Protests against the search for oil by Brazilian company Petrobras off East Cape look increasingly like an own goal. If anything, they seem to have heightened the Government's interest in New Zealand's oil and gas potential. So much so that this takes centre-stage in its latest energy strategy. A year ago, New Zealand's extensive coal reserves were a dominant theme, even though extraction must await carbon capture and storage technology. Now, the pinning of hopes on oil and gas is emphasised by plans to change the way exploration permits are issued and to open up some areas for tender.
Everything possible should be done to establish the extent of our oil and gas resources. Even Taranaki has been only moderately explored. The strategy's optimism relates to the perceived geological prospects of the country's petroleum basins. Yet even if significant discoveries are considered likely, there are reasons for caution. The most obvious is that the resource remains largely unproved.
Establishing its size will inevitably attract further protests, especially when deepwater drilling is proposed. Opposition to the extraction of methane hydrate, when it becomes commercially viable, is also certain. As a counter, the Government has commissioned a report that values the Crown's royalty income from petroleum reserves. This suggests the $3.2 billion in royalties from oil and gas fields already in production could, at best, increase to $12.7 billion with future discoveries. But that depends on greatly accelerated exploration, much higher oil prices, and much more oil and gas coming from frontier basins outside Taranaki.
The pitfalls of such optimism are obvious. Exxon Mobil has withdrawn from the Great South Basin and the results of recent drilling have not been as encouraging as hoped. The Government hopes a more welcoming permits process will attract explorers. Rising oil prices should also work in its favour. Either way, it cannot afford to overlook potential oil and gas riches. Equally, it is right to note that the fossil-fuel tap cannot just be turned off on the path to a lower carbon economy.
That road has been emphasised by the Government restating that 90 per cent of electricity should come from renewable sources by 2025. The figure now stands at 79 per cent. Yet again, however, the Government has given no clear idea of how that target will be reached. It seems to assume that "removing unnecessary regulatory barriers" and the emissions trading scheme's incentives for investment in renewable energy ahead of fossil fuels will be enough.
