New Zealand Pushes Ahead to Grow Upstream Sector, Reap Economic Gains

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With New Zealand’s two main political parties – National and Labour – broadly supportive of the role that the petroleum sector can play in the local economy, industry players are cautiously optimistic about future developments in the industry, especially as New Zealand heads toward its Sept. 20 general elections to choose a new government.

While the ruling National Party remains committed to expanding New Zealand’s petroleum sector, the opposition Labour Party, which is also keen to tap the potential economic benefits offered by the industry, places greater emphasis on environmental protection.

For the present National-led government, New Zealand should make the most of its petroleum potential through environmentally responsible development, Simon Bridge, New Zealand’s energy and resources minister wrote in The Gisborne Herald July 19.

“Petroleum is currently our fourth largest export [$1.45 billion or NZD 1.7 billion in 2013], employing more than 7,000 people who earn more than twice the average New Zealand salary. The government receives approximately $680.89 million [NZD 800 million] in taxes and royalties, which helps pay for schools, roads and other essential infrastructure,” Bridge added.

Unlike the government, the Labour Party, while supportive of the oil and gas industry, however does not see New Zealand’s economic development as dependent solely on petroleum discovery.

“Most New Zealanders support oil drilling. Most New Zealanders also want to make sure that the environment is well and truly protected … We can do both of those things together. And you only need to look at Norway or Taranaki [in New Zealand] to see that’s the case,” Labour’s energy spokesman David Shearer told 3news July 12.

The relative convergence of views on the petroleum industry held by the main political parties comes at a time when New Zealand stepped up its exploration activity this year – the most active it has been in a long time.  

Offshore drilling carried out so far includes:

Despite drilling about 14 offshore exploration wells, no petroleum discovery has been made in the country yet, Shearer said.

2014 BLOCK OFFER FOR PETROLEUM EXPLORATION

In early April, the government launched New Zealand’s third annual Block Offer for petroleum exploration in eight onshore and offshore blocks – covering a total of 156,371 square miles (405,000 square kilometers).

New Zealand will award exploration permits in December after the tender for bidding closes Sept. 25. The country hopes to attract world-class companies to invest in New Zealand’s petroleum industry in its latest block offer.

“We are certain that this year’s Blocks offer announcement will build on the success of 2013 which saw three new international players entering New Zealand’s oil and gas scene,” Deborah Mahuta-Coyle, communications manager at Petroleum Exploration & Production Association New Zealand (PEPANZ) told Rigzone.

“Internationally, New Zealand is recognized as one of the world’s most promising regions for petroleum development, but we have barely scratched the surface of our potential. With 18 sedimentary basins, and only one currently producing – our country is under explored. Its potential has put New Zealand firmly on the map as a key destination for oil and gas explorers,” Mahuta-Coyle added.   

Norway’s Statoil ASA and Australia’s Woodside Petroleum Ltd. successfully participated in Block Offer 2013. Statoil was awarded the offshore Regina-Northland permit last December, while Woodside partnered with New Zealand Oil and Gas Ltd. and took a 70-percent stake in the Vulcan block in PEP 55793 offshore Taranaki Basin and in the Toroa block in PEP 55794, located in the Great South Basin south east of the South Island.

Interest in New Zealand’s petroleum potential was not confined to offers of new exploration blocks. New Zealand Petroleum & Minerals (NZP&M), manager of the country’s oil and gas resources, noted that its exhibition at the Australian Petroleum Production and Exploration Association (APPEA) Conference & Exhibition in Perth, Australia, which took place just days after Block Offer 2014 was announced, had attracted a “particular increase in interest from service industries, reflecting interest stimulated in New Zealand by Block Offers over the last three years.”

In addition, “we are looking to promote farm-in opportunities for New Zealand oil and gas companies, pursue negotiations with existing investors and raise awareness about the overall value proposition New Zealand offers,” Kevin Rolens, National Manager Petroleum & Minerals, NZP&M said in an April 17 media statement.

FIRMS SETTING UP OPERATIONS

The rise in petroleum related activities in New Zealand has encouraged some oil and gas service companies to establish business operations in the country.

One of these firms is INTECSEA – a deepwater engineering company specializing in floating systems, offshore pipelines, marine riser systems, subsea systems and Artic development – which is wholly-owned by Australia’s WorleyParsons Group. INTECSEA’s expansion into New Zealand is part of the global strategy to help boost INTECSEA and WorleyParsons’ market position in Australia and New Zealand (ANZ).

“We are excited to officially include INTECSEA New Zealand as part of the ANZ subsea and floating systems business offering. Local presence of a WorleyParsons and INTECSEA branded office demonstrates our commitment to generating a full wellhead to market offering for our customers,” Bernard Mackin, senior vice president for INTECSEA ANZ said in a June press release.

Better prospects for New Zealand’s petroleum industry also led Swift Worldwide Resources, a Houston-based company providing manpower resources to the oil and gas industry, to open an office in New Plymouth, Taranaki. The new office will focus on providing expert engineers for exploration work and support drilling operations in New Zealand.  

“The family of ‘Swifties’ is looking forward to becoming part of the close-knit oil and gas industry in ‘the ‘Naki’ [i.e. Taranaki] and breathing new energy into the area,” Tobias Read, Swift CEO remarked, as reported in New Zealand’s media Scoop.

EXPLORATION HITS AND MISSES

While interest in exploration activities in the established Taranaki Basin remains relatively high, other parts of New Zealand are starting to gain the attention of petroleum firms venturing into the country, especially when more relevant information becomes available.

“Past Block offers have seen companies venture outside of the Taranaki region – the East Coast, Northland and Southland. Seismic surveying is planned for this summer, once completed and analyzed, results should give a better indication of the petroleum potential in those new basins,” Mahuta-Coyle told Rigzone.

Mosman Oil and Gas Ltd., Australia’s oil and gas exploration and development firm, was one of the new entrants venturing into New Zealand last year, when it secured PEP 38526. Mosman recently made two oil discoveries – Cross Roads-1 and Crestar-1 – in the onshore permit – now called the Petroleum Creek Project – that is located near Greymouth on the South Island.

If developed, the Cross Roads-1 discovery would be the first commercial production of oil in New Zealand outside of the Taranaki region, Bridges said, as quoted in the June 24 edition of local media Stuff. That however appears to be some time away as Mosman has indicated in late July that more appraisal drilling needs to be carried out.

Meanwhile, industry efforts to search for hydrocarbon in New Zealand may not always produce the desired outcome. In June, Canada’s New Zealand Energy Corp. (NZEC) relinquished the Castlepoint and Wairoa permits in the East Coast Basin of the North Island to focus its resources on the Taranaki Basin permits which offer near-term production potential and possibly enabling revenue to be generated earlier.

“Relinquishing the Castlepoint and Wairoa permits has reduced our work program commitments by $12.9 million [CAD 13.9 million] for 2014, and $50.4 million [CAD 54.3 million] over the life of the relinquished permits,” NZEC CEO John Proust commented in a press statement.  

Others like Anadarko, which drilled the Caravel-1 prospect in the Canterbury Basin off the South Island in February, has not decided whether to continue with exploration in New Zealand as the company is still analyzing the drilling data. Anadarko encountered natural gas shows at the Caravel-1 well.

Through exploration and development activities, the petroleum industry had made an increased contribution to the New Zealand economy, according to latest data from the Ministry of Business, Innovation and Employment. Petroleum exploration and development expenditure reached $1.26 billion (NZD 1.577 billion) last year, 7 percent more than in 2012. This amount may rise further if New Zealand succeeds in getting more international participation in the sector, including through the 2014 Block Offer.

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