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With the latest award of an offshore exploration permit to a government-owned multi-national energy company, Bryan Gundersen and Phillipa MacDonald from Kensington Swan view the merits of a national (state-owned) exploration and production company.
In this regard, one of the Government’s key aims is to ensure that New Zealand is a highly attractive global destination for petroleum exploration and production investment. Consistent with the Action Plan, on June 1 this year, Brownlee announced that Petrobras International Braspetro B.V (Petrobras), a Brazilian multinational energy company, had been awarded an offshore petroleum exploration permit in the Raukumara Basin. Aside from the fact that a major global exploration company has successfully been attracted to our waters in line with the Action Plan, Petrobas’ entry into our oil and gas sector highlights another interesting issue – the merits of a national (state-owned) exploration and production company. To call Petrobras an energy heavy-weight is an understatement. The company is Latin America’s largest company by revenue and eighth largest company in the world. Petrobras has a presence in 28 countries and has planned investments in the order of US$174.4 billion by 2013. What is so interesting about Petrobras, is the fact that it was originally, and still is to a large degree (over 50 percent), owned by the Brazilian Government. Petrobras has been extremely successful in diversifying its operational and asset-owning portfolio so that it is now active in the areas of refining, oil and natural gas trade and transportation, petrochemicals (and derivatives), electric energy (wind and thermoelectric), biofuels and ethanol, as well as the traditional exploration and production of oil and gas. The company’s expertise in offshore drilling technology and production in deep and ultra-deep oceans is also very well recognised. OMV provides another example of a successful and dominant nationally-controlled exploration and production company operating in New Zealand. Like Petrobras, OMV had its beginnings as a state-owned company, which morphed over time into a successful industrial corporation. OMV also has a very successful international portfolio; with a focus on petroleum exploration and production, gas and electricity, refining and marketing, renewable energy (through its Future Energy Fund) and other petrochemicles. OMV has been active in the New Zealand scene for sometime, currently holding seven petroleum exploration permits in total; four in the Taranaki Basin, and three in the Great South Basin. Should New Zealand follow the Petrobras and OMV examples? McDouall Stuart in a report titled Stepping Up, commissioned by Brownlee in June 2009, concluded that a partially privatised, government-backed oil and gas exploration company is a practical option for improving the level of activity in the New Zealand oil and gas sector. The report noted that the New Zealand government was already involved (directly and indirectly) in the oil and gas sector by way of policy development, asset ownership and investment, and recommended that further integration of governmental participation be explored. According to this report, “the active management of direct involvement by government in field development would likely result in the establishment of an investment vehicle mandated to make merit-based investment decisions in support of specific exploration opportunities… [which] will by definition be in the business of picking winners.” As the examples of Petrobras and OMV show, with the careful consideration of issues such as business structure, level of governmental investment and strategy, such a company could have a meaningful impact on the health of New Zealand’s oil and gas sector. The report also recommended the extension of the domestic geoscientific mapping programme to lift the understanding of, and access to, pre-competitive hydrocarbon data in New Zealand – something that is essential in attracting international energy players. The government has already acted on this recommendation with the implementation of the Petroleum and Geosciences Initiative (PEGI) Project in May 2010 to improve knowledge of our petroleum resources. Ultimately, there is real merit in exploring the option of a national oil company. The Report by McDouall Stuart clearly recognised the benefits of having governmental participation at this level. However, the success of Petrobras and OMV in the global energy sector show that such an organisation may need private equity participation and a diverse portfolio of investments and revenue streams (and therefore, risk mitigation) before investing in high risk exploration.
Energy NZ Vol.4 No.4 July-August 2010 |
In November 2009, Energy and Resources minister, Gerry Brownlee, announced the Government’s Action Plan for unlocking and maximising New Zealand’s petroleum potential, with a specific focus on exploration of offshore deepwater basins.