Hi PDK. Why not just have sound money? I.e. money that can’t be generated from nothing. As long as we agree to accept a token and it holds its value then in my mind we’re all good. It doesn’t necessarily need to be linked to energy or oil it just needs to be a consistent measure/value.
This could be a good conversation. I think it has to be linked to something, but only because, as a studier of something (energy is my thing) I've come to realise that the current token system is in trouble.
Somehow, you have to link the expectation that your token can be exchanged for something tangible tomorrow, to the supply of things tangible tomorrow. If there's not enough, then your tokens devalue via bidding, or trust in them gets lost completely.
The problem is that we were growing our consumption of things tangible - using tangibly-sourced energy to do so - exponentially. And we built a token system to work in the exponential phase. Now we have to build a token system to work in a steady-state consumption regime. Or even a reducing-consumption one.
Obviously interest is for the chop - and I think that's why desert-dwelling cultures outlawed it - there wasn't the physical underwrite. Then we're left with an issuance-versus-underwrite problem.
And we have to realise that we can't survive as a species, by living through token indicators. It didn't work with the Ozone Layer, with DDT, with Thalidomide, with CO2 - so we need to go back to making societal decisions ex-token.
I just think that linking money to energy has the potential to replace the gold standard - there not being enough gold.....
Definitely a good conversation. I think we’re currently about 50% on the same page. Our current money creation system is used to try and force growth amongst other things and this has caused a lot of unintended consequences.
Where we might depart is how we view tokens. They should be plain and simple a medium of exchange that stays consistant. Other things can change around them like energy which will be then be reflected by how many tokens it cost per KW for example thus placing a new value on energy and naturally (if prices rise as they undoubtedly will) reduce consumption.
I would prefer gold over energy as it is suits the definition of money and has a fairly static quantity. Regarding there not being enough gold, I don’t agree. We would just revalue gold as it’s valued at what we agree it’s valued at. If that’s $10,000 usd per ounce then so be it, it only reflects how much money we’ve created with no backing since leaving the gold standard. The comment about interest would be moot with sound money as well I think.
Your thoughts?
Of course, there's always the nuclear option.....being developed apace by Indonesia with thorium (which we ain't gonna run out of anytime soon), and by China, which is set fair to becoming the prime supplier to the world by 2030. PDK, I'm afraid, consistently ignores the geopolitical aspects of energy around the world. Inevitably, these developments will leak back into Godzone, as we look out and see how others are progressing while we stand pat. It's not a static world.....and certainly not given to embracing theory from the woods....
The problem with trying to reduce consumption - of KW or anything - by making it 'more expensive' is that it is a reactive process, not a proactive one. Which (I contend) is why we're in the trouble we're in.
I'd rather start with physical/biological/sustainable rules; This river is out-of-bounds permanently. This one can be dammed here and here, nowhere else. The water quality bottom-line is this. We will re-create this level of biodiversity. Riparian planting will be X. (The problem comes when global others eye up your well-looked-after resource, of course).
If you used gold, well, it's a finite resource. In practical terms we're about half-way through it - just north of me there's a huge effort (much energy being applied) making a huge landscape change, to get at it. I suggest it's taking more Petajoules per oz (lovely mixed metaphor) than ever before - how does your idea measure that change?
Interest is compound - very soon you run out of universe with compound. I'd be dubious that it can be incorporated. The Arabs allowed the charging of a flat fee up-front - proves that only something affordable was being charged. Banks were parasitic on the energy/resource flow system anyway, it sort of makes sense that they become obsolete, or at least, that their business model becomes very different.
Back to the thread: "We strongly believe that natural gas has a global role to play in reducing emissions"
No, natural gas adds to emissions, just less than oil/coal. The statement is just self-justifying fudge-speak - which is why we simply have to have Governance, ex money-talk. It very quickly justifies itself with 'jobs', and we're back to depletion/trashing/unwelcome legacy territory.
It’s not trying to reduce consumption, that’s not the goal. As something becomes more scarce it will naturally be consumed less. What I was getting at is sound money is just a means of valuing that.
Agree to look after rivers.
You don’t need more gold for a gold standard to work. The idea is that it’s relatively fixed.
I’m on the fence with interest, charging a flat fee up front is a different but the same. Some sort of “interest” will be necessary to value loans etc.
Finally, be pragmatic. If gas produces less emissions than oil/coal then great. Let’s use it on our way to renewables. There’s no point (especially politically) reducing living standards drastically to achieve change if you don’t need to.
And yet another serious scandal brewing with Peters over his involvement with investigation into his old mate Wally Haumaha, the coalition has been emitting a powerful stench in recent weeks:
Curren's furtiveness - leading to demotion.
