The Government's announcement that it would offer to buy a 15% stake in new gas field developments came out of left field in an otherwise predictable Budget 2025.
Perhaps that's why no one asked about it during the Budget lockup press conference. Willis eventually had to ask if anyone had a question for Resources Minister Shane Jones.
But she needn’t have worried about the policy going unnoticed. Always a showman, Jones kicked off his Budget speech in Parliament by offering the Green Party a sniff of crude oil from the Māui fields, harvested in 1969.
“Because this Budget is the real oil: $200 million dedicated to accelerate, de-risk, enable your nation—our country, fellow MPs—to take a cornerstone in recovering a foundation industry destroyed by the last regime,” he told them.
In 2018, the Labour–NZ First Government passed a law halting new oil and gas exploration permits. Jones and his party reluctantly voted for the bill, but now calls it "the worst decision made in the history of our nation."
At the time, his defence was that existing exploration permits, some valid until 2030, would remain in place, and active gas fields would continue production until 2050.
But the plan didn’t unfold as expected. International investors saw the writing on the wall and lost interest in funding risky exploration projects in a country phasing out gas.
B***ger off
Andrew Jefferies, chief executive of Echelon Resources, said it was like “putting a big signpost in your front lawn saying bugger off, we're not interested in having you here.”
His firm, then called NZ Oil & Gas, held a permit for a promising block off Canterbury’s coast and had secured international partners to fund the first well.
“Within a week those international partners had gone, and they are not coming back,” he said.
Establishing new gas fields can take a decade and cost over a billion dollars. Investors were unwilling to make that commitment with a Government working against them.
To make matters worse, output from existing gas fields has declined and is now insufficient to meet demand from electricity generators and industrial users. When power shortages hit last year, it was partly due to the lack of natural gas — though the link to the exploration ban remains speculative.
Search for certainty
The Coalition has now reversed the exploration ban. But Jones said overseas investors were still telling him they lacked confidence that the government would "stick by its word."
This has led Jones to search for a way to block a future Labour–Green government from reinstating the ban and reassure international investors that it is safe to set up new gas fields.
Initially, he sought advice on providing an insurance bond that would pay out if the government restricted sector activity. This idea didn’t take off and has seemingly been replaced by the $200 million co-investment fund.
“You can't totally prevent green madness in the future, but by committing the Crown to a fellow partner, it would be an extraordinarily difficult step, if not impossible, to immolate such an investment,” he told Interest.co.nz.
The fund has a dual purpose: to impose a fiscal cost on any future government that moves against the sector, and to serve as an incentive to attract wary investors back into the market.
Jones will head to Singapore in the coming weeks to promote the sector and explain how the fund will help protect oil and gas interests.
Other ways
Even if he succeeds, it could be many years—if not a decade—before new gas fields begin supplying energy. Critics argue that this time and money should be spent transitioning away from natural gas to lower-emission energy sources.
Natural gas makes up only a small share of New Zealand’s overall energy use, but it remains essential in regions like Taranaki and underpins the electricity supply during dry weather.
The drop in gas production last year, combined with low hydro storage, sent electricity prices to record highs. This forced manufacturers like Methanex’s Motunui plant, Winstone Pulp’s mills, and Oji’s Penrose facility to scale back or shut down.
Still, critics argue that the solution isn’t more oil and gas exploration, but helping these industries transition away from fossil fuels. That could mean switching to electricity or hydrogen, alongside investment in batteries and renewable generation to manage supply.
14 Comments
Yeesh. Don't bother with hydrogen. It's got too much going against it (cost to product, difficulty of storage, metal embrittlement, etc.).
Anyways, Jonesy will mine all our resources, urinate the revenue up against a wall and leave us with nothing other than some empty holes in the ground and no ideas for future prosperity.
On reading that for some reason the Pink Floyd lyric “is there anybody out there” sounded in my head but adapted as - is there anything down there. At the time of the closing off of exploration in 2018 I recall reading a comment somewhere that there were more prospectors withdrawing than newcomers? If so would that not indicate that in general there is not much optimism for locating significant further resources?
