Background
New Zealand has long produced oil and gas from various oilfields around the country, in particular, in the Taranaki region. There are 37 active petroleum permits currently operating in New Zealand.[1]
More recently, New Zealand's stance and legislation on offshore oil and gas exploration has experienced politically-driven turns. In 2008, New Zealand's offshore environment was opened up for further oil and gas exploration with the establishment of the "Business Growth Agenda" under John Key's National-led Government. This included the development of extractive industries. The sector's growth was halted with Jacinda Ardern's Labour-led Government implementing the Crown Minerals (Petroleum) Amendment Act 2018, which banned all new oil and gas exploration permits in the New Zealand Exclusive Economic Zone (except for a small area of active production off Taranaki).
Since the ban, three onshore petroleum exploration permits were granted in 2018 and 2019 block offers,[2] as well as an additional exploration permit that was a hang-over of the 2017 block offer.[3] Only one petroleum mining permit has been granted since the ban was enacted.
Following the recent general election in mid-October 2023, the National Party is now in the process of forming the next New Zealand Government, so we think it timely to consider what this might mean for the oil and gas sector.
A new turn?
Leading up to the general election, National repeatedly declared plans to lift the ban on offshore oil and gas exploration once the final election results come in and it forms a government. This would allow exploration and mining permits to once again be granted beyond onshore Taranaki.
National's "Rebuilding the Economy" policy[4] stated its aim of repealing the ban to reduce New Zealand's reliance on imported coal and ensure gas can be used as a transition fuel. While National supports the move towards a net-zero economy, the party has publicly disagreed with the approach taken under the previous Labour government. For example, Stuart Smith, Member of Parliament for Kaikōura, and National's Energy and Resources Spokesperson, said that National's proposed repeal of the ban is based on:[5]
“Gas [being] part of the solution to deliver Net Zero. We need it to secure our electricity system and to keep energy affordable…"
The Act Party, which is likely to be a coalition partner of National in forming the new Government, has also publicly supported National's promised repeal of the ban, with Act's leader David Seymour saying:[6]
"Taking away the option of natural gas has increased New Zealand's reliance on coal. Reversing the ban would be a simple and effective way to reduce emissions and reliance on imported coal."
The New Zealand First Party also supports National's plan, but has taken a slightly different tack with its offshore oil and gas policies, promising to repeal the ban and examine potential for a state-owned exploration company to explore offshore oil and gas using seismic data in the Great South Basin and Canterbury Basin.[7]
What does this mean for the sector?
While the policy and law change in 2018 did not change existing exploration and mining permit holders' property rights, it undermined the confidence that investors had in the tenure of oil and gas assets and prospects in New Zealand. Oil and gas exploration requires significant financial investment over a long period of time, and investors have low appetite for any actual or perceived jurisdictional instability of law or policy that could impact the ability to continue planning, investing in, developing, and operating oil and gas assets and prospects.
In this sector, New Zealand competes for investment against South East Asia, Australia, and Africa. Therefore, while a repeal of the ban is important, to attract new investment, it is equally critical for the new Government to give assurance to the sector that the Government's support for the sector is an enduring one that can withstand change of political winds.
Support for oil and gas can comfortably co-exist with a strong push into renewable energy, including development of the offshore renewable sector in New Zealand in the same region (Taranaki) as where much of oil and gas production occurs. This allows a realistic transition to renewable energy while maintaining energy resilience for the country.