THE WEALTH BENEATH OUR FEET THE NEXT STEPS THE VALUE OF THE OIL AND GAS INDUSTRY TO NEW ZEALAND AND THE TARANAKI REGION. A FRESH PERSPECTIVE ON THE INDUSTRY AND ITS ECONOMIC IMPACT. O&G INDUSTRY SUMMARY 208 PETAJOULES (PJ) OF GAS New Zealand produced Oil is our produced from our fields in 2013. The energy equivalent to: 4TH HIGHEST • 10,000 lightbulbs on for 10,000 35,500 EXPORT EARNER years or barrels of oil per day • 200 round trips to the sun from during 2013 earth in a Ford Falcon XR6 Natural gas is used by over Natural gas provides instant heat, 10,000 energy & continuous hot 11,720 COMMERCIAL USERS water supply for over such as restaurants, hotels, JOBS (FTEs) greenhouses & hospitals 245,000 NZ HOUSEHOLDS Gas underpins Gas provides Natural gas is used as an input in manufacturing to create 19% 22% ADDED VALUE of our electricity generation of our primary such as methanol for export, (2nd only to hydro) energy supply or urea for use on our farms Oil and gas contributed OUR GAS RESERVES $1.5B IN ROYALTIES Since 2008, drilling increased by 31% to government revenue activity has averaged (2013-2014) over the last 4 years – 40 WELLS PER YEAR sufficient to meet annual equivalent to the annual demand for 14.5 years budget for the NZ Police CURRENT PRODUCING FIELDS: 20 O&G fields are in production, all in Taranaki. Key oil & condensate fields (in descending order of remaining oil & condensate reserves) Maari, Pohokura, Maui, Kupe, Mangahewa, Turangi, Tui, Cheal, & McKee Key gas fields (in descending order of remaining gas reserves) Pohokura, Maui, Mangahewa, Kupe, Turangi, Kapuni, McKee, Kōwhai & Ngātoro FOREWORD hen we first measured for new jobs and greater, localised Over the last five years, the economic the full economic economic development. case for harnessing our mineral wealth significance of the oil has become even more compelling. 1 Has the strategy delivered a return on and gas industry in investment over the past five years? This report underscores that the W2010, it made headlines for redefining What can be learnt from an economic resources most able to effect economic the scale of the oil and gas industry and perspective, and how we can further transformation are not those that lie its value to New Zealand’s economy. foster healthy and informed debate on deep beneath our feet, but the people Since then, the nation has experienced the industry? who continue to apply leadership, an unprecedented period of exploration innovation, and an entrepreneurial spirit As sentiment towards oil and gas activity, both on and offshore. While to the industry. evolves, how well is the contribution of success has been variable, it has raised energy understood in economic terms, Wealth seeks to inform discussion, the profile of the industry, particularly in the actual physical impacts on the debate and decisions around the role in a number of frontier communities towns and communities that stand to the oil and gas industry will play in New which have either embraced or rejected host the industry, and in the benefits Zealand’s economic and social future. the presence of this new type of that it can deliver? economic activity. Ultimately, we must work hard to The last edition concluded with a wish- develop our economic potential so our Prospectivity remains high around list that, based on the data presented, children and grandchildren have cause the country, with attention shifting would see the potential of oil and gas to thank rather than criticise us for beyond the traditional ‘energy province’ deliver maximum value to the nation as developing the wealth beneath our feet. of Taranaki. More positive economic a whole. That list included: returns from offshore activity hold the key to maximising the benefits to • A change to our philosophical the nation. definition of the oil and gas industry The commercialisation of our mineral • Building stronger partnerships to wealth is a cornerstone of the foster the industry government’s economic agenda. In • Shifting the government partnership STUART TRUNDLE assessing how far the nation has come model Chief Executive, Venture Taranaki towards realising the potential of the March 2015 ‘wealth beneath our feet’, it must be While some progress has been made asked how well that policy has gone towards these items, more can still be towards meeting regional aspirations done to leverage these opportunities. THE WEALTH BENEATH OUR FEET EXECUTIVE SUMMARY rom the first commercial it is presented to inform discussion, maximum benefit from the resource mining attempts in the 1860s debate, and ultimately the strategic while safeguarding the environment to its current position as our decision-making that will enable the and the health and safety of both its fourth largest export earner, industry to reach its potential. Or not. workforce and the communities in Fthe oil and gas industry has been a core which it