Why we must keep looking for oil and gas

Is it really the “end of oil”, as the front page of the Herald asked this week? Our answer: not yet, not by a long way, and certainly no matter what New Zealand does. Most people have a sense of how important oil and gas is to New Zealand’s economy. They generate around $1.5 billion a year in exports and support around 11,000 jobs.

They also provide half of New Zealand’s energy to which there is no affordable and readily available alternative.

We use oil and gas to move people and goods, heat our homes, cook our food and create a wide range of essential goods from fertilisers to medical supplies.

What isn’t so well known are the environmental benefits of producing it here. How is that possible?

The short answer is that without production here, we will eventually have to import more expensive fuels from overseas with higher emissions than our own locally produced fuels (as well as the emissions required to get them here).

New Zealand is blessed with natural gas which has half the emissions of coal, and oil produced here also has a lower emissions footprint than oil produced overseas.

This means limiting future exploration and production would probably increase the world’s overall greenhouse gas emissions, and we would miss out on the economic benefits of producing it here as well. That’s a lose-lose scenario.

Around the world about 1600 coal-fired power plants are planned or under construction. If we could get them to run on natural gas instead (ideally supplied by New Zealand) that would make a major reduction in the world’s emissions.

A major gas discovery somewhere around the South Island could also mean current coal users (such as milk processing plants) could switch to gas and lower our net emissions as a result. That’s not to mention the transformational economic impacts it could have in the regions.

This is why the International Energy Agency expects demand for natural gas to grow 45 per cent by 2040, and demand for oil is also expected to continue for decades.

New exploration in New Zealand is important because without new sources we will run out of natural gas in around 10 years. This would be a major blow to the 268,000 households, schools, businesses and community facilities which currently use gas. Let’s also remember that New Zealand only produces about 0.014 per cent of the world’s oil supply, which is less than the USA uses in one day.

Banning exploration here wouldn’t stop that amount of oil being consumed; it just means it will come from somewhere else, most likely with lower environmental and safety standards.

It is demand, not supply, that is driving the consumption of oil and gas. That’s why demand-focused policies like the emissions trading scheme are the sensible and effective way to reduce our emissions. As an industry we absolutely accept the importance of doing this. But we have to use the right tools, and do it in a careful way that looks after workers, consumers and all New Zealanders.

Cameron Madgwick

is chief executive of the Petroleum Exploration and Production Association of New Zealand.