It has been revealed the Government ignored the advice it was given by the Ministry of Business Innovation and Employment (MBIE) when deciding to ban new offshore oil and gas exploration.
A document released under the Official Information Act (OIA) shows MBIE on February 27 advised the Minister of Energy and Resources, Megan Woods, to limit the 2018 Block Offer to onshore and offshore Taranaki.
In other words, continue to allow oil and gas companies to apply for exploration permits, but limit this to in and off the coast of Taranaki.
It also recommended the Government commit to reviewing what to do in the Pegasus/East Coast and Great South/Canterbury regions once exploration milestones under existing permits had been met.
Once it found out the Minister wanted to go further by banning new offshore oil and gas exploration, it on April 10 explicitly warned that a ban would be “detrimental to a number of public policy objectives”.
It said it would increase risks around security of supply, increase costs to consumers, decrease economic activity in Taranaki and reduce Crown revenues from lower future royalties.
MBIE warned a ban would have a "negligible impact" on reducing domestic greenhouse gas emissions and would "likely increase" global emissions, as the methanol produced by Methanex using gas from New Zealand would be replaced by methanol produced using coal in China.
“It also removes the opportunity, both domestically and internationally, or any future gas discovery being used to displace coal,” MBIE said.
It advised that the Government ensure existing explorers be guaranteed that should they wish to move to production, they could apply for mining permits.
Woods took this advice, yet on April 12 announced there would be no further offshore oil or gas exploration permits granted, meanwhile onshore permits would be limited to Taranaki and phased out over three years.
Neither Cabinet nor the industry had been consulted before this decision was made.
In a statement accompanying the release of 13 documents under the OIA on Tuesday, Woods admitted the first time she sought advice on Block Offer 2018 was February 19.
"As you know, this decision was about taking political leadership to act on climate change and its flow on impacts,” she said.
“The decision was a political decision, looking out 30 years and taking steps towards 2050 being emission neutral."
MBIE’s more moderate approach
Coming back to the original piece of advice MBIE gave on February 27 to limit new exploration to Taranaki, it said focussing investment and competition to an area most likely to yield new discovery in the short term would go “some way to limiting security of supply risk”.
People would keep their jobs in Taranaki and investments by firms in the region would be honoured.
It said that if Woods limited Block Offer 2018 to onshore Taranaki and reviewed what to do with offshore exploration, this would have similar benefits to its preferred option, but would erode investment certainty and not honour investments made by firms doing work in New Zealand. It would also lead to “muted interest” from explorers.
MBIE noted that if the Government chose this option, it would need until September/October before it could provide further advice.
It said the only upside to an exploration ban was “investor certainty”.
As mentioned above, it saw the downsides as “significant risk” to security of energy supply, upward pressure on domestic gas prices, a perception of sovereign risk, existing oil/gas facilities being decommissioned more quickly than planned, significant impacts on regional employment and “residual risk of legal challenge from investors”.
On the final point, MBIE noted: “A primary consideration of ending Block Offer without a review or replacement is that it could be challenged as inconsistent with the Act, since resource development would be impeded.”
Some in the oil and gas industry are considering legal action against the Government.
87 Comments
I imagine that oil and gas companies would make investment decisions based upon the finds they have been proven but with the implicit knowledge that they could continue and explore in adjacent blocks to increase scale to make their overall investment more profitable. To force a halt to the future exploration, it is obvious that it will curtail investments starting now.
It's not just them. Methanex needs to invest capital over the next few years. Capital that makes no sense if investment in exploration/development is limited and gas prices rise.
There's another thousand jobs the government has destroyed with no analysis or consultation - and what benefit do we get for the environment?
No one knows because the government hasn't done the analysis.
Cutting domestic oil and gas supply to curtail demand for hydrocarbons is the most ill-informed decision I have ever come across.
How about redirecting taxes, royalties and levies from exploration and extraction towards alternative fuel research or something of that sort. But that would require intellectual and collaborative efforts instead of just plain dialogue.
I think with the big companies having left that that should be a pretty clear that they have left because there is no substantial finds likely. Ergo this is a sunset industry all we are doing is hastening it a bit.
I do see some interesting comments like "NZ gas is used internally but we could export it" which needs a substantial investment in a terminal for a dubious period of time removing our ability to have it in the future.
