Govt officials estimate cost to NZ of ban on new offshore oil and gas exploration at $7.9 billion

The day in April when Prime Minister Jacinda Ardern announced the ban on new offshore oil and gas exploration permits with Megan Woods, Shane Jones and James Shaw. Photo / Mark Mitchell

Government officials have estimated that the cost to New Zealand of banning new offshore oil and gas exploration permits will be $7.9 billion between 2027 and 2050.

The advice is contained in a just released regulatory impact statement (RIS) by officials from the Ministry of Business, Innovation and Employment (MBIE).

It was previously known that officials opposed the move, but the estimated cost to the Government is new.

The $7.9 billion estimate is the midpoint of a series of estimates that vary widely with different variables but represents a medium exploration scenario.

Foregone revenue to New Zealand could be higher under high exploration, $14 .3 billion, or as low as $2.7 billion with low exploration.

But Energy Minister Megan Woods contests the estimates.

Her statement on the bill, says the modelling by officials was based on a GNS report for inputs and the report itself expressed caution about relying on resource estimates, saying "this study attempts to qualify what is almost unquantifiable."

Woods' statement also said the model used for estimating the cost was unable to take into account any potential from existing exploration permits, covering 100,000 sq km.

The new advice has been released alongside the Crown Minerals (Petroleum) Amendment Bill which gives effect to the ban announced in October by Prime Minister Jacinda Ardern, Regional Economic Development Minister Shane Jones and Climate Change Minister James Shaw.

The ban in April took the industry by surprise because it was not part of any confidence and supply or coalition agreement and had not been explicitly promised by Labour during the election campaign.

However Ardern said it was an important step to address climate change.

She promised that the existing 31 permits covering an area of 100,000 square kms would be protected and said they could run as far out as 2030 could go an additional 40 years.

The papers reiterate the advice to Government that the ban could actually increase global greenhouse gas emissions by transferring production to other [less efficient] countries.

It also says there is risk that the change would result in uncertainty in the petroleum exploration and production companies and gas user which could result in investments not proceeding.

National energy spokesman Jonathan Young said the ban decision had been a rushed job and would cost the Government and oil companies tens of billions of dollars.

"And that's before you take into account the loss of jobs and economic impact in Taranaki communities in particular.

"MBIE believes that the change may increase the price of gas and electricity. MBIE advise that the change may actually increase global greenhouse gas emissions, as we just shift to importing gas from overseas.

"No new discoveries have yet been made and known gas reserves are forecast to fall below demand from 2021 onwards and reduce significantly each year, without a significant commercial discovery. "

Greenpeace said it was disappointed that the MBIE was opposing the amendment and it could be known as the "Ministry of oil."

"They're essentially operating as the 'enemy within' by working with the oil industry to stop progress on climate change," said executive director and former Green co-leader Russel Norman.

"The Regulatory Impact Statement that MBIE produced to go with the amendment bill could have been written by the oil industry," he said.

"MBIE hasn't considered the economic and human consequences of climate catastrophe in their benefits and costs analysis - just like the oil industry they serve. "