Grant Bradley

Aviation, tourism and energy writer for the Business Herald

Slip for oil and gold production

Drop bucks a decade-old trend in which exports from the petroleum and minerals sector have tripled.

Photo / NZ Herald
Photo / NZ Herald

A Government report shows oil and gold production has slipped sharply, bucking a decade-old trend in which exports from the petroleum and minerals sector have tripled.

Despite the Government identifying the sector as a key part of New Zealand's economic growth, those in it are more concerned than average businesses about regulations hampering innovation.

The Ministry of Business Innovation and Employment report finds that oil production last year dropped 13 per cent from 2011 to hit its lowest level in the past five years.

New Zealand's mean production rate was 40,300 barrels per day in 2012, down from 58,600 barrels per day in 2008 when the Tui field offshore from Taranaki was at its peak.

Petroleum royalties slid to $333.7 million - the lowest level in five years - although they returned $1.8 billion over that period.

Gold production is down from 2010 highs of nearly 13,500kg to 10,164kg last year as mining at Newmont's Waihi mine declined.

Total revenue in the petroleum and mineral sector was $7.472 billion in 2011, up slightly from the previous year but more than $1 billion less than 2009.

In 2008 revenues soared by 56 per cent on the previous year, plunging to minus 15 per cent in 2010. Earnings growth for all businesses are more even - 7 per cent growth in 2008 and minus 4 per cent in 2010.

A survey of 96 exporting firms on barriers to growth found just 20 per of them found exchange rate volatility a factor - half of the average of all New Zealand exporters - and were less concerned about distance from markets. They were most concerned about inability to rapidly increase supply (40 per cent).

Firms were less concerned about barriers, including lack of appropriate personnel, management resources and development costs than other businesses, but more concerned about Government regulation (9 per cent) than others (7 per cent).

Energy and Resources Minister Simon Bridges said the Government had taken steps to reform the Crown Minerals Act and Exclusive Economic Zone law.

"I think the tension does reflect the social contract that the Government believes in - yes, we want to see more development but we want to see the highest standards."

Falling oil production reinforced the need for exploration which would hit new levels this summer, he said.

"If you look at the figures over the last decade there's been exponential growth but production was down last year - to see production growth you've got to explore and on some figures this coming summer will be the biggest exploration season ever."

The industry is expected to spend between $600 million and $755 million on oil and gas exploration with 13 exploratory wells being drilled offshore and 27 onshore.

The report also shows gas production rising, up 7 per cent in 2012 compared with the year before, driven mainly from an increase in production from the Maui field from the preceding year. Aggregate production is sharply down. Although figures from last year have not been finalised, production is down 27 per cent on 2011.

Petroleum Exploration and Production Association chief executive David Robinson said the report showed the sector generated $333 per hour worked, making it the most productive in the economy but there was room to grow through further investment and exploration.

- NZ Herald

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