Major oil explorers assemble for NZ pep talk

Monday 3rd October 2011

A high-powered group of global oil and gas exploration companies, including Chevron and the Chinese national oil company, have converged on Wellington today for a targeted push to encourage new interest in the country’s under-explored frontier basins.

New Zealand Petroleum and Minerals, a division of the Ministry of Economic Development, is using the international attention of the Rugby World Cup and the recently launched New Zealand Energy Strategy to acquaint potential explorers with the new regime for selectively opening up offshore zones for exploration.

Among the dozen or so participants targeted for the strategy session are the super-major global oil company Chevron, owner of the Caltex retail chain in New Zealand but not a current explorer or producer in this country.

Also involved are two large “super-independent” players, ENI from Italy and U.S. global player Conoco-Philips.

Other American explorer-producers represented at the one day strategy session are Murphy Oil Corporation, Apache Corporation, and Anadarko Petroleum Corporation, which has deep-water exploration permits in the Taranaki Basin and the Canterbury Basin.

Also attending are the China National Offshore Oil Corp. (CNOOC), the Norwegian state oil company Statol, and the Korea Gas Corp., known as KoGas.

A key element of the new energy strategy, the new approach will exclusively use the competitive Block Offer method for allocating petroleum exploration rights, in contrast to the first-in, first-served “priority in time” approach.

The policy is designed to channel investor interest into areas of highest prospectivity, focus government investment to those areas identified as of most interest to potential explorers, and to allow politically sensitive territories to be more carefully managed than in the past.

Facilitating discussion to “test drive” the NZPAM’s new competitive bid round process for awarding exploration rights is global oil industry strategic consultant Duncan Clarke, of Global Pacific & Partners, who also assisted in selecting attendees.

“From the New Zealand point of view, they are very open,” he told BusinessDesk. “They’re asking ‘what do we have to do to get you here?’”

While a politically stable and potentially very prospective territory, New Zealand opportunities were nonetheless very much frontier and often deepwater opportunities, meaning the country needed to attract high quality, experienced operators who could withstand a rigorous approvals process and had high environmental standards.

The new policy allowed “shaping of bid rounds over the next decade or more”, and a “mix and match approach for different kinds of opportunities.”

“That’s the intelligent way to approach the industry,” Clarke said, who said New Zealand’s six million square kilometre Exclusive Economic Zone represented an enormous opportunity, at one-fifth the size of continental Africa.

He dismissed concerns about the environmental dangers of deepwater drilling as “illogical”, saying the same argument could be equally applied to shallow water drilling.

“The big issue is unlocking national wealth. It’s a vote for poverty not to do it. Maybe New Zealand is rich enough to afford that, but I doubt it. In the developing world, no one is in the position to indulge that view.”

High quality international oil companies now sought to apply the same environmental and operational standards wherever they operated, as they faced reputation risks globally, along with potential destruction of shareholder value if things went wrong.

Part of New Zealand’s opportunity lay in its high potential for natural discoveries. With the development of a global market for liquefied natural gas and the proposed shutdown of Japan’s nuclear power industry after the Fukushima plant disaster, gas demand and prices were on the rise globally, said Clarke.

Major oil discoveries in New Zealand would also be handily placed for export to Australia, where there is plenty of gas but relatively little locally produced crude oil.

BusinessDesk.co.nz

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