Fears oil move may have ‘chilling effect’
Days before announcing an end to new offshore oil exploration, the Government was warned the move could increase global emissions.
On April 12, Prime Minister Jacinda Ardern announced the Government had decided to offer no new offshore oil exploration permits, with three years of onshore permits in Taranaki.
Ardern has confirmed the decision was a political one agreed between coalition party leaders, without a Cabinet paper or Cabinet decision.
Yesterday, Energy Minister Megan Woods released documents related to the decision in response to a high number of Official Information Act requests.
One document on the existing rights of exploration permits shows that officials at the Ministry of Business, Innovation and Employment (MBIE) warned the move would ‘‘run counter to a number of important public policy objectives’’, official James Stevenson-Wallace wrote.
The decision would have a ‘‘negligible impact in reducing domestic greenhouse gas emissions but a likely increase in global greenhouse emissions’’.
Stevenson-Wallace said this could come as a result of methanol, which is produced from gas in New Zealand being replaced by methanol produced from coal in China. ‘‘It also removes the opportunity, both domestically and internationally, of any future gas discovery being used to displace coal.’’
MBIE also warned the move was likely to lead to higher gas prices and reduce security of supply ‘‘at a time when New Zealand has its lowest reserve to production ratio since . . . 2003’’.
Industry body Pepanz said the documents showed the decision was a ‘‘lose-lose’’ for the environment and the economy and should be reconsidered.
Woods said she did not agree with MBIE’s assessment of an argument referred to as ‘‘carbon leakage’’, which put forward that any cut in production would simply be replaced elsewhere.
‘‘The world has moved on and changed significantly,’’ Woods said, pointing to a major increase in renewable electricity generation in China.
Woods pointed to different advice about the relatively high cost of producing gas in New Zealand, which could make some gas deposits uneconomic.
‘‘If you look at the price of gas, we’re never going to be the commodity producer of gas,’’ Wood said. ‘‘One of the documents . . . points to the current market conditions making a lot of our current discoveries uneconomic to extract. The fact they’re in stormy southern seas rather than onshore shale gas deposits, a la the US, just means the cost of extraction means it’s never going to be the commodity producer to the world.’’