Is it black gold or fool's gold?

Brazilian oil giant Petrobras has been granted a five-year permit by the Government to explore oil drilling off the coast of the East Cape. Photo / Supplied

Sometime over the next few months, a research vessel contracted by Brazilian oil giant Petrobras International Braspetro B.V, awarded a five-year petroleum exploration permit by our government last week, will arrive in the Raukumara Basin. This is located between the East Cape of the North Island and the Kermadec Islands in our Exclusive Economic Zone.

The vessel will "shoot" a seismic survey, towing an array of compressed air guns that fire signals into the sea floor.

By measuring the speed at which sound waves bounce back to hydrophones towed further astern, geologists will map the rock strata, producing first a 2D picture, then a 3D geological cross-section.

They will be hunting for porous, permeable "reservoir rock" - typically sandstone or limestone - through which oil and gas flow.

If petroleum is found, Petrobras will drill a test well, then sink several wells if the field proves commercially viable. Oil will be pumped ashore or into a stationary tanker that partially refines oil, discharging the crude into tankers that sail directly to their market.

"You want to get the oil out quickly and recoup your investment," explains John Pfahlert, who represents the Petroleum Exploration and Production Association of New Zealand.

The Government believes petroleum exploration will be one of our "most significant economic opportunities".

Besides the Raukumara venture Exxon Mobil has a "drill or drop" exploration permit for the Great South Basin off the tip of the South Island, which expires in October. The benefits, say the Ministry of Economic Development, will be "more jobs, more tax and royalty income" plus "long-term regional development". Oil companies typically pay a 20 per cent royalty that last year amounted to $509 million in revenue.

The Raukumara's potential is unknown - the Petrobras permit is for 12,333 sq km, or half the basin - but data gathered in 2005 indicates there are sediments and sands able to trap hydrocarbons in "commercial quantities". Pfahlert says the odds of a strike in New Zealand's "frontier country" are one in 20. The MED dreams of New Zealand becoming "a highly attractive global destination for petroleum exploration and production investment". It is a potential made possible by "peak oil".

Certainly as peak oil - the point at which oil production enters terminal decline - looms (some argue we have passed this point), it is becoming harder to locate fields in easy-to-extract locations. Instead, oil companies are exploring more dangerous regions, such as the Falkland Islands, the Arctic and the wild seas within New Zealand's EEZ.

"All the oil reserves we find now are in hard-to-extract places," says Dr Bob Lloyd, director of Otago University's Energy Studies Programme. "The sorts of problems that are happening in the Gulf of Mexico will happen more and more."

The Raukumara deal was overshadowed by BP's Gulf of Mexico oil spill, the largest in US history.

The sheer magnitude of the catastrophe - some 26,500 to 30,000 barrels are leaking from the Deepwater Horizon well each day according to Florida State University oceanographer Ian MacDonald; six times BP's estimate - seemed likely to deter nations from offshore drilling. Norway said it would stop. The US declared a moratorium. Clean tech advocates hoped the spill might be the tipping point, but this week it was business as usual.

The Obama administration said the halt was "temporary" even as Britain stepped up deep-sea exploration off the Shetland Islands. BP is leading that charge. Britain's energy minister, Charles Hendry, said the move was "in the national interest" and that safety regulations would be tightened.

No doubt there was pressure from Big Oil, which has a financial incentive - BP has spent about US$1.6 billion ($2.3 billion) on the Gulf spill and has lost half its market share, about US$95 billion. But in a transitional energy economy - from fossil fuels to clean tech - the key word is "transitional".

Climate change notwithstanding, we have only just begun to shuck our dependence on petroleum.

The BP disaster highlights Big Oil's global reach. One of the companies involved in the BP spill, Anadarko, has stakes in fields off Taranaki and Otago. It has until August 21 to decide whether to continue with an Otago exploration well, even as the company's share price implodes due to liability fears in the Gulf of Mexico.

Back in the Gulf, Washington warns BP may face fines amounting to "many billions of dollars". Big talk. Whether the US can walk the walk will be an intriguing process. In the Guardian this week, columnist George Monbiot cited a UN report that estimates the fossil fuel sector's "decommissioning costs" between US$50 billion and US$170 billion a year, a figure British scientists elevated threefold.

But who will pay? Big Oil is adept at evading responsibility. Transocean, which owns the Deepwater Horizon rig, is registered in the Marshall Islands, a "flag of convenience" ploy designed to limit exposure to regulation or liability.

Elsewhere Texaco (now Chevron) has faced down a decades-old oil pollution lawsuit from Ecuador that at US$27 billion is the biggest environmental case in history.

Last year Exxon Mobil finally paid $507.5 million - 10 days' profit in 2009 - for the 1989 Exxon Valdez tanker spill in Alaska, which was, until the BP spill, the world's worst.

