GOVERNMENT RELEASES ENERGY STRATEGY AND PROPOSED CHANGES TO PETROLEUM PERMITTING REGIME ^Featured

The Acting Minister of Energy and Resources Hon Hekia Parata, recently released the New Zealand Energy Strategy (NZES) and the companion New Zealand Energy Efficiency and Conservation Strategy (NZEECS).

Earlier drafts of these Government policies were leaked in April 2011. Those drafts were criticised at that time for the lack of priority given to renewable energy sources as compared to fossil fuel-based energy. (Read our earlier article on the leaked NZES and NZEECS here.)

The officially released NZES contrasts slightly with the Strategy leaked in April 2011. It provides further explanation around the Government’s reasons for prioritising the development and realisation of oil and gas reserves alongside other renewable energy options. The priorities for energy development and use are much the same as those previously released, and comprise the following four broad categories (now specifically recorded in the NZES as being ‘in no particular order’):

• Diverse resource development;
• Environmental responsibility;
• Efficient use of energy; and
• Secure and affordable energy.

The focus areas under the priority of ‘Diverse resource development’ comprise developing both renewable energy resources and petroleum and mineral fuel resources and embracing new energy technologies.

In terms of renewable energy, the government’s former target remains. That is, that 90% of electricity generation be from renewable sources by 2025 (in an average hydrological year) providing this does not affect security of supply. The NZES records that renewables contributed 74% of electricity generation in 2010, and that renewable choices “help sustain our reputation as an environmentally-responsible nation”. The NZES also states that the government “welcomes and expects to see considerably more investment in renewable electricity generation, particularly from geothermal and wind resources”. It touts the renewable energy generation NPS as one of the key achievements to date in removing unnecessary regulatory barriers. Some argue that NPS did not go far enough in assisting developers by recognising national benefits and getting renewable projects over the line.

Developing petroleum and mineral fuel resources is another focus of the NZES. The government has recognised that the majority of our NZ’s territory is yet to be explored, and that the potential for further petroleum resource development is significant. Expansion of oil and gas exports is promoted. The NZES notes that production could be increased so that New Zealand becomes a net exporter of oil by the year 2030. In this respect, the Government has reviewed the Petroleum Action Plan and proposes the following actions:

• reviewing the current fiscal and royalty framework to ensure the Government receives a fair return from petroleum resources, while also providing sufficient incentives for investors;
• investing in data acquisition to improve resource knowledge and foster greater investment; and
• developing a legislative framework fit for the petroleum sector.

Those in the petroleum industry should be aware of the Government’s proposed changes to the permitting regime for oil and gas exploration. The changes would adopt a Block Offer method (rather than the ‘priority in time approach’ currently utilised). This would encourage international players to enter a competitive tender for exploration of specific blocks around New Zealand. The specific blocks would be notified in the first quarter of each year. An evaluation panel would then select successful candidates for each block, having assessed candidates’ technical and financial capabilities and proposed work programme.

Submissions on the proposed new permitting regime close at 5.00pm on Wednesday 26 October 2011.

Please contact one of the ChanceryGreen team for further information, or if you’d like to make a submission on the proposed changes to the Minerals Programme for Petroleum.