Liam Dann: Gulf spill may put dampener on NZ oil drilling

Is the attention New Zealand is getting from foreign oil prospectors accelerating?

Or is it just that those news snippets about drilling licences and geological data tend to leap off the page a bit more against the backdrop of the terrible Gulf of Mexico oil spill.

Certainly the spill has focused attention on oil drilling at a time when our Government is talking up the prospects of getting an economic boost from our natural mineral resources.

Energy Minister Gerry Brownlee's announcement that Brazilian giant Petrobras had been awarded a five-year permit to explore of the Raukumara Basin off the East Cape couldn't have come at a worse time from a public relations point of view.

But that deal was some time in the making and it probably would have been done regardless of which party was in power.

Governments have been awarding offshore drilling licences since 1965.

The last Labour Government awarded five licences for exploration in the Great Southern Basin in 2007 after a Crown-funded geological survey found that there might be as much as two billion barrels of oil out there.

When it comes to untried territories for oil drilling, the Southern Ocean is right up there.

Adding to the mix is increasing oil production in proven areas closer to land like Taranaki.

This week shares in New Zealand Oil & Gas, a 12.5 per cent partner in the Tui SW-2 well, rose sharply after it announced promising signs of oil.

The prospect of New Zealand becoming a South Seas Norway, running enormous budget surpluses funded by taxes from big oil companies, is politically very appealing.

At least it was. It may now be tainted by the public reaction to the Gulf of Mexico spill.

The environmental catastrophe may be a game changer in terms of the public attitude to oil drilling.

It is to be hoped that we might see some acceleration of investment in alternative energy sources and moves to become less dependent on oil.

But that's probably overly optimistic. Oil remains so fundamental to the modern way of life that we are all ultimately complicit in the mess created by the industry. Filling up at a Shell or Mobil rather than a BP won't change the environmental risks around all drilling.

The size and scale of the Gulf spill - and the fact that it has happened in American waters - means it is more likely to be a game changer for the industry itself.

Quite what the final impact will be is difficult to assess because there are huge and conflicting pressures at work. For example BP is fighting for its very survival.

The price it is paying for this industrial accident is so high that it may deter the other big explorers from taking the risks of deep sea drilling.

But conversely President Barack Obama's suspension of all deep sea prospecting in American waters has already caused oil futures to spike.

That creates added incentive for big oil companies to keep exploring and, with American waters off limits, places like New Zealand could become more attractive.

However the prospect of oil gushing from a deep sea well in our waters remains distant.

Geological data is one thing, a gushing oil field big enough to justify the cost of getting the stuff out is another.

It may be a decade or longer before offshore drilling and the associated rewards and risks become a reality.

In the meantime, let's hope those doing the drilling are learning some hard lessons from the mess in the Gulf of Mexico.

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