operates. The industry and its contribution have component of New Zealand’s economic grown considerably over the last half- The wider regulatory framework spans evolution. decade, and notwithstanding radical the permitting process, royalties, When the original edition of The Wealth shifts in energy demand or further health and safety and environmental Beneath Our Feet was launched in 2010, and sustained instability in global management. At each step of the way a it quantified, for the first time, just how commodity prices, the second edition number of checks and balances exist to significant the economic contribution of of Wealth Beneath Our Feet finds this manage the impacts of the industry, and oil and gas was to the economy. Based trend has the potential to continue, a number of local, regional and central on data from 2009, the report found and to keep fuelling the economy and a government agencies have active roles that oil and gas injected $1.9 billion into greater number of communities around in this process. the nation’s GDP. Adding in induced the nation. Not to be understated is the effects, the industry contributed $2.5 Understanding of the industry engagement of Iwi throughout the billion annually, and created 7,700 jobs. generally rests on the exploration and process. The unique relationship Perhaps more importantly, the earlier production phases – the finding and between Māori and the environment edition found there was significant extracting of the mineral resource. But has a profound impact on the evolution potential for oil and gas to contribute that is just one phase of a complex of the oil and gas industry in New more – the industry had the potential to and extensive industry that spans a Zealand. In seeking to build a greater 2 make a step-change contribution to the comprehensive midstream supply chain understanding of this relationship, New Zealand economy. and downstream users, and provides prominent Māori leader Dion Tuuta a critical component of New Zealand’s shares his perspective on the Five years on, this new edition looks energy security. overarching positions of Māori towards at whether progress has been made oil and gas exploration and production, towards that goal, and goes far Some 96 percent of New Zealand’s and explores how these views need to beyond an updated economic impact Exclusive Economic Zone lies be given greater currency if we truly assessment to take a much deeper underwater, which presents both want to leverage the nation’s mineral look into the industry, its activity, its challenges and opportunities for the wealth for the benefit of all current and potential and the challenges it faces if it long-term prospects of the industry. The future residents of Aotearoa. is to continue to add value. process of identification, acquisition, exploration, appraisal and – ultimately The 150-year evolution of New Zealand’s While this report again measures – development and production of the oil and gas industry has fostered the economic value of oil and gas to resource constitutes the upstream credible and capable supply chains. New Zealand, and to the Taranaki phase. The processing, storage, These local companies are a critical region where all national production is refinement and transporting comprises component of the sector’s output, and currently domiciled, it also recognises the midstream component of the sector, are an important touch point between the landscape in which the oil and gas while the marketing, distribution, what is seen as a global industry and the industry sits has changed markedly: trading and retailing of the end result communities in which it operates. new exploration opportunities have comprises the downstream initiatives. been opened up, public awareness Certain stages of the production and scrutiny of the sector’s activity This report analyses the activity and process are more conducive to has evolved, and so has the regulatory impact of all three phases, which work leveraging local suppliers, with project framework under which it operates. in concert to deliver the full value of oil characteristics, timeframes, cost and and gas. skill competitiveness, geographic This report is not an argument for or location and local knowledge being against the presence of an oil and gas Driven by necessity, oil and gas is one of determinant factors. As projects move industry in New Zealand. It is, rather, an the most tightly controlled industries, beyond the development phase into assemblage of up-to-the minute data, with a raft of legislative, regulatory, ongoing production, there is likely case studies, analysis and projections policy and procedural controls that to be a greater component of local that define the industry and its impact seek a balance between extracting the involvement. at this particular point in time. As such OIL & GAS INDUSTRY CONTRIBUTION TO This involvement is extensive.