Personally I think as Peak oil bites we'll be desperate to use our our resources to reduce the impact but there you go.
Exactly right Steven. The key thing about this decision is that it creates a *reason* to advance alternative energy sources.
The government is simply formalising a process that the big players in the market have already started for themselves - there aren't viable FF reserves left around Taranaki or the so-called Great Southern Basin.
Look at the list of those who have tried and failed over the last decade and then *voluntarily* left NZ:
- Petrobras
- Shell
- ExxonMobil
- OMV (Austria) & PTTEP (Thailand) & Mitsui Exploration and Production (Japan).
The government is simply formalising a process that the big players in the market have already started for themselves
So if this is the case, what is the point in the exploration ban?
If there is nothing left, why bother 'formalising' the process?
And why not actually present a plan to wean ourselves off of dependence.
I'm not against us moving away from fossil fuels.
I'm just against us thinking we can go cold turkey on them. More so I'm doubtful that any government could be competent enough to actually structurally replace their usage with viable alternatives. Pretty much everything they touch turns into a mess.
There's not even a shred of truth in your statements here.
Exploration has reduced everywhere in the world in the last 5 years since the oil price collapsed. There are plenty of great opportunities and plenty of companies willing to invest in these opportunities - well, until this philosophical government announcement made with no planning.
NZ already exports gas in a multitude of forms such as methanol and milk. no terminals needed.
Important to note in this report also is the anticipated effect that the ban is likely to have on Motunui and Waitara Valley Methanol plants.
It essentially gives them only 8 more years before they may face substantial supply issues.
You are probably looking at 400 direct jobs (where the average salary would easily be >80k) and a huge amount of associated supporting services.
Virtue signalling gone very wrong (again).
A lot of interesting information has been released by the Government this morning. You may be interested in having a look yourself, while I make my way through the documents.
https://www.beehive.govt.nz/feature/block-offer-2018-release-information
Sending a signal that new oil and gas a no verboten is pretty clear invest in the alternatives signal. The areas that we already produce already show that their future is limited and production is declining all this does is hasten that.
"pushing more money overseas" a) your argument appears to ignore any necessity to move off oil and coal due to CC. b) that investment in renewables will not occur as alternatives to imports.
You have some (strategic) truths but also errors here.
a) The problem is by and large yes there will be no real alternatives. eg cheap commercial airlines / flights are toast within 20 years. Dont invest in airlines I suggest. Also shipping uses bunkerfuel the lowest grade of oil that still flows (though at around 120C to be usable). Just where you get the energy from to run both two essential shipping options at an affordable cost remains a mystery. Of course China is talking about a railway running from the USA all the way down to China and beyond.... now rail you can electrify.
b) i) Much business load is during the working day eg air conditioning peaks just when solar is outputting its maximum as Germany has found. So you sell the power when you odnt need it and buy it back when you do.
ii) see a) ie there will have to be significant lifestyle changes.
EVs, actually the cost break even where its cheaper to buy an EV is projected for about 2024 if not earlier.
Musk is a bright guy, he's seen where the bottlenecks are and set Tsela up to be at those choke points.
ie Tesla have the gigafactory and its ramping up and absorbing all the lithium production. Also EV is not a mechanical engineering challenge they typically have 20 moving parts all low wear so its a software challenge and hence why Apple and Google seem to be playing in this area.
So if it doesnt alter the cost much in NZ there cant be much impact then can there? In terms of NZ jobs renewables will follow the lead of other countries and with the massive output in Solar panels from china lots of jobs seem to being created in this arena.
Import gas terminal? that assumes we still have the demand for gas. Domestically it is far more likely that as the price for Gas climbs (it isnt cheap right now) people will switch to cheaper power which will be electricity.
NB I looked at gas for my home and by the time you pay the standing charges and the other gouging it made no sense, heat pumps are the better deal.
Essentially you are missing the main point, we have to get off fossil fuels and this is part of the process of doing so.
a - No. You are wrong. Just look at the known worldwide reserves of oil. We have more than 20 years at current production levels. Plus, there is an absolute shit tonne of tight oil and tars that become viable at $80 a barrel.
b - Actually, everywhere peak load is between the two 6-9 periods (am and pm). It is not during the day. One look at the demand curves and price clearances from and energy market will show you this. Can solar smooth demand cycles? Yes. How does it do it? Only with battery usage because the sun don't shine very brightly at these times of the day, generally.
