More debate needed on oil & gas

Jason Krupp
14 October, 2013

Oil and gas exploration is one of the most polarising issues being debated right now as judged by the number of "don't drill" signs popping up in the front yards of neighbourhoods across the country.

That's probably because, as an issue, it's easy to polarise. In fact it has already been polarised into "Save the Planet" versus "Drill Baby, Drill".

But not surprisingly these viewpoints are woefully too narrow to make an informed decision on whether New Zealand is too pure to drill. There is a lot more that needs to be added to the discussion.

For instance, how dependent we are on domestically sourced fossil fuels.

Since 1959, when first fields on the Taranaki Basin were first tapped, New Zealand's economy has enjoyed the benefits of a readily available oil and gas supply.

By the numbers, crude is our second biggest export to Australia, with almost all of the oil we produce sold to refineries across the Tasman because of its high quality (somewhat ironically we import lower quality crude, which is converted into transport fuels).

In total, our oil and minerals exports were worth $2.8 billion in 2012, of which crude, oils and petroleum accounting for 72 per cent of that.

It's also a healthy revenue generator for government, bringing in $1.8 billion in royalties and levies since 2008 - and that's excluding tax charged on oil company profits.

But critically it's running out.

According to a report compiled by Woodward Partners in 2011, the government's revenues from the petroleum estate are expected to start declining markedly over the next 15 years as the Taranaki Basin reaches the end of its peak lifespan.

Exports earnings and royalties aside, here's why that's concerning:  New Zealand's economy, like it or not, is highly dependent on gas.

The electricity sector consumes 46 per cent all the gas produced, followed by industrial use at 29 per cent, and then non-energy use at 16 per cent. Commercial and residential use only consumes about 4 per cent respectively.

Yes, natural gas is a fossil fuel but it has a lower carbon footprint than coal, and until we can find a viable replacement, it is the cleanest source of fuel we have for those processes that can't be replaced by electricity.

So from a purely economic perspective there is a clear imperative to find new energy reserves.

Luckily, New Zealand has 17 frontier basins, any of which have the potential to supply the economy with another 70 years of energy.

But it should be recognised that it's also not entirely about the pure economic considerations either - it is also about the environment and livelihoods.

Just three years ago the Deepwater Horizon disaster showed us what the consequences are when things to do go wrong.

According to official figures, nearly 5 million barrels - or close to 800 million litres - spilled out of the well during the 84 days it took to close it.

Should a disaster of the same scale as the Deepwater Horizon happen in New Zealand, the response time would be notably worse because it would take several weeks to tow a drilling rig here - provided one is immediately available.

And while New Zealand is internationally lauded for its clean-up abilities, the reality is that the damage will take many years to reverse, and even then getting back to a pre-disaster state is not guaranteed.

We've also come a long way with the introduction of oil dispersants like Corexit, but important questions remain over how effective they are and what impact these chemicals have on human health.

We also need to consider what impact a spill would have on other sectors of the economy. Oil exports are only worth about $400 million more than fish and seafood exports on an annual basis.

Now add the billions that international tourism brings in and you can see just how vulnerable our economy is to a spill.

The facts are that the risk of an oil rig blowing is incredibly small with modern drilling practices, but the consequences of just such a disaster are severe.

So, given all this information, is New Zealand too pure to drill?

That's too narrow a question.

A better one would be: "are the financial benefits of oil and gas exploration - backed by world class health and safety regulations - worth the risks posed to the environment and our economy given how dependent we are on fossil fuels for security of electricity supply, industry and exports?

You could, of course, flip the question the other way around, but either way it's a mouthful and far too big for any campaign slogan.

Perhaps a better question would be "what are you, pro- or anti-drilling, willing to sacrifice in your daily life to have the policy go your way?"

That is how we get closer to debating the oil and gas exploration issue on its merits, and avoid the ideological shouting match where only extreme voices get heard.

Source: More debate needed on oil & gas

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