By Jen Purdie*
This week’s announcement of the government’s plans to reopen New Zealand’s territorial waters to oil drilling comes as no surprise. All three coalition parties campaigned on reversing the 2018 ban on offshore oil exploration.
But it flies in the face of projections that demand for oil could peak as early as this decade.
Minister for Resources Shane Jones has confirmed the government plans to reverse the ban later this year and seeks to incentivise oil investors by paying them a bond in case their drilling rights are cancelled by future governments.
The government is also considering weakening a law that requires oil and gas permit holders to pay for the decommissioning and clean-up of wells. This law was passed in 2021 in response to taxpayers having to pick up a NZ$400 million bill for decommissioning the Tui oil field after the financial collapse of the oil company.
The government’s decisions go against projections by many sources, including the International Energy Agency, that demand for oil will decline soon as we electrify the global transport fleet. Consequently, investment in oil exploration is projected to decline too.
Peak oil demand
The use of fossil fuels is due to decline this decade, according to several major oil companies. A 2023 report by Shell projects fossil fuel use dropping rapidly in coming decades, while BP thinks oil demand for combustion has already peaked.
Many large organisations think peak oil demand will happen this decade or the 2030s. This includes the International Energy Agency (IEA), which has predicted demand for oil will peak before 2030.
The Organisation of Petroleum Exporting Countries (OPEC) and Exxon Mobil are bullishly stating they see oil growth continuing, albeit at a slower rate, into the 2040s. But at the same time, Exxon Mobil is investing significantly in renewable energy, lithium mining and carbon capture technology.
Even if oil demand peaks later than forecast, the progression from prospecting to exploration and mining can take decades. Projects prospected now may not yield fuel until demand is already in decline.
We have enough oil to make the energy transition
We’ve known for some time that remaining fossil fuels must stay in the ground to meet the Paris Agreement goal of keeping the world below 2°C above pre-industrial temperatures.
The last UN climate summit – COP28 held late last year – agreed to “transition away from fossil fuels” and signalled the “beginning of the end” of the fossil fuel era.
But further to this, the IEA has stated we don’t need any new fossil fuel exploration or development, with enough projects already in existence or planned to meet global energy demand forecasts to 2050. New research agrees, saying governments around the world should stop issuing new oil, gas and coal licences.
In line with decreasing oil demand, BP also projects declining investment in new oil and gas infrastructure globally in coming decades. The IEA’s World Energy Investment report notes an ongoing hesitancy about oil and gas investment comes partly from concerns about downward long-term demand projections.
New Zealand does not import natural gas, but our gas fields have been yielding less than forecast for some years. Therefore, to remain independent, some more maintenance drilling or limited new expansion may be needed to see us through the energy transition. But using taxpayer dollars to pay international oil companies to come to New Zealand doesn’t make economic or environmental sense.
The momentum for the energy transition is unstoppable
The good news is that the world’s energy sector, which produces almost 75% of global emissions, is now transitioning at an ever increasing rate. Significant amounts of renewable electricity generation (which is now far cheaper than fossil fuel generation) are being built, with global renewable capacity set to double this decade.
New Zealand’s electricity system is already 85% renewable. Significant investment in renewable generation is under way ($42 billion by 2030) to supply the approximate doubling of electricity needed for the expected mass electrification of transport and industrial heat by 2050.
Renewables are also being built to replace retiring coal plant. Global coal consumption peaked in 2013 and has flatlined since. In 2021, the COP26 global climate meeting in Glasgow agreed to phase down coal, and 60 national (and 51 sub-national) governments have joined the Powering Past Coal Alliance, committing them to phasing out all coal-fired power plants and not building new ones.
Other uses of fossil fuels are in industrial heat and transport. Electric vehicle demand is skyrocketing globally, with the global fleet growing from 300,000 vehicles in 2013 to 41 million in 2023. With prices falling, electric vehicles are expected to reach price parity with internal combustion engine cars as early as 2025.
Most large global vehicle manufacturers have pledged to produce only electric vehicles by 2030 or 2040. And 30 countries, including New Zealand, have signed the Zero Emissions Vehicle declaration to ban new petrol or diesel vehicle sales entirely by 2040.
New Zealand should be enabling the energy transition
The world is moving very rapidly away from coal and oil, and eventually all fossil fuels. A growing number of countries require adherence to Paris Agreement pledges by their trading partners. The recently signed free trade deal between New Zealand and the EU imposes trade sanctions if Paris pledges are not met.
New Zealand’s current emissions reduction policies take us on a track that is much less than our per capita global fair share to limit warming.
New Zealand should be moving away from oil drilling and instead invest in the energy transition, including decarbonisation of industrial heat, subsidising low-emitting vehicles and charging high emitters, better public transport and bike lanes, increased EV charging infrastructure, and “urban mining” (recycling) of batteries and other technology currently filling rubbish dumps.
*Jen Purdie, Senior Research Fellow, Centre for Sustainability, University of Otago.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
40 Comments
Let's go back to the good old days, when everything was better and we pumped as much fossil fuels as possible. We can make those days last forever right?
