20 Feb 2019

Oil industry backs report saying exploration ban could cost $28bn

12:15 pm on 20 February 2019

The oil industry is defending a report that estimates the cost to the economy of the government's oil exploration ban is $28 billion.

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The Pohokura platform off the coast of North Taranaki. Photo: Supplied

Greenpeace New Zealand said the figures were based on on false assumptions and alternative facts.

The report commissioned by the Petroleum Exploration and Production Association (PEPANZ) said the ban on new oil and gas exploration would cost the New Zealand economy $28bn by 2050.

It said exports were likely to fall by between and $3bn and $10bn, and the impacts would be particularly severe in Taranaki where the local economy could shrink by $16bn-$40bn. The study was carried out by the New Zealand Economic Institute for Economic Research (NZIER).

Read the full report [https://www.pepanz.com/assets/Uploads/NZIER-Economic-impact-of-ending-new-oil-and-gas-exploration-permits-outside-onshore-Taranaki-February-2019.pdf


Minister for Energy and Resources Megan Woods said the report was based on disputed figures put out by Ministry of Business Innovation and Employment (MBIE) last year.

Ms Woods said the figures had left out more than 100,000 km/sq of exploration area that was protected under the government's decision. She noted that operators had recently announced an extra $500 million for gas exploration the Taranaki region.

But association chief executive Cameron Madgwick told Morning Report he was very confident in the numbers in the NZIER study.

"What we've used is government data put through an economic model which uses Statistics NZ data to supplement it," he said.

Looking at three scenarios, MBIE came up with a range of $1.2bn-$23bn as the potential impact. The Cabinet paper cautioned that the study attempted to quantify what was almost unquantifiable, and the results must be treated with caution.

Mr Madgwick said any projections were uncertain, but that was simply an argument for getting better figures.

"That doesn't undermine the validity of a study that seeks to quantify - using the same three scenarios - the full economy cost rather than just the cost to the Crown.

"The Cabinet paper only addressed the loss of taxes and royalties to the Crown based on those three scenarios, and they were low, medium and high scenarios, so somewhere within those modelling ranges you would expect to be the outcome.

"If there is this uncertainty, if there's no better data in place, that's not a very good basis to make a large decision of this nature and it is time to have a rethink of that. Ask somebody independent to actually do some analysis."

Mr Madgwick said Austrian-based oil and gas company OMV's planned $500m exploration investment was catered for its existing permits.

"What is modelled is there'll be no new permits from now offshore and as they trail off there'll be no new investment on those

He said the government's assertion oil and gas drilling could continue until the 2060s assumes existing permits result in successful finds that go into production and that permits are renewed and was "not the most likely scenario".

Greenpeace climate and energy campaigner Amanda Larsson said the report was simply a rehash of old modelling that failed to take into account the cost of climate change, or the value that new clean energy industries would have in the transition away from fossil fuels.

"It assumes we have a choice about whether or not we respond to climate change. We don't. We have just ten years to cut our emissions in half if we want to avoid passing the 1.5 degree warming threshold for human safety."