Resources Minister Shane Jones wants to assure oil and gas companies New Zealand is open for business. Photo / Mark Mitchell
Resources Minister Shane Jones wants to assure oil and gas companies New Zealand is open for business. Photo / Mark Mitchell
National and Act are willing to consider offering oil and gas companies compensation should they be subject to another ban by a future Government.
The Minister for Resources, NZ First’s Shane Jones, is looking into creating a type of bond scheme to give companies prevented from bidding for new explorationpermits by the previous Government the confidence to invest in New Zealand again.
“I’ve asked officials to help overcome perceptions of sovereign risk,” Jones said, acknowledging he was only in the initial stages of investigating whether the Crown’s balance sheet could effectively be used to insure oil and gas companies against regulatory risk.
While National and Act strongly oppose “corporate welfare”, they are open to putting taxpayer money on the line to give oil and gas companies surety they won’t have the rug pulled out from beneath them again.
“The coalition Government is committed to reversing the oil and gas exploration ban, which will help support the uptake of more renewable electricity generation and reduce our reliance on imported Indonesian coal,” Energy Minister and National MP Simeon Brown said.
“Minister Jones is working hard to restore investment confidence in New Zealand’s resources sector, and I understand he is considering a range of options as part of this work.”
Meanwhile, Act energy and resources spokesman Simon Court said, “Act would have to see the specific shape of any proposed bond scheme. Broadly, we support moves to give investors greater regulatory certainty as they consider whether to bring wealth into New Zealand.”
Court rejected the Opposition’s suggestion that “compensation for a regulatory harm equates to a subsidy”.
Labour’s energy and resources spokeswoman Megan Woods argued compensation would be akin to a subsidy.
She accused the Government of being all over the show, scrapping the taxpayer-funded Government Investment in Decarbonising Industry (GIDI) Fund, on the basis of it being “corporate welfare” while considering de-risking activities of big oil and gas companies.
“Shane Jones wants to step back into a past that doesn’t exist anymore,” she said.
Woods stood by the 2018 decision of her Government - which NZ First was a part of - to ban new offshore oil and gas exploration.
She noted existing permits were honoured, and oil and gas companies with existing operations in New Zealand could progress from exploration to production. They just couldn’t bid to explore in new areas.
Labour's Megan Woods says Shane Jones wants to step back into a past that doesn’t exist anymore. Photo / Mark Mitchell
Woods also didn’t buy Jones’ sovereign risk argument, saying the current Government was creating uncertainty by changing policies implemented by Labour.
She accepted New Zealand needed to use gas while it transitioned to cleaner forms of energy, but said the Government’s championing of the industry set the country back in its various commitments (including in newer free trade agreements) to reducing emissions.
Woods accused Jones of bowing to the requests of the oil and gas industry.
John Carnegie - the chief executive of the energy industry group Energy Resources Aotearoa - talked up the chilling effect of the ban on new exploration.
He accepted that around the world, oil and gas companies face regulatory risk, as efforts are under way to mitigate the impacts of climate change. Indeed, talk of stranded assets predates the oil and gas exploration ban.
Nonetheless, Carnegie said oil and gas companies genuinely viewed investing in New Zealand as high-risk.
“New Zealand was known for its below-ground risk. Now it’s known for its regulatory risk,” he said.
Carnegie didn’t believe establishing a bond scheme for the oil and gas industry would prompt other sectors to ask the Government for similar assurance.
“I don’t think any other sector faces the nature and magnitude of the risks that have almost been baked into the system,” he said.
Asked if there was any appetite among oil and gas companies to embark on new ventures in New Zealand, as the most productive wells were reaching the end of their lives, and the cost of building infrastructure to support production in new areas could be astronomic, Carnegie said a few companies were in fact bullish on New Zealand before the ban.
He pointed to New Zealand Oil and Gas and Beach Energy eyeing the Barque prospect off the coast from Oamaru, as well as Beach Energy, OGOG, and Discover Exploration looking at the Canterbury Basin.
New Zealand Oil and Gas chief executive Andrew Jeffries, in 2021, explained the company was surrendering its permits for a range of reasons.
“Adverse regulatory settings for offshore exploration; the dry hole at OMV’s Tawhaki permit; the recent announcement terminating Wherry-1 drilling; and the effects of Covid on drill rig costs and availability have formed a perfect storm, making the task of finding suitable partners in the required timeline impossible,” Jeffries said.
Carnegie said there was plenty of resource; New Zealand just needed the investors.
Coming back to Jones’ bond idea, Carnegie said the Government needed a set of responses that were proportionate to the problem.
He didn’t know where Jones got the bond concept from, but believed the minister was on the right track.
“We’re pleased to have a champion in the new minister.”
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