Sarcasm aside, why would we encourage investment in dying industries, when we could invest in growing ones where the expertise will still be relevant in a few decades?
That's ideological conceit, you can't tell what expertise will be relevant in one decade let alone in a few decades. China, Asia and India are locking down long term fossil fuel supplies to guarantee their future productivity and growth, NZ unfortunately is going to be left stranded at the end of a very long and tenuous supply chain.
Productivity yes, growth no.
Please be concise, rather than throw sound-byte words around.
The planet doesn't/can't grow from here on, collectively. There will indeed be conflict over 'what's left' of the fossil energy.
Purdie, however, misses a vital point - one known in her department - which is the question of concurrent Limits, including replacement materials, lag-time, EROEI and entropy. Which makes this a little like a puff-piece, at the other end of the Bishop/Jones tug-of-war rope.
The planet doesn't/can't grow from here on
China, India and Africa (about four billion people vs the anaemic west's one billion) beg to differ. Just because western economies have been led into a dead end by short sighted incompetence and poor leadership doesn't mean everyone else is in the same boat.
Yes, there is a lot of momentum from the big end of town.
"“What should I do, you say? You should lobby your government officials – invest in an election and buy some politicians. I am happy to say we do quite a bit of that at the Grantham Foundation – only green politicians. We will vote for any party – any candidate as long as they are green”, Grantham states."
https://nordsip.com/2019/03/27/doom-gloom-but-great-investment-opportun…
"Minister for Resources Shane Jones has confirmed the government plans to reverse the ban later this year and seeks to incentivise oil investors by paying them a bond in case their drilling rights are cancelled by future governments."
One could be forgiven for thinking that some of those incentives may find their way back to the politicians approving them...if one were a cynic.
Does Jen Purdie google before writing these opinion pieces?-"The world is moving very rapidly away from coal" This other comment is from a dated link and is flat out wrong :Global coal consumption peaked in 2013 and has flatlined since."
LITTLETON, Colorado, Jan 18 (Reuters) - Worldwide electricity generation from coal hit record highs in 2023, while thermal coal exports surpassed 1 billion metric tons for the first time as coal's use in power systems continues to grow despite widespread efforts to cut back on fossil fuels.
"Total supply [oil] capacity rises by 6 mb/d to nearly 113.8 mb/d by 2030, a staggering 8 mb/d above projected global demand of 105.4 mb/d."
From the source of that article , a nice graph.
The source was Reuters per my comment. "LITTLETON, Colorado, Jan 18 (Reuters)"
"In major coal importing nations, coal-fired electricity generation increased on the year in China, India, the Philippines, Turkey and Vietnam, Ember data shows.
Coal-fired output declined by 8.2% in Japan and by 4% in South Korea, but those reductions were nearly offset by the increase in Vietnam alone last year.
https://www.reuters.com/markets/commodities/global-coal-exports-power-g…
You think 2023 wasn't a record year for coal? The authors IEA own link states as such - though Jen didn't bother to read it or misquoted it.
https://www.iea.org/energy-system/fossil-fuels/coal#tracking
"Worldwide, more than 107 countries and 2,000 entities are using coal across roughly 13,800 coal units. Some 204 new coal power plants are currently under construction, another 93 such projects have been announced and 260 new ones are in the pre-construction stage. Worldwide coal use still generates 36 percent of global electricity production, reaching a new record of 10,440 terawatt hours (TWh) in 2022.
It is the primary energy source in China, India, Indonesia and many other countries. China, India and Indonesia combined account for about 70 percent of worldwide coal demand."
profile,
I think I might get his email address and send him that quote, plus a few other figures. I know you do a lot of research and I would thoroughly recommend getting hold of Material World by Ed Conway. It tells the story of our almost total dependence on just 6 materials; sand, salt, copper, iron, oil and lithium.
I came across a paper from the American Geophysical Union-A comprehensive Assessment of Anthropogenic and Natural Sources and Sinks of Australasia's carbon Budget published last Dec. The Abstract says this; "New Zealand was a net CO2 sink of -38.60+- 13.40 TgCyr." later on, "This study marks an important step toward a more comprehensive understanding of the net CO2 balance in both countries". If this study could be independently verified, it would be interesting to see the reactions to it.
Cheers, I've read that paper.
Niwa reached similar conclusions that NZ is a CO2 sink. It is not a very popular data point.
"Results from Beata Bukosa's research from confirm New Zealand as a carbon sink."
https://dothemath.ucsd.edu/2024/05/watching-population-bomb/
Tom Murphy has been musing recently on UN projections for the human population and how they may be over estimating. That could have a big impact on FF demand...
it is a good article, but it's flaw is the same one you're pushing. While peak consumption maybe close or has been passed, that doesn't mean that demand is going to cease. That argument is too much extremism, all or nothing. I suggest the reality will be that alternative technologies will replace most demand for fossil fuels ( in truth should have years ago, but for the interference of the big oil companies) but there are small sectors where that replacement technology is a long way off or will not be found.