And good luck to Nigeria in getting Big Oil to pay for clean ups in the Niger Delta the World Wildlife Fund says amount to 1.5 million tonnes over 50 years - 175 times the Exxon Valdez spill. What real clout would New Zealand have if a major oil spill happened here?

The MED gives Petrobras, founded in 1953 and 55 per cent owned by the Brazilian government, a glowing report, citing its experience in deep-water operations in the Atlantic off South America. The Raukumara Basin plunges to 2400m.

Curiously, the MED press release ignored Petrobras' spotty environmental record. In 2001 the company lost the world's biggest floating oil platform, P-36, 1300m off the Brazilian coast after a series of explosions killed nine workers. The P-36 disaster came hard on the heels of two other Petrobras calamities; a pipe leak in Rio de Janeiro Bay in 2000 and another oil spill - four times as large - six months later in Parana.

Questioned by the Greens about how oil companies in the EEZ could plug deep-sea leaks, Energy and Resources Minister Gerry Brownlee was sanguine. Given liability issues, he was confident that "they are as safe as they possibly can be". It sounded like an echo of the self-regulation and cosy relationship with authority traditionally enjoyed by Big Oil, one of the prime factors in the Gulf spill.

If things were to go badly wrong in the Raukumara Basin, New Zealand would be poorly equipped to respond. Contingency plans can cope with small spills, such as bunker fuel pollution if two ships collide. Pfahlert warns anything bigger would require outside assistance.

Aerial dispersal, using C-130 Hercules, could be deployed within 24 hours.

But vessels, summoned from Australia or Southeast Asia, would take a week at least to steam to the region. Pfahlert suggests a Raukumara spill would likely be less serious than one off Taranaki due to the prevailing westerlies - although a strong nor'easterly gale might change that.

Two days after the MED made its Petrobras splash Environment Minister Nick Smith, said the Government would create an independent Environmental Protection Agency with tougher rules for the EEZ. While this felt like shutting-the-stable-door-after-the-energy-horse-had bolted, it was wise. The Environmental Defence Society's Gary Taylor suggests using the Resource Management Act. "They need to get environmental consents. They need to examine the risks and see what contingency plans are in place. Maybe Petrobras needs to post a bond."

"In a sense it doesn't matter what the rules are if the oil companies don't have the technical capacity to plug [a] leak," says the Green Party co-leader Russel Norman.

"Given that it's largely deep water in the Raukumara Basin, and oil companies have proven they don't know how to plug a hole in deep water, it seems pretty reckless to let them go ahead before they can demonstrate they can do that."

The reality is that with an epic spill, all bets are off. The company has had to customise solutions on-site.

"When things go catastrophically wrong in deep water," says Pfahlert, "any response has to be at the leading edge of technology."

Add concerns about climate change, and not everyone is singing from the MED songbook.

There is a weird disconnect between approving oil exploration as we pledge to cut CO2 emissions.

"Oil contradicts our clean, green brand," says Greenpeace climate campaigner Simon Boxer, who sees BP's spill as the oil industry's Chernobyl.

He wants a paradigm shift, from extractive economies like petroleum exploration to clean tech, which he says will grow jobs, tackle climate change and end our fossil fuel addition.

"Whether we do it this year, or in 10 years, we're going to have to figure out how to run an economy with reduced oil inputs," says Norman. "It is a fundamental external weakness of the economy that we have to import heaps of oil." Any oil found by Petrobras finds, he says, will be sold in New Zealand at the international price.

A report this week by the European Renewable Energy Council and Greenpeace said clean tech could create 8.5 million jobs worldwide by 2030, cut carbon emissions 80 per cent by 2050, and swell the clean tech market from US$100 billion to US$600 billion by 2030 (a BP report, also out this week, said world oil consumption fell in 2009 by 1.2 million barrels a day, the second annual consecutive drop).

Last year, clean energy passed fossil fuel investment worldwide for the first time. Advocates believe nations that decarbonise their economies fastest will get pole position in the 21st century. Trade and Industry's Investment New Zealand says we come up with innovative ideas - including renewable transport fuels using sustainable sources of algae and timber - but have a hard time exploiting them, partly due to distance, our biggest strategic weakness.

Exploiting this resource, writes INZ's Chris Mulcare, will revitalise our "100 per cent Pure" brand.

The main obstacle to building a clean tech economy - maybe via a carbon price to encourage investment - is political will. New Zealand can't wait for a tipping point.

Under the Kyoto Accord and our ETS, we have accepted responsibility for carbon emissions produced in New Zealand. But the thinking on carbon emissions is evolving, with suggestions that nations pay for carbons they export, such as oil. Taxpayers might get a better deal - and a cleaner world - by pushing for an energy transition.