Paul Thomas: Oil may make us rich - if we can handle it

A US money manager believes New Zealand could be set for an oil boom within a decade. Photo / Hawke's Bay Today

On the face of it New Zealand and Norway have a lot in common: small, sparsely populated countries - there are 4.9 million of them, almost 4.4 million of us - with fiords.

One big difference is Norway has a $600 billion sovereign wealth fund and we don't.

While New Zealand borrows to stay afloat, as Energy and Resources Minister Gerry Brownlee put it recently, per capita Norway has the world's largest capital reserve.

Norway is one of the world's leading oil and natural gas producers. In 1990, 20-odd years after oil began flowing from the North Sea, the Norwegians decided to start planning for the day the oil and gas runs out. (Well over a third of its reserves have already been extracted.)

The Government created a fund, administered by the central bank, which used surplus oil revenues, mainly from taxes, to buy stocks and bonds.

It's now the world's second largest state-owned wealth fund (Dubai's is the biggest) and is projected to almost double in value by 2014.

When the fund was worth a mere $200 billion, US business columnist Daniel Gross pointed out it enabled Norway to have the benefits of socialism without the chronic problems besetting other European nations with cradle to grave welfare: unemployment, low savings, high national debt.

You're probably thinking lucky old Norway. But if the bullish projections for our energy sector are borne out, it could be lucky old New Zealand.

US money manager William Buechler believes New Zealand is set for an oil bonanza that will be a country-changing event, eclipsing Britain's North Sea oil boom.

Don Elder, chief executive of State-owned coal miner Solid Energy, told the petroleum conference in Auckland this week if our vast coal and methane hydrate deposits can be converted into transport fuel and natural gas, all our troubles will be over.

Within a decade Solid Energy aims to be generating up to $10 billion a year in export revenue. When discussing the maximum potential value of these resources, Dr Elder talked in trillions which isn't a number we hear around here too often.

But there's another big difference between Norway and New Zealand: they're Scandinavians and we're not. Scandinavians are renowned for the pragmatic and co-operative way they go about things. They're tolerant but seem to have a highly developed sense of the common good.

They distrust ideology and don't think compromise is a dirty word if it produces a good outcome for most citizens.

If it turns out New Zealand really is sitting on a treasure trove of energy resources, what's the likelihood of the various political parties and interest groups engaging in a constructive discussion with a view to ensuring the national interest is served?

For a start there would probably be a determined effort to strangle the discussion at birth by insisting a petro-economy is incompatible with our clean, green, nuclear-free national identity, although these have hardly stood the test of time in terms of defining who we are.

If we actually had the discussion, the chances are it would swiftly degenerate into name-calling and obstructionism, so by the time we finally got around to extracting the stuff, someone would have invented an engine that can run for 24 hours non-stop on a teaspoon of seagull poo.

Maybe that would be for the best. After all, we're always hearing money can't buy happiness.

This axiom has always struck me as a secular version of the biblical claim that it's easier for a camel to pass through the eye of needle than for a rich man to enter the kingdom of heaven. Both attempt to soften the blow of doing it tough in the here and now with a specious consolation prize.

After surveying 16,000 people a few years ago, two American economists concluded that going from having sex once a month to once a week provided as much happiness as a $60,000 pay rise.

Even it that's true - and there are a few variables at play in that premise - you could turn the equation around: a $60,000 rise made people as happy as a big improvement in their sex lives.

More believable are the just-released findings of a survey of 450,000 Americans which suggest the more you earn, the happier you are, up to $100,000. After that the effect levels off.

Given the national wage is about $50,000, that's a good reason for being open-minded about oil.