Solar -
Why are you even talking about this in the New Zealand context?
One of the key tenets of energy production in New Zealand is that it must be economically viable - i.e. it receives no subsidy.
Currently solar isn't a viable option in New Zealand, because of the abundance of our existing zero marginal cost production potential. Until the efficiency and life span increases substantially these are pointless in New Zealand.
NB I looked at gas for my home and by the time you pay the standing charges and the other gouging it made no sense, heat pumps are the better deal.
Ironically currently the only reason you and all your tin foil hat cronies can run your heat pump is because we have security of supply from our Taranaki peaking stations running on natural gas.
Looks like you need to do another 12 years of reading and research on maths and science..
Yes,
We have a small barbie and gas bottle left over from our Y2k disaster planning.
We recently installed emergency lighting, a pair of hand sized camping lanterns and a USB charger.
I must say however power supply has been quite reliable in the North this winter.
The classic Sierra Madre clip seems appropriate:
Data?
We ain't got no Data!
We don't need no Data!
I don't have to show you any stinkin' Data!
Couple of points; first exploration does NOT mean production. Although I do have some concerns re seismic exploration off shore and the effects on marine life. And secondly while they are not the first Government to fail to follow expert advice, rightly or wrongly, I do believe their underlying message is right - that of with the rampant use of fossils fuels, something has to change, to both drive it down and find some form of alternative that will maintain our technological development in a sustainable way.
An exploitation ban means a stop to new investment.
That affects production both in terms of capital investment associated with existing plant and investment in replacement production facilities.
Their underlying message is BS.
They have, effectively, just said "The way to stop reliance on fossil fuels is to ban production without offering any viable alternative."
A completely futile unilateral approach.
I think people underestimate just how reliant we are on Taranaki gas in the North Island for a huge amount of industry.
Currently the only reason we can achive >80% renewable energy generation is through the security that our abundant CH4 supply gives us.
Is it 100% clean?
No.
But what are our viable alternatives?
I largely agree with you Nymad. It doesn't change what they are trying to say - things have to change. We are too small for their unilateral move to have much effect. No one currently knows what the next source of energy will be. My reading gives me little hope, because all the current possible alternatives appear to carry a cost that in one way or another make them just as bad or worse than fossil fuels. I fear that some of the doom sayers on this blog may be right, that the end of fossil fuels will spell the end of civilisation as we know it. Without a viable alternative that is available to everyone, as the supply runs out, the major powers will go to war for the dregs, and that war will be an all or nothing affair. That will be the curtain fall on this world as we know it.
That is indeed the Mad Max scenario I fear. However to wage war and transport the energy prize takes energy. To me this means it will simply be un-economic to wage a conventional war and hold onto the prize once won.
You talk about /consider energy as a direct use? However also consider the double whammy of how reliant our industrial agricultural system is on Ngas for fertilizer (as one example) Take out oil and gas from the system and through in CC impacts are NZ's food production could fall 3/4s.
There are some interesting youtube videos on cuba looking at its peak oil crisis after the Soviet Union collapsed and oil flow stopped, and how it survived it, sobering watching.
However I am fairly confident watching the likes of Elon Musk that with effort and sacrifice the transition will not be as black as Mad Max. If we make the effort that is and leave ourselves the time to do it.
In the US, it all depends on your location/geography. The union of concerned scientists puts out a yearly outlook of the equivalent ‘mpg’ of electric cars based on fuel sources;
https://www.ucsusa.org/clean-vehicles/electric-vehicles/ev-emissions-to…
Cool tool, eh?
So if we can't use moderately clean gas we will have to go back to coal to manage peak demand/drought/population increase/cheap electricity for Rio Tinto etc in the unlikely event that windmills and solar fail to supply power to ensure all the houses for the 10 million are at a minimum of 18degrees C (by regulation of course)(and kept cool in the summer? )
Actually if you look at energy use it would be at worst around the 1800s, not the stone age. ie we will be forced to live within the Sun's annual output no matter what within 30 years anyway.
Where did I say life would be great?
Lets consider somethings though, our advancements and knowledge in Public health will still exist, medicine still exist, education, still exist. Science, still exist etc etc.
So allowing for renewable energy and organic like farming techniques the planet can feed about 2billion, which is the population in the 1920s.
