New Zealand revoking offshore exploration ban amid gas crunch fears

After New Zealand’s more than 4 million km2 exclusive economic zone has been off limits for further fossil fuel exploration permits for six years, the country’s government is setting the stage to lift the ban on offshore oil and gas exploration with a suite of proposed changes to an energy bill in a bid to stave off energy security woes due to looming gas supply shortages.

Rig approaching Taranaki coast (for illustration purposes); Source: Greenpeace

The ban on exploration outside onshore Taranaki, which dealt a blow to the fossil fuel industry, was put in place in 2018 by Jacinda Ardern, the country’s Prime Minister at the time, following the acceptance of Greenpeace’s petition signed by 50,000 New Zealanders.

The country’s new government officials now believe that reversing the ban on petroleum exploration beyond onshore Taranaki, which is part of proposed amendments to the Crown Minerals Act, will enable the country to come to grips with the energy security challenges posed by the decline in natural gas reserves.

Shane Jones, New Zealand’s Resources Minister, commented: “When the exploration ban was introduced by the previous government in 2018, it not only halted the exploration needed to identify new sources, but it also shrank investment in further development of our known gas fields which sustain our current levels of use.

“Without this investment, we are now in a situation where our annual natural gas production is expected to peak this year and undergo a sustained decline, meaning we have a security of supply issue barrelling towards us.”

While the ban removal is seen as a step in the right direction by many, it is believed that rebuilding investor confidence in New Zealand’s petroleum sector will require more than that. In light of this, the Coalition government is proposing further changes to re-establish the country as “an attractive and secure destination” for international investment, as agreed in the New Zealand First and Act coalition agreements with the National Party.

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Jones explained: “Some of our current settings are a barrier to attracting investment in exploration and production because they are overly costly and onerous on industry. Some obligations lack necessary flexibility, and compliance obligations are uncertain and unclear.

“As well as removing the ban, we are proposing changes to the way petroleum exploration applications are tendered and allocated, aligning the petroleum decommissioning regime with international best practice, and improving regulatory efficiency.”

The country’s government is now determined to reap the benefits of economic contributions from the petroleum and resources sector and the opportunities further development can bring, with the help of the Crown Minerals Amendment Bill. This piece of legislative reform will be introduced to Parliament in the second half of 2024 to cut red tape and enable resources and infrastructure projects across New Zealand.

“I want a considered discussion about how we use our natural resources to improve the security and affordability of energy and resources supplies, stimulate regional economic development opportunities, and increase New Zealand’s self-sufficiency to protect against volatile international markets,” emphasized Jones.

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The Crown Minerals Act Amendment Bill proposes to reverse the 2018 ban on new petroleum exploration outside onshore Taranaki, change how petroleum exploration permits are allocated by allowing for a choice between a tender and a non-tender method, and adjust the petroleum decommissioning requirements to align with international best practice, and better balance regulatory burden and risk.

Aside from these, the bill will signal to the industry that New Zealand is open for business by giving the government the mandate to promote prospecting, exploration, and mining of minerals actively.

“Natural gas is critical to keeping our lights on and our economy running, especially during peak electricity demand and when generation dips because of more intermittent sources like wind, solar and hydro,” highlighted Jones.

Energy Resources Aotearoa, representing energy-intensive businesses, welcomed the news about the scrapping of the ban with its CEO dubbing the ban as New Zealand’s failed experiment. He pointed out that a stable, positive investment in the energy transition toward a low-carbon future was needed instead of banning new permits.

John Carnegie, Energy Resources Aotearoa’s CEO, commented: “New Zealand faces an energy shortage which threatens our electricity system and the competitiveness of our exporters. We now urgently need to attract further investment in exploration and production to keep the lights on, our houses warm and business humming.”

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The ban reversal has not been met with open arms from the opposition, thus, it is facing backlash not only from Greenpeace and other climate groups but also Labour, which claims that the move will take the country backward. Megan Woods, Labour’s climate spokesperson, underlined that the government showed all their talk about meeting climate targets was just hot air as they cut more than $3 billion in climate-related work.

Russel Norman, Executive Director at Greenpeace NZ, said: “Luxon might try to restart oil and gas exploration but we are warning oil companies that they will once again face determined community resistance if they try. We are determined to protect our families from catastrophic climate change.”