Editorial: Offshore oil eclipsed by fracking breakthrough

The two developments confirm there is a limited international appetite for the country's vast unexplored offshore areas.

Opinion

In matters related to oil and gas exploration, the Government is becoming accustomed to putting a brave face on detrimental developments. First, there was the decision by Petrobras to surrender its permit off the East Cape. More recently, it received just three applications for the 11 permits for deep-sea drilling in its latest block offer. Most of the permits granted were for blocks in the well-traversed Taranaki Basin, with just two going to the previously unexplored Pegasus Basin and another to the Great South Basin.

This is disappointing for a Government that has made oil and gas production a significant part of its economic strategy. The two developments confirm there is a limited international appetite for the country's vast unexplored offshore areas. These of course, have become a source of contention, highlighted by protests by Maori and Greenpeace against Petrobras' activities.

The Brazilian company said the protests were not a factor in its decision to quit New Zealand. Mediocre survey results were the prime motive. The Government, for its part, chose to focus on Petrobras' wish to be closer to home for financial reasons. But it also noted the dynamics of world energy markets, notably the surge in shale gas production in the United States thanks to innovations in fracking and horizontal drilling. This undoubtedly played a large part in the muted interest in the deep-sea permits in the block offer. Indeed, so important is this development, and so relatively cheap is the cost of extraction, that extensive deep-sea drilling may well be off the agenda for the foreseeable future.

The figures associated with extracting gas from shale are astonishing. The Bowland field, on which Blackpool sits, is thought to be big enough to keep Britain supplied with gas for 50 years. And if the US has taken the lead, other fields are scattered around the globe and ripe for exploitation. In addition, there is the prospect of massive reserves of oil shale. The Green River Formation, in the west of the US, is estimated to contain three trillion barrels of oil, three times more than the world has consumed in the past century.

The implications are enormous. Nigel Lawson, the Secretary of State for Energy in the Thatcher Government, has suggested, quite plausibly, that such figures mean the West will achieve energy independence relatively soon. Reliance on the Middle East for oil and gas will be a thing of the past. Equally, talk of "peak oil" will be redundant. In the local context, the debate over deep-sea drilling will become somewhat academic. With shale believed to be able to provide the world with about 250 years of gas supplies, there will be no incentive for it. International companies will be far more inclined to seek cheap, easily accessible oil and gas close to home than bear the substantial cost of exploring our turbulent waters.

That is not a welcome outcome in terms of economic prosperity and when much work has gone into striking a reasonable balance between exploiting mineral wealth and protecting the environment. Green activists will, of course, see things differently. But as the prospects of extensive deep-sea drilling subside, there will be a greater emphasis on fracking, another of their pet hates.

It is important, therefore, to note the Parliamentary Commissioner for the Environment's advice that this can be managed effectively provided operational best practices are implemented and enforced through regulation. That view must be heeded. The British Government has just announced a new strategy to promote the fastest practicable exploitation of its shale deposits. New Zealand must do all it can to keep pace with the new world energy dynamics.