Far from the Stone age....except if we are stupid, which frankly given how we are going is quite likely.
Have the 'experts' calculated exactly how much climate impact our natural gas burning is impacting the environment?
Have they quantified the net effect of environmental damage resulting from the absolute removal of this energy source?
Solar and battery tech isn't that clean. Or is it okay that we just export that pollution to developing nations?
If your argument is as simplistic as burning fossil fuels causes climate change, why then don't we address the elephant in the room - animal husbandry and population growth?
We seem to have no problem with farmers cramming more and more livestock onto New Zealand pastures. Nor are we worried about the climate effects of increasing our population at crazy rates.
If I were a betting man, I would say that the climate damage produced by these two factors alone by far outweighs the damage of our natural gas usage.
per capita it is actually quite high, I think NZ is in the top bracket of consumers, basically around 32kw each V 5.4 for india and 22 for china. China, who actually produces our goods for us and hence our real impact of NZ is actually probably higher.
I do not disagree on population, I have said so in here (and elsewhere) and been vilified for saying it. Even in some instances I have also been kicked out of Green party supporter web sites for the saying same thing.
The point of this is to send a signal that we need to move away from fossil fuel production. Yes it is an inadequate response overall but it is the correct direction.
I can confirm your bet, population growth is actually one of the biggest drivers by far there was at least one academic grade paper on it this (or last) year.
I think NZ is in the top bracket of consumers, basically around 32kw each V 5.4 for india and 22 for china
What? is that our energy usage?
32kWh? per day?
I don't understand what your nonsensical comments are saying. Use some grammatical structure .
Also, don't compare us to India and China who produce like 50% of their energy from Coal.
Relatively speaking CH4 usage might be high, but that's because it is the only form of thermal production in New Zealand (Barring Whirinaki and the likes). It's a stupid comparison if that is your argument.
Per capita is hideously misleading in almost all scenarios. 17% of our kW is exported in the form of aluminium from Tiwai, for which they pay single-digit cents per unit. We feed around 20-40 million via exports of food. We house unquantifiable numbers via export of logs. And so on and so forth.
Per capita is a useful stick with which to assail Straw Personages.
Low user plan is a rort and won't be around for ever.
Allows holiday homes and the better off with gas heating to use this for which it was never intended.
Net effect is to load line charges on those with large families and large electrical loads.
Great example of unintended consequences from another ill conceived green policy initiative.
I think line charges have to be the rort.
The other rort is the notion of shopping around....
Even in our perfectly free market line charges vary from $1-2 per day for competing suppliers over the same lines.
Certainly our supplier wont allow holiday homes on the plan and we had to ring them and discuss our smartmeter reports before we could change.
Can you provide more information on pricing structures for electricity?
Well, in the end it is the monthly account that matters and even our customer services person believed there would be savings by changing plan
That is around the 4000 kwhhr per month mark.
It would be interesting to know how many families would benefit by the switch.
Nymad.
I agree with you on population growth, but you are incorrect about increasing animal numbers causing increased methane emissions.Ministry of Primary Industries figures show there has only been a 5.1 per cent increase in livestock produced methane in New Zealand between 1990 and 2015 - logical, because although the dairy herd has increased sheep numbers have plummeted. That is a far lower rate of increase than emissions from transport and industry.
A just-published study co-authored by Frame and colleagues from Victoria, Oxford University and the University of Reading in Britain, and Norway's Centre for International Climate and Environmental Research, is re-evaluating the impact of short-lived greenhouse gases.
Frame said the study mainly showed the way methane was currently accounted for - by using the idea of CO2 equivalence - exaggerated the long-term effects of methane on the climate.
"Basically, CO2 is a stock pollutant that accumulates in the atmosphere, but methane is a flow pollutant that disappears about a decade after emissions occur."
Frame argued that the current approach of comparing the gases posed a risk of prompting to target methane emissions instead of carbon dioxide. "If we make trade-offs that favour reductions in agricultural methane instead of fossil carbon, then we will be making a mistake from a climate change perspective," he said.
https://www.newsroom.co.nz/@future-learning/2018/06/04/112729/heres-our…
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12064270…
"exploration does NOT mean production."
Yes, you are right. But the issue is not so much the result (i.e. end of exploration), rather the process.