I do agree that there is a risk that NACT might being hanging their hats on oil and gas exploration too much, but I do see the need continuing for many years to come, and it is better if we are not dependent on others for the supply.
I suggest the reality will be that alternative technologies will replace most demand for fossil fuels ( in truth should have years ago, but for the interference of the big oil companies) but there are small sectors where that replacement technology is a long way off or will not be found.
I agree with your statement however I feel that here in NZ we are so far behind the rest of the world that we are just burying our heads in the sand. With the likes of Shane 'Zero Fs Given' Jones around for the next few years, things could get even worse.
You appear to be conflating the two topics....my comment was directed at the linked population article.
In reference to your comment I would suggest that obviously demand for fossil fuel will not cease in the foreseeable, however supply and access will increasingly become problematic, with or without alternative energy provision.
As to oil and gas locally...you cant find what aint there (in viable concentrations)....we know whats there already and we havnt developed a new site in decades e.g. gas offshore canterbury that was touted as a great find but when push came to shove the company with the already approved extraction rights walked away....who in their right mind would waste effort looking over well picked ground sans 'incentives'?
"who in their right mind would waste effort looking over well picked ground". Texans? Laughable to suggest NZ is well picked over. If Texans had listened to Hubbert and the Chicken Littles they would be a lot poorer today.
Texas Oil and Gas Production Hit Record Highs in 2023
https://www.rrc.texas.gov/news/040924-texas-oil-and-gas-production-reco…
There is an app for that.
"Surplus global supply capacity will reach unprecedented levels by 2030
Total supply capacity rises by 6 mb/d to nearly 113.8 mb/d by 2030, a staggering 8 mb/d above projected global demand of 105.4 mb/d."
Only a fool - or a paid hack - would think you can ramp your way at exponentially-increasing rates, into a FINITE resource, and think they weren't 'running out'.
We've been 'running out' since we started that - stupid in hindsight - extraction. We built an unsustainable population, and a collection of unsustainable infrastructure upon it - AS IF IT WERE INFINITE.
Which it ain't.
Tui oil company going bust? Standard business practice in the O+G sector globally. Sell off production assets to companies set up to fail once the production curve collapses and get the clean up liabilities off the books. The free market how it's supposed to work, according to the "Interest" libertarian and climate science coalition (NZ branch) comments team. Closet socialists when it comes to cleaning up their mess.
And Shane Jones wants taxpayers on the hook for cleanup as a matter of policy? My comment would be removed if I said what I thought of Mr Jones.
He's playing 5 % politics, though it doesn't seem to be working in the polls at the moment.
I might even feel sorry for Winston , got this clown as his no 2 , and no apparent talent behind that. Their best MP was Tracey Martin, and she no longer wants any part of them.
These same people have been declaring peak oil for decadaes. Even if it is the peak, there is still the downward side of the peak which requires sustained albeit declining oil supply. Climate change catastrophists will have us poor and surviving off kale soup but I'd rather we have a functioning domestic oil and gas industry rather than pay through the nose for oil from dictatorships. Remember that Taranaki is only one of the oil and gas basins available to us. We could be like Norway and solve our infrastructure deficit if we were willing to explore other reserves. Check out the map of petroleum basins on p192: https://www.mbie.govt.nz/assets/77e0694e33/oil-an-introduction-for-new-…
I’m with you Alpha.. this country is going backwards and I would much prefer we use some of our resources to improve infrastructure healthcare education etc etc. As the article notes a lot of our energy production is sustainable anyway and we produce very very very little of the worlds pollution. Time to be just a little bit selfish and create a decent country for our kids and grandkids.
And yes there will still be a country here!!
ab https://www.norskpetroleum.no/en/facts/historical-production/
Take a good look at those graphs - and they're from inside...
Norway is well past peak, and has busily turned much of it into shares in the EU market - which will be worth? post-oil. It has indeed also gone down the renewable route (it was already one of the big four in hydro, compared to population (with Iceland, BC and NZ) but how much of that is maintainable beyond the oil? As in: what road-surface will those EVs roll on? Laid by what? how?
https://ourworldindata.org/grapher/oil-consumption-by-country
Do I need to say anything more? Almost 90% of our energy comes from oil/gas/coal. Not to mention plastics, pharmaceuticals, energy for mineral extraction. Look around the room that your're sitting in. Everything around you is produced either directly or indirectly, and at low cost using oil/gas/coal.
What then? Actual new zero; best case would be an almost unimaginable drop in living standards, and worst case would be the collapse of civilisation. Currently we have inexpensive energy to build infrastructure. Actions will be counterproductive, and opportunities squandered as long as the problem is misidentified as CO2. For example, In my city they signal virtue with talk while a tremendous amount of diesel fuel is wasted every day driving empty busses in circles around the city. Another example, a friend of mine works on carbon capture which is the epitome of counterproductive stupidity. My friend is smart, and he knows is BS, but it’s EU funded.
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