Exactly Foxy, they’d been looking for decades and not found much of economic value so the sector was done anyway. Obviously they won’t come back now despite the efforts of fossils like Jones. $200m buys a decent amount of solar these days, which works best in dry months. Every kWh of electricity produced by solar, wind and geothermal leaves water in hydro lakes for another time - this is where we should be investing
I've lived off-grid on solar, for 20+ years, so no knocker.
But no PV panel was ever made using PV panels, nor ever will. So what you are doing is spreading out the time you are using fossil energy (PV panels deteriorate slower than fuel in a drum). That is valid - and my approach.
But it means that modernity is doomed. The future construct will be much, much simpler.
I'm confused.
My understanding is solar front-loads its energy cost during manufacturing, but then repays that energy, 1 to 4 years, depending on its location and type. After that, it produces net renewable energy for another 20+ years.
So it's a net energy contributor over its lifespan, surely meaning it can support itself?
The mining/manufacturing/logistics processes needed to produce the panels (not to mention associated control gear) all require fossil fuels.
At present yes, but look how battery grunt has developed. One might expect the grunt to become enough to tale over the heavy lifting?
Lets assume that we can somehow convert every piece of equipment needed to run on electricity provided by solar panels etc ....how long do you think it may take to convert the required equipment/processes to maintain the current level of extraction/production....assuming we had enough raw materials (we dont) and all while maintaining the existing levels of output while we do so.
We are unable to maintain the existing infrastructure we have already built using proven systems with energy dense oil.
Might as well just give up then.
Or recognise the reality and seek to operate at a level that may be sustainable, or at the very least more chance of becoming sustainable.
well if solar panel eroi is 4 years and it lasts for 20 plus its theoretically possible. Chuck in some nuclear as well.
'held a permit for a promising block off Canterbury’s coast and had secured international partners to fund the first well.'
It wasn't a 'well, Dan. Ít was for an exploratory drill to see if there was/is anything there.
The Limits to Growth (manifest in the falling EROEI of fossil energy) tells us nobody will ever tap into FF off the coast of the South Island - by the time we are down to those options, we don't have an economy. Because not enough surplus energy left to 'produce' enough to maintain it.
I told the oil protesters a decade ago that they were wasting ther time - it'll never happen. So few people understand exponential growth; the last 'doubling' is actually the last half (and you aren't growing as you chew through the last half of the energy reserve, for sure).
https://www.nzherald.co.nz/business/anadarko-pulls-out-of-oil-explorati…
Homework time.
Edit - actually, Dan, your comment re 'electricity' and 'hydrogen', shows how little homework you have done re energy - despite having had it put under your nose. For the record, so-called 'renewable' electricity is really 'rebuildable'; and nobody has built a dam, a windmill or a PV panel, ex fossil energy. Nor maintained a grid, ditto. And hydrogen has such a bad EROEI, again, you're not running 'an economy' on it. Indeed, even THIS economy, running on ever-lower EROEI fossil energy, is tanking - can you not see that?
What a F that physics isn't taught to economics types. And what a F that the media choose to believe the latter. Fiercely. Dan, the global 'economy' is past-peak. Dwindling. Decaying. Despots are emerging (real some Jared Diamond, some Tainter, some Kunstler). We aren't ever going to see a return to an NZ refinery. We aren't going to see FF infrastructure built - not new, we aren't.
Natural gas as a less-polluting interim solution on the way to decarbonisation would make some kind of sense if the revenues were used to fund the infrastructure for properly managed, just transition away from petrochemical fuels.
On past and current performance, what are the odds of that?
We really are saddled with (insert adjective here) bunch of politicians.
Well look at the fuss over a few cycle lanes in Wellington and you get an idea of what a politician is up against.
China of course does not have such a problem and seem to be making great strides.
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