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The Government’s proposed ban on new thermal power stations has cast a pall over the oil exploration industry, reports Hugh de Lacy. Just when it seemed New Zealand was coming into its own as a destination for global oil exploration companies, the Labour-led Government has yanked the welcome mat out from under its sole proven petroleum resource. That’s the effect on the Taranaki off-shore oil and gas resource of the Government’s plan to ban the installation of any new gas-fired power stations for the next 10 years, according to Richard Tweedie, the chief executive of the country’s biggest locally-owned oil and gas producer, Todd Energy. From the excitement last year of two international consortia taking up exploration options in the Great South Basin off Southland, the local oil industry has been plunged into gloom by the thermal ban foreshadowed in the Climate Change (Emissions Trading and Renewables Preference) Bill presently before Parliament’s Finance and Expenditure select committee. The ban will kill oil exploration in the Taranaki Basin, Tweedie says, because it will wreck the New Zealand domestic market for the gas that powers its most efficient fossil fuel electricity generation. “Who’s going to go and spend $30 million and take all the risks associated with it to drill a well when you’re either going to over-supply the gas market, or there’s no gas market of consequence to supply?” says Tweedie. The essence of the problem is that of the nearly 20 petroleum basins scattered around New Zealand, only Taranaki has been explored to any significant degree, and from the outset it has proven to be gas-prone – that is, while there are plenty of hydrocarbons under the seabed, most of them are in the form of gas rather than oil. Indeed, the only giant field so far discovered, Maui, was virtually all gas and little oil. And the problem with gas is that, unless it’s in quantities vaster even than the 3000 petajoules that was Maui, it’s too expensive to liquefy and export, so it has to be used domestically. The gas from the Maui field, and from the smaller fields that have been discovered since, has been piped to on-shore Taranaki for distribution to the main western North Island markets, of which Auckland is inevitably the biggest. The Government’s focus on renewables, to the exclusion of fossil fuels, by the thermal ban, will result in the gradual winding up of Taranaki’s formerly vigorous off-shore exploration programme, says Tweedie, resulting in a blow to the security of the nation’s power supply. He says it is happening already, with one major overseas company – which he declined to name – having instructed its New Zealand subsidiary to quietly up stakes and pull out of Taranaki. On-shore exploration in Taranaki “might dribble on,” Tweedie says, and the pending thermal ban won’t stop the ExxonMobil and OMV-led consortia from surveying and eventually drilling the Great South Basin, but its the off-shore Taranaki efforts that will be wound down. The Government’s policy appears to be, “Let’s go renewable at whatever cost, and to hell with gas exploration and gas-fired electricity generation,” says Tweedie. And this was occurring despite the fact that gas is cheaper than renewable, and that Taranaki is so close to the key Auckland market. Gas was a far better option “than a windfarm down the bottom of the South Island, where they have to upgrade the transmission links to the [national] grid and over Cook Strait,” he argues. “The simple thing right now would be for a couple of decent-sized gas-fired power stations close to Auckland. The gas industry and explorers need that to keep them probing off-shore Taranaki.” Tweedie asks why does the Government, if it thinks renewables have such a bright future, need to stimulate their uptake at the expense of gas-fired generation? And why, if the Emissions Trading Scheme in the same Bill is the competitive economy’s answer to global warming, does a key element in power generation have to be excluded from the competition? He is somewhat comforted by the fact that the Bill is only in draft form, and this is election year and is pinning his hopes on the opposition National Party throwing the thermal ban out if it comes into power. “The Nats have indicated they’re got a more open mind about it: [deputy leader] Gerry Brownlee said he thinks it’s a rather blunt instrument,” says Tweedie. “It would be helpful if the Nats came clean on it.” Meantime Tweedie has taken his opposition to the thermal ban directly to Energy Minister David Parker, telling him in a face-to-face meeting, “David, you will be worried – and I predict it will happen one day – when little old ladies in the middle of winter are having to turn their two-bar heater off.” According to Tweedie, Parker replied, “Yes, if that happens, I’ll be worried too.” But Parker, it seems, is otherwise unmoved, and Tweedie and the gas industry are left to wonder if the oil exploration and production business they’ve built up off the Taranaki coast over all these years will wither under the impact of the thermal ban. “If the Nats go with Labour on it, that will kill the Taranaki off-shore oil industry – unquestionably kill it,” warns Tweedie.
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