We can see now that major policy changes can be unilateral, immediate, without consultation, non-questionable, and ill-advised.
Essentially this Govt could shut down anything at anytime, with no notice, no justification, and no alternatives.
Who wants to invest under those conditions?
and just what is immediate? the Govn has signalled that some areas (those most likely to actually produce anything) will actually soldier on for a bit.
Any Govn can shutdown or make a business un-economic. This is and has always been a business risk.
I dont agree with "no justification" the justification si quite clear move off fossil fuels towards renewables.
In fact what you do not seem willing to grasp is this push by Govn tells businesses that green and renewable businesses and produce is the way to go.
Immediate. It was passed with no Cabinet paper, no notification, and no consultation.
Any Government can shutdown a business. That is correct. But usually they
- Consult
- Take to cabinet
- vote on it
- Discuss options
There was zero justification. Reducing our exploration cannot reduce our impact on the climate, if we do not change the demand. Demand in NZ is going up - where do you think we will source it from?
Grasp? lol. good one, do you grasp the complete lack of democratic process used in coming to the decision. How can you possibly justify that?
No, the consultation was at party level, and at voter level already ergo its simply enacting the agree terms in the support agreements. In this case the vote then has already been cast by forming the CoL.
The democratic process was followed as per MMP if you dont like that well tough.
As far as demand is going up, well this needs to be reversed or alternatives moved to in order to lessen CC impact.
Not to forget Green Party support is vital for the survival and also Labour has done - lot of promises and are no now trying to avoid and if are not able to avoid are trying to delay and dilute but this promise they could not have delayed or diluted as need power and cannot upset the Greens.
decades of advice from climate scientists...lots of them.
meanwhile MBIE only shows one side of the story, the immediate short term fossil fuel side, no consideration I could see on medium and long term impacts from CC as a counter-balance. No mention I saw on the benefits of moving to renewables ie a real net benefit analysis.
None of them (scientists or official advice) said that banning exploration in NZ will mean anything for climate change. In fact there is the potential it will make these worse as we will replace that energy with another that in the short to medium term will be worse than natural gas.
I think moving to renewable is a good idea but this move by the government does not constitute that plan but rather an ill thought out move that is more interested in good PR than actual fact based policy.
Well done Winston and Jones. Successfully stuffed up one of the few remaining well paid industries in the regions. Saboteurs! Iconoclasts! Sacre bleu!
Watch out Ivercargill, they are coming for you next. All that nice electricity going to waste at Tiwai can be routed North to Auckland to replace the gas fired stations. We can bring in another million, maybe two.
Or 10 million souls, under TransPower's 'Vibrant Haven' scenario.
Oooh, 10 million, I'm starting to feel Vibrant, or at least Oscillatious, at the very thought.....
As if we did not warn it would be detrimental ............ idiots !
This Government thinks money grows on trees or comes from the bank , like New York kids who think milk comes from the fridge !
They are hell bent on smacking businesses not realizing its where their bread is buttered
Truley stunning. Cost billions in irreplaceable foreign earnings, kill 10000's of jobs. Net benefit to environment=0, and they were told and still did it. Only benefit was for Ardern to have something to preen about on her European Visit. How much does NZ have to pay for her irrational ego-trip?
Collossaly irresponsible and irrational policy from the silliest of silly little girls.
Just read Lomborg's latest 2017 comments on Climate Change - The facts 2017.
Using IPPC models and spending between US $ 1 Trillion pa - most efficient interventions to $ 2 Trillion pa - least efficient - we will reduce temperatures by 0.05º in 2100 vs do nothing because global emissions are going to continue to rise irrespective of what we do.
Will rank as the most stupid of interventions ever and with first world constraints on lending to new coal fired generation in third world countries condemn millions to an early death.
Not much better than mass genocide !
Lomborg is a well known CC denier.
Mass genocide is indeed the likely outcome of CC at the rate we are going. Though in fact its more like "entirehumanspeciesocide" ie we sent ourselves extinct.
Is he right on the trivial sums spent make trivial changes? yes his comments have some truth, ie the cost to stop CC is way bigger but the cost of inaction is extinction which personally strikes me as a worse outcome.
yet where rural communities are moving to wind they are booming.
"https://climatecrocks.com/2018/06/05/wind-energy-revenue-for-hard-hit-r…"
maybe the MBIE needs to take it blinkers off.
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