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Beefed-up Crown Minerals to chase deep-sea hydrates

Monday 20th September 2010

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New Zealand oil and gas exploration will get a substantial boost in government resources, including funding to chase deep-sea methane hydrates that have yet to be commercially exploited anywhere in the world.  

Energy and Resources Minister Gerry Brownlee announced the initiatives this morning at the biennial Petroleum Conference in Auckland, this morning.

Also announced were a revamp of the Crown Minerals Act, a new plan to manage the country's petroleum resources as an integrated portfolio, and the impending release of a study valuing the current and likely future value of royalties from oil and gas production.

Brownlee also made a plea for New Zealanders to consider the potential for an accelerated oil and gas discovery programme to be achieved in an environmentally responsible way.

"People need to shift their thinking on exactly this issue," said Brownlee.

"The development of New Zealand's natural resources and the protection of the environment are not mutually exclusive. It is only through a strong economy that New Zealand can afford the expenditure required to look after and improve our environment."

He foreshadowed a major role for the newly established Environmental Protection Agency in managing the new environmental regime being worked up at present for the Exclusive Economic Zone which, after recent extensions, is now the fourth largest in the world.

In a speech updating last year's Petroleum Action Plan, Brownlee said the government had decided to invest in "a larger and more high profile Crown Minerals group within the Ministry of Economic Development".

"The new unit will have a much more commercial and strategic approach", a substantial increase in staff, greater industry experience, increased technical capacity and increased resources for compliance and permitting.

An advisory board of independent, senior executives with local and international experience would oversee the unit, which would be responsible for a new, strategic "portfolio" approach to New Zealand's 15 potentially hydrocarbon-bearing basins, of which only the Taranaki Basin is currently producing oil and gas.

Initial proposals for such a strategy are due next month, Brownlee said.

Meanwhile, he expected to release an "updated and streamlined" Crown Minerals Act to Parliament before Christmas, for passage by July next year.

New rules requiring greater disclosure of reserves information by oil and gas industry participants were on track for announcement by the end of the year, he said.

No significant changes are intended for the current royalties regime, although a study of the current and future potential of petroleum and minerals royalties, the first since 1998, would be released shortly.

In a surprise move, Brownlee also announced the government would develop a strategy for accelerating understanding and possible mining of huge deep-sea deposits of methane hydrates - a relatively novel resource that is starting to attract international interest but has yet to be commercialised.

Methane hydrates can be converted to natural gas and transport fuels, and are likely to cause controversy both because they require deep-sea extraction methods and because methane is one of the most potent greenhouse gases.

"Subject to the technology being available to commercialise these resources, they could provide either a long term underpinning of energy security for the country, or even a major Liquefied Natural Gas export opportunity."

New Zealand's methane hydrates are "potentially some of the most accessible in the world as they occur close to shore and in water depths from only 1,000 metres, which is much shallower than those identified in areas such as India, the Gulf of Mexico, Japan and Korea."

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