Oil find rich for all NZ

By Mark Reynolds

Between the lines

Several investors were disappointed by this newspaper's front-page headline yesterday.

"Oilfield bonanza for NZ's rich," it, drawing on the fact that investors including Sir Michael Fay, David Richwhite and the Todd family were shareholders in a big oil find near Taranaki.

But as Herald reader John Hunt points out, a billion dollar oil field should be celebrated regardless of who owns the field.

"It is great news for New Zealand, it creates wealth, it creates jobs," Mr Hunt said. "Why don't you actually highlight the fact that it is good news for all New Zealand?" he asked.

Mr Hunt, who happens to be an investment fund manager, is right. The news that the Maari oil field off the coast of Taranaki holds 40 million barrels of crude should be celebrated.

Shell Petroleum, which owns 49 per cent of Maari and operates the field on behalf of its other partners Cultus and Todd Petroleum, expects $US100 million will be spent to develop the prospect. The partners might spend $US200 million, if they find the field warrants new oil-industry infrastructure in Taranaki.

Shell has agreed to invest here even though it is slashing its international exploration and development budget because of low oil prices. In Australia, for example, Shell has several promising prospects but will cut its exploration budget by $A100 million, or about a third, this year.

But it will invest in Maari ahead of other potential development prospects in part because our government welcomes foreign investment. We have a fair taxation regime with relatively low royalty rates on oil finds, and the Government's control of inflation means costs can be budgeted with some certainty.

The commitment Shell and its partners are showing to New Zealand will likely add 150-200 direct jobs in the oil sector next year, plus several times that number of indirect jobs.

The development will be New Zealand's first bonafide offshore oil development rather than primarily a gas field. That will enhance investor perception of the exploration potential here because oil is much easier to market than gas.

Developing Maari will also build local expertise in the oil industry and that will inevitably have a wider spinoff in developing a more knowledgeable energy sector.

These benefits are on top of the obvious value that $1 billion of oil will have on our nation's balance of payments.

The Maari find would not have occurred without the financial commitment of some wealthy individuals who own shares in Cultus and the family-controlled Todd Petroleum, to say nothing of the hundreds of small investors who are Cultus shareholders.

As Mr Hunt suggests, we should celebrate the success of any investors who are prepared to risk their capital in such ventures.