Govt rules hinder oil and gas exploration, says industry boss

Energy and Resources Minister Gerry Brownlee. Photo / Sarah Ivey

Energy and Resources Minister Gerry Brownlee came to a big petroleum conference bearing good news but his Government came in for criticism from a leading figure in the industry.

New Zealand Oil & Gas chief executive David Salisbury says aspects of Government policy undermine the country's attractiveness as a destination for oil and gas exploration.

Speaking at the biennial Petroleum Conference in Auckland, Salisbury said this Government had to be applauded for many of the measures it had introduced, including overturning the ban on new thermal generation.

"Disappointingly, however, the current Government has introduced regulations that are viewed by the industry with concern, and which undermine the objective to ensure that New Zealand is a highly attractive global destination for petroleum exploration and production investment."

Carbon charges are levied at the point of production, even though the purpose of the legislation was intended to change consumer behaviour.

"The Government is aware that there are in place long-term gas contracts under which carbon charges cannot be passed on from producers to gas purchasers."

Speaking afterwards Brownlee rejected the criticism.

'We have a solid regime here, well ahead of other countries, it doesn't seem to be damaging our economy at the present time."

Salisbury also said the Government should quit any consideration of a National Oil Company, which would have as its foundation existing state-owned upstream assets, principally Genesis' 31 per cent interest in the Kupe gas-condensate field.

"A National Oil Company may lift overall sector activity, but runs the risk of crowding out private investors."

Salisbury said he understood the focus for a National Oil Company would be to stimulate exploration, in particular outside Taranaki.

"It must be questioned whether direct Government involvement in the higher risk spectrum of a high-risk, knowledge-based, capital intensive industry is an appropriate and optimal use of Government funding."

The idea has been mooted in industry commentary but Brownlee said he had "no idea" where it was coming from now.

"There are a number of people around who think this might be a good idea but that's not what the Government is considering at the moment."

He told delegates a group within the Economic Development Agency would be pumped up to improve the focus on the oil and gas sector.

"The unit will be a key driver of an integrated petroleum investment strategy based on geoscience knowledge and promotion investment, which the Government is developing."

Brownlee said the Crown Minerals Group would have a more commercial and strategic approach.

The Government received $450 million in royalties from petroleum in the 2009/10 financial year, and $540 million in 2008/9 or about 44 per cent of the revenue generated by an oil or gas field development in royalties and taxes.

"I want to reassure you that we are not planning any major reforms to the royalty regime," Brownlee said.