Greymouth Petroleum, the second-largest New Zealand-based oil and gas producer, has started court action challenging the Government’s plan to ban new offshore exploration permits.
The company, whose assets include the onshore Turangi, Onaero, Kowhai, Radnor and Ngatoro gas fields, says the Government’s April 12 announcement halting further offshore block offers is unlawful.
Chairman Mark Dunphy said the Crown Minerals Act requires the government to consult on any planned changes – which it had not done. And the recent proposal by Energy and Resources Minister Megan Woods to sustain activity by extending drill or drop deadlines for existing permit holders risked adding to the “clouded muddle” of process explorers and producers now face.
Greymouth filed its claims with the High Court in April, but it became public through the Crown Minerals (Petroleum) Amendment Bill process. The Government is rushing the bill through Parliament to effect its exploration ban, with the public having only until October 11 to put in a submission. The legislation, if passed in its present form, will also prevent any onshore acreage being offered outside Taranaki and could also end onshore Taranaki exploration offers after 2020.
Dunphy says Greymouth wants the case to be heard as soon as possible, but it’s unlikely to be this year.
He says there isn’t enough gas being produced in New Zealand, with production having fallen at the Pohokura field earlier this year, and again currently.
“I think people are coming to terms with the real problem, which is that New Zealand is short of gas,” he says.
The Government says the ban is necessary as part of its climate change strategy and will ensure a long-term transition away from the use of fossil fuels. Woods believes the existing 100,000 square-kilometres of exploration footprint is sufficient to ensure long-term gas supplies for industry and electricity generation.
But critics say the minister doesn’t understand the low probabilities involved in offshore exploration, and that the ban has already slowed investment. They argue much of the present offshore acreage is likely to be surrendered as permits reach their drill-or-drop deadlines over coming years.
“The real problem is that New Zealand is short of gas.”
Ministry of Business, Innovation and Employment officials have also come out against the ban saying that long-term it was likely to result in an increase in global greenhouse gas emissions as locally produced methanol, urea and steel is replaced with overseas product, often from countries and industries using coal rather than gas.
They also estimated the potential loss in Crown revenue out to 2050 at between $1.2 billion to $23.5 billion.
Dunphy says the government appeared determined not to consider what the “top end of that curve” really meant. And the public, who struggle to visualise a million dollars let alone a billion, would find it hard to believe that any government would take a decision to potentially forego $23.5 billion in revenue, he said.
Even if the cost to the Crown is $1 billion, Dunphy says it still leaves New Zealand “perilously” short of gas.
Greymouth, formed in 2000, specialises in supplying low-cost gas to industrial and commercial consumers. Its clients include producers of fertiliser, petrochemicals, wood products, meat products, health foods, beer, sugar and glass.
Dunphy says his company’s clients rely on gas and their processes don’t lend themselves to electrification or use of other renewables. Without local gas supplies they would have to look at imported LPG, which would be “out of the question”, he says. Another option would be for New Zealand to start importing liquefied natural gas, which would be just as expensive.
He claims under that scenario most of his clients would likely shut down. “This is really, really backwards thinking,” he said of the exploration ban.
“What you will find is that imports will end up replacing our manufactured goods sector.”
Greymouth is also fighting its unsuccessful bid for acreage in the 2017 block offer. Dunphy says the company bid for an offshore coastal permit, but won’t say where.
He says the application had been declared compliant and appeared to be proceeding normally, but that changed with the new Labour government coming into power.
The only acreage awarded on December 20 was a 547 square-kilometre permit granted to Westside New Zealand. The near-shore permit abuts the onshore Kauri and Rimu fields the company operates on the South Taranaki Coast near Hawera. Westside, which also operates the Meridian gas field in Queensland, is owned by China-based Landbridge Group.
Dunphy says he isn’t concerned if bidders are Chinese or Russian, so long as they are judged on the quality of their work programmes and New Zealand operators aren’t given the “raw prawn.”
He says Greymouth’s work programme was better than that proposed by Westside, and the acreage involved was far less “complicated.”
Dunphy said the company is “not ‘big oil’,” and had not wanted to go to court, but had not been able to resolve the issues with the minister or officials.
“We are hardworking New Zealanders who are proud of what we do. New Zealand petroleum companies rely on the block offer process to ensure transparency, contestability, maintain competitiveness and grow their businesses.”