Meka Whaitiri's bruising of an underling - leading to demotion, though her Maori caucus supports her right or wrong (where else outside of Labour would an employer physically abusing staff be OK?).
Ardern misleading the house over her communications with her mate Derek Handley as they circumvented usual hiring procedures to give him a made up CTO job, leading to Curren falling on her sword.
Whatever your opinion about the ban, one thing is rather indisputable. The way the government has went about to pass this ban has been anything but transparent and democratic. Maybe those who believe that democracy and transparency have passed their used by dates as voters with vested interests are unlikely to make hard choices today to save the future, do not find this alarming. But surely a government who talks so much about transparency and democracy should be ashamed of the way they have gone about this.
Couldn't agree more.
This is appalling policy making at its worst and completely undermines the credibility of the government.
They should simply let the carbon price/cap & trade price (+exploration costs) determine how fast and when exploration ceases.
The cost to NZ of the proposed policy is massive.
Meanwhile the rest of world does the heavy lifting. “U.S. exploration and production companies (E&Ps) are generating such substantial output growth that the International Energy Agency (IEA) estimates their increase in 2018 liquids production could equal the entire growth in global demand. Remarkably, they’re accomplishing this with half the capital investment of 2014. The driver has been a shift to a manufacturing mode that has transformed the E&P industry as dramatically as Henry Ford’s moving assembly line changed the automobile industry in 1913. Geophysical and technological innovations, such as multi-well pad drilling, have allowed the industry to double output per well bore at half the previous cost.
As a result, the 44 E&Ps we track reported $21 billion in pre-tax operating profits, up from $6.2 billion in the first six months of 2017, and over $50 billion in operating cash flow, up from $39 billion a year ago. Most notably, these companies are on pace to garner an astonishing $30 billion in free cash flow.“
Such a shale fail.
Heavy lifting? Heavy debt more like it -
https://www.wsj.com/articles/wall-streets-fracking-frenzy-runs-dry-as-p…
https://www.economist.com/business/2017/03/25/americas-shale-firms-dont…
Maybe these profits are simply from lower taxes - a net transfer of wealth from the federal government to frackers as a result of the tax cuts that will bankrupt the US even faster -
https://www.reuters.com/article/us-usa-fiscal-deficit/republican-tax-cu…
Or even heavy-handed intervention in the Persian Gulf *again* to distract us from Trump's domestic woes -
https://www.theguardian.com/commentisfree/2018/sep/26/trump-idiocy-war-…
Hmmm, look there's more oil to be had in Venezuela - maybe causing chaos there will drive up prices too?
https://www.theguardian.com/world/2018/sep/25/us-sanctions-venezuela-fi…
Gee whiz, oil prices might be a little lower for you & I if Trump hadn't cut off Iranian supplies via sanctions. I wonder who benefits from higher oil prices - maybe Saudi/OPEC and the frackers?
Get off oil. Buy an EV. Who cares what Big Oil thinks.
Until there is a concerted effort to reduce the consumption of petroleum and natural gas, instituting a ban on exploration and local production has the effect of increasing total usage due to the cost of transport. The effort should be placed on usage reduction rather than resource extraction. Reducing usage will have a meaningful effect, reducing extraction is just signalling.
I still have issues with a person defining themselves as being for a sustainable future, while having six (6!) children. The very definition of unsustainable is over-breeding. One of the Green co-leaders has six children. This is seriously unsustainable behavior. A rational Green party should have limitations on offspring...
This is the problem with the way the government has approached this issue. They have gone for the green vote winning banning the big bad oil companies and virtue signalling when the real 'make the world a better place' approach would have been to ban something on the demand side.
They could have banned imports of petrol/diesel vehicles for instance, or looked at tariffs/bans on plastic products which would have ACTUALLY had a positive impact on the environment, but they have not. Sorry but ours kids and grandkids won't thank us for JA photo ops while their environment/climate is materially worse off.
Anyone truly green would be more concerned with end usage not extraction, after all, nobodies going to drill for oil when nobodies buying it. Its just a vendetta between greenies like Russel Norman etc who can't see the wood for the trees. Its consumers destroying the planet not oil companies!
Its a bit like pretending we recycle when all we do is ship our plastic waste to Asia and then climb on our moral high horse about their environmental records? Its all a lie we tell ourselves so we can buy crap and throw it away guilt free!
There is much truth in what you say.
Of course, to go off fossil fuels means collapsing your economy - there simply isn't enough grunt from renewables to keep us in the air, so to speak. Even though I champion them and live on them, I can assure the wide-eyed soft-greens that you can't morph seamlessly to electric cars and keep your flat white culture - it will take a bigger sift than that.
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