The New Zealand Parliament has passed the Crown Minerals Amendment Act 2025 (Amendment Act), repealing the ban on offshore oil and gas exploration and introducing flexibility in the decommissioning liability regime.
Part of this flexibility results from the removal the current statutory obligation, where former permit holders were automatically liable for decommissioning if the current permit holders failed to fulfil their decommissioning obligations. Ministerial discretion will now determine whether the outgoing permit holder (and / or their related bodies corporate) will be required to provide a guarantee for the costs of decommissioning (referred to as 'trailing liability').
Additional flexibility arises through the potential increased use of exemptions to the requirement for total removal of the infrastructure to be decommissioned.
We discuss each of these points in more detail below.
Reversion of offshore permits ban
Parliament banned the issue of new offshore oil and gas exploration permits in 2018, to signal the phasing out of fossil fuel energy (although existing operations and onshore exploration in Taranaki were retained).
The Amendment Act overturns this ban, reopening the possibility for the issue of new offshore oil and gas exploration permits, whether in Taranaki or elsewhere. The Government hopes that lifting the ban will provide an avenue for the private sector to address gas shortages in the energy markets (including as transition fuel) and would restore investor confidence in the oil and gas sector. This change is intended to boost investment in petroleum exploration, on the basis that oil and natural gas are crucial to ensure energy security and affordability, and provide significant economic benefits.1
Lifting the ban could be timely given the emergence of a renewed investor appetite for gas as part of the transition to more intermittent sources of electricity generation. At the recent Infrastructure New Zealand Building Nations conference, Jo Spillane, Executive Director and Global Head of Private Capital Markets for Macquarie Capital, stated that there has been a "realisation that [gas] is an absolute necessity in terms of firming up the energy transition as we plug in more renewables."2
For investors who wish to be part of this, there are three different ways to apply for exploration permits:3
- Acceptable work programme offer: This is the most common way to allocate permits and will be granted on a 'first in-first served' basis that meets New Zealand Petroleum and Minerals criteria.
- Newly available acreage: This is designed for existing permits which come available, and conducted though a competitive process.
- Competitive tender: As with the newly available acreage, permits can be allocated through a competitive process (further details of such process have yet to be provided, but could involve some form of block offer).
Secondary legislation is required to give effect to the Act. Therefore, applications for new permits for petroleum exploration will need to await such secondary legislation. New Zealand Petroleum and Minerals anticipates that applications will open in late September.4
Putting money where one's mouth is
The Government has allocated NZ$200 million of tagged contingency funding (over four years) through Budget 2025 to co-invest in the development of new gas fields. This is an effort to address New Zealand's waning gas supply, which we wrote about in a previous Energy Blog. This allocation is intended to catalyse investment and incentivise companies to explore and develop New Zealand’s untapped gas reserves.
Decommissioning: financial security and trailing liability
Following the insolvency of the Tamarind entities operating the Tui Oil Field, and Crown expenditure on decommissioning matters, there was a legislative response focussed on financial security for decommissioning obligations.
The Crown Minerals (Decommissioning and Other Matters) Amendment Act 2021 introduced a regime that imposed automatic statutory decommissioning obligations on parties with interests in petroleum permits. These obligations included an obligation to decommission the petroleum infrastructure (including the removal of the infrastructure, plugging and abandoning the wells and undertaking site restoration), as well as the requirement to provide financial security which would be applied to the costs of decommissioning if the decommissioning obligations were unmet. The 2021 amendments also enabled liability to flow back to former permit holders. This “trailing liability” was designed as a last-resort mechanism but raised concerns about its impact on investment certainty and whether it applied in cases of corporate restructuring.
The Amendment Act replaces the automatic trailing liability with a discretionary model limited to the outgoing permit holder and their related bodies corporate, meaning that other former permit holders will not automatically be responsible for the cost. In our view, this appropriately places the risk on the outgoing permit holder, without exposing previous permit holders that do not have control over, or even visibility of, the transferee in the most recent permit transfer.
Under the new framework, when an interest in a petroleum exploration or mining permit is transferred or a change of control occurs, the Minister for Resources and the Minister of Finance may jointly require an outgoing permit holder, or a related body corporate, to provide a financial guarantee for decommissioning.
This requirement is assessed at the point of approving the permit transfer or change of control. If the guarantee is not provided, the Ministers may withhold consent, effectively preventing the permit transfer or change of control from proceeding. The Minister will likely consider whether the transferee is financially substantial and operationally capable to support the case for no trailing liability. The Minister is permitted to consider anything that they think relevant to the decision, including:
- how soon decommissioning will be required;
- the current level of reserves and production forecast;
- the cost and the extent to which any financial security will cover that cost;
- the circumstances of the current, incoming and outgoing interests in the permit; and
- risks relating to the ability to meet decommissioning obligations.
Under the Amendment Act, ministerial consent is now required for any change of control of a permit participant in a petroleum exploration or mining permit. This contrasts to the prior regime, where a permit participant would only be required to notify the Minister for Resources of a change of control. This amendment makes the treatment of a change of control consistent with how a transfer is treated.
In addition, where a guarantor of a permit participant's obligations undergoes a change of control, the permit participant must now notify the Minister of that fact. The Minister holds the power to revoke the permit if there is a failure to notify, or following the change of control, the Minister is not satisfied with the financial capacity of the new guarantor to meet its obligations under the permit. The Minister could also require the permit participant to provide additional, or a different type of, financial security.
The proposed changes reflect an effort to strengthen investment confidence in the oil and gas exploration sector in New Zealand. The new ministerial discretion regarding financial security aims to ensure that those that have benefited economically from petroleum activities contribute appropriately to decommissioning costs, while avoiding undue deterrence to investment.
For international investors, the move to ministerial discretion in decommissioning decisions can provide a better balance between regulatory burden and risk, if the new regime is navigated well. To make the most of the discretionary model, a permit transferee should engage early with regulators to understand potential obligations, engage on practical mitigations within a balanced risk management framework, and ensure compliance with ministerial expectations.
Decommissioning obligations
The base-line position on decommissioning requirements that oblige removal of all infrastructure and plugging and abandonment of wells remain the same. However, the Amendment Act specifically refers to the existing broad power of the Minister to grant exemptions to this requirement, and the ability to provide class exemptions under regulation – this could signal a potential intention for these exemptions to be applied more widely in the future.
This could apply where the removal of the petroleum infrastructure is considered unreasonable or inappropriate. Accordingly, this could both reduce the cost of decommissioning and, also reduce the amount of the financial guarantee required in respect of that decommissioning liability.
Nevertheless, permit holders that are responsible for decommissioning will remain liable for issues that arise after decommissioning, such as any problems with plugged wells or infrastructure that is permitted to remain.5
If you would like to discuss the change to the Act and its implications for your business, please get in touch with one